Yesterday morning, I was walking my golden retriever Jack. He stopped suddenly when saw a giant turtle. It took some encouragement form me but he started to move forward. On the rest of the walk I thought about how Jack would not remember the turtle, but I would. As I walked in my front door, I started comparing the turtle to our government and Jacks reactions to the stock market. A lot of legislation happened in the last week. Here are some of the highlights. July 15th New Tax Due DateFrom the IRS Website on ExtensionOn March 21, 2020 the Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020. Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax. Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004. The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds are still being issued within 21 days. Required Minimum Distributions Not Required for 2020On March 27 the Coronavirus (COVID-19) Aid, Relief and Economic Security Act (CARES Act) was signed into law. This $2 trillion relief /stimulus package does many things to help individuals and businesses affected by the Coronavirus. There are three provisions which directly affect your Individual Retirement Account (IRA):
- Required Minimum Distributions (RMDs) for 2020 are not required,
- Distributions prior to age 59 1/2 of up to $100,000 are not subject to the 10% excise tax in 2020, and,
- Distributions of up to $100,000 this year can be reported as income over three years and/or repaid.
The suspension of the RMD rules apply to all taxpayers who are otherwise required to receive an RMD in 2020. The other two provisions apply only to IRA owners affected by Coronavirus. This is defined as a person: who is diagnosed with Coronavirus, whose spouse or dependent is diagnosed with Coronavirus, who experiences adverse financial consequences as a result of: being quarantined,being furloughed or laid off,having reduced hours,being unable to work due to lack of childcare,closing or reduced hours of a business owned or operated by the participant, orany other factor determined by the Secretary of the Treasury. The suspension of the RMD requirement applies to anyone who had attained the age of 70 1/2 before January 1, 2020. If you turned 70 1/2 last year and were waiting until March 31 to take your 2019 distribution, you are in luck. You are not required to take your 2019 RMD or your 2020 RMD. If you took your 2019 or 2020 RMD within the last 60 days, you are also in luck. You can roll over your distribution to the same or a different IRA within 60 days of the prior distribution and not pay the income tax on the withdrawal (as long as you have not made an IRA withdrawal within the 365 days preceding your distribution). Although inherited IRAs can take advantage of the RMD suspension for 2020, they are not eligible for the indirect rollovers within sixty days. RMDs are calculated using the value of the IRA at the end of the prior year. With equity prices much lower than at year end, taxpayers would potentially have to take out a larger percentage of the current value of their accounts and be forced to sell assets and pay tax on a larger percentage of their IRA. The purpose of suspension of RMDs in 2020 is to provide relief for taxpayers whose IRAs have been adversely affected by market conditions, but it does apply without regard to the impact of the Coronavirus on the taxpayer or the IRA. This is a good year to look at Roth Conversions if you normally would have a Required Minimum Distribution.
Government Loans and Grants
A network of community banks and financial institutions is gearing up to implement one of the most ambitious economic relief programs in U.S. history as small businesses across the country weather the Coronavirus and its economic fallout. The $2 trillion Coronavirus relief package signed last week, officially known as the CARES Act, includes nearly $350 billion for a federal small business loan program called the Paycheck Protection Program. The program is designed to get cash in the hands of suffering small businesses quickly, with less red tape and fewer guardrails than the SBA’s existing loan programs. It is designed to incentivize business owners to keep employees on payroll by offering them loan forgiveness. Business groups say lenders are moving as fast as they can to make the loans available. The new loan program is separate from existing federal loan programs, including the Small Business Administration’s disaster relief loans. To learn about the SBA’s other relief programs, visit the SBA’s COVID-19 resource center. Here are the details on how small-business owners can access the new federal Paycheck Protection Program.
Q: How do I apply for a small business loan through the Paycheck Protection Program? The Small Business Administration has a network of 1,800 approved lenders that process small business loans. If you are interested in a Paycheck Protection Program loan, you should first contact your bank to see if it is an SBA-approved lender. If your bank is not an SBA-approved lender, you can contact the SBA to find one.
Q: Which businesses qualify under the Paycheck Protection Program? Small businesses, nonprofits, tribal business concerns that meet the SBA’s standard business size definition and veterans organizations organized under 501(c)(19) with fewer than 500 employees are eligible for loans under the program. Self-employed individuals, independent contractors and sole-proprietors also are eligible. To receive a loan, your company must have been in business as of Feb. 15. If you are in the food service business, the 500-employee cap is applied on a per-physical-location basis, according to a fact sheet published by the U.S. Chamber of Commerce.
Q: How much money can my business receive through the new loan program?The Paycheck Protection Program provides small business loans of up to $10 million to cover payroll and certain other expenses. Other SBA loan programs, including the federal disaster relief program, offer much smaller loans.
Q: Can the loan eventually be forgiven? Yes. The act includes loan forgiveness for companies able to keep employees on payroll or continue paying bills throughout the coronavirus crisis. The amount of loan forgiveness will include payroll costs for individuals below $100,000 in annual income, mortgage and rent obligations, including interest and utility payments. The total amount will be reduced if your workforce is drawn down through attrition or if wages are reduced. If you are forced to lay off employees because of economic conditions, you may be able to preserve some of your loan guarantee by hiring them back. Eligibility for loan forgiveness starts eight weeks after the loan origination date. There is a maximum 10-year maturity after application for loan forgiveness.
Q: What’s the interest rate? The maximum interest rate for the Paycheck Protection Program is 4 percent.
Q: It looks like there are a lot of different federal loan programs. Can my business receive funding through more than one? Yes. Businesses that have pending or existing SBA disaster assistance loans can still receive funding through the Paycheck Protection Program as long as the loans are being applied to different cost centers. You also can still apply for a loan if you have an insurance claim pending.
Q: What do these loans cover? Loans through the Paycheck Protection Program can cover payroll costs, mortgage and rent payments, and health-care benefits for employees, including paid sick leave. In some cases they also can cover interest on other debts.
Q: What if I’m still paying off a different SBA disaster loan? The Small Business Administration has made all deferments through Dec. 31 automatic. That means small-business owners do not have to contact the SBA to request deferment.
US Chamber of Commerce Emergency Loan Guide
SBA Applying for Covid19 Economic Disaster Loans
SBA Applying US Senate Committee on Small Business Paycheck Protection Program
Plan Today. Protect Tomorrow.
Peter
Ready to Take The Next Step?
For more information about any of the products and services listed here, schedule a meeting today or register to attend a seminar.
