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How Small Businesses Should Prepare for a Second COVID-19 Lockdown

How Small Businesses Should Prepare For A 2nd Covid-19 Lockdown

 

 

As COVID-19 continues to surge across the country, one thing is certain—the pandemic is far from over. The second wave of coronavirus is here, coinciding with cold and flu season, making everyone extra cautious. Experts believe that this second wave could last longer than the first, with restrictions going beyond face coverings and washing your hands. If you’re running a business during the COVID-19 pandemic and are wondering how to keep your small business successful during this unprecedented time, SD Associates is here to help. Here are some guidelines below to assist your small business for a second COVID-19 lockdown.

 

Build & Save Cash Reserves

One way to keep your small business successful during this time is to not be caught off guard. This includes building and saving assets in case of an interrupted cash flow. Your savings are there to support your business in the event of an emergency. During the first shutdown, if you found you only had enough cash to cover expenses for a couple of weeks, it’s time to formulate a plan and work on aggressively building up a reserve. Experts suggest asking landlords, suppliers, and your bank for deferrals. With our advisory services, we can help you layout your perfect strategy, catered specifically to your business.

 

Tighten Budgets & Spending

While you might already be operating on a tighter budget, now is the right time to consider trimming any excessive “fat”. Try to prioritize your spending based on needs, rather than wants. Negotiating with vendors to defer or stretch payables, spending less on advertising or marketing efforts, and running down inventory to minimum quantities should all be considered when trying to slim down your budget.

 

Strengthen E-Commerce Business

Running a business during the COVID-19 pandemic has forced many businesses to pivot, and this could be mean switching to an e-commerce business model during these unstable times. Nowadays, most people have access to the internet through their phone, computer, or tablet and if your business isn’t online yet, you should make that a top priority. Setting up an e-commerce store is going to be your biggest asset and can help keep sales afloat. If you sell products, services, or food, try moving them online. Take pictures and videos to advertise your specialties to keep business rolling in. If there’s one thing we’re sure of, it’s that the internet isn’t going anywhere anytime soon.

 

Invest in Remote Technology

Remote work became a staple for most businesses at the onset of the pandemic. While most people have a phone and internet connection at home, many companies weren’t set up to allow employees to work out of their homes. The use of video calls, secure Wi-Fi networks, and collaborative tools, like Microsoft Teams, Zoom, and Google Workspace, all allow people to work together virtually, and they come in handy during this shift to a remote-first approach. If the first lockdown brought challenges to your remote work, take this time to assess what went wrong and what you need to do to improve these items.

 

If the first shutdown taught us one thing, it’s to always be prepared for the unexpected. While many businesses around the country brace for a second lockdown, it’s now time to set up and execute a disaster plan. Having a plan in place could be the difference between surviving during the second shutdown and your business closing its doors. If you need help with financial services or planning for your small business, contact the experts at SD Associates in Elkins Park, PA today.

Fall Tax Tips for the Small Business Owners

Whether your small business has a great fall season or slows down, thinking about tax preparation probably falls to the bottom of your to-do list faster than the leaves fall to the ground. But this new season means that the holidays will come and go, winter will be over and tax season will be here once again before you know it. Rather than putting your tax preparation off until the new year. There are some easy tax tips for small business owners that will make tax season much easier.

Create a Checklist

Leaving something out or having an error on your tax return can cause your small business to lose money and may result in you losing precious time. To avoid this, it’s best to write out or type up a list of all the items that are important for filing your business’s taxes. This will include, but is not limited to, the following:

  • Filing payroll forms
  • Submitting 1099 forms to certain employees
  • Putting together income and expense records
  • Collecting expense records

Get Everything Organized

Almost every business owner has dealt with the stress of taking care of business taxes at the last minute of tax season, but there’s no need to put this additional stress on your already full plate. Instead, now is the time to prepare yourself tax filing—you can do this by making sure your bookkeeping is up-to-date, putting all of your tax-related documents in the same place and organizing the receipts that have accrued over the course of the year. In addition making sure your accounting software is up to date including all bank reconciliations have been done timely.

Be Aware of Deductions Eligibility

Far too often, small business owners miss out on tax deduction opportunities, meaning they also miss out on the opportunity to put more money into their pockets. The following is a list of popular small business tax deductions that may apply to yours:

  • Expenses for your home office
  • Costs from starting up your business
  • Office supplies
  • Office furniture
  • Office equipment (may include cell phones used for business)
  • Mileage from transportation to job sites, client visits, etc.
  • Costs from business trips (flights, car rental, meals, etc.)

If you are unsure of which tax deductions your small business is applicable for, now is the time to contact a tax services professional.

Handle Things Early to Maximize Deductions

By “things” we mean spending more money throughout the fall to help maximize your deductions. If your small business is financially stable, then you may want to consider taking care of the following expenses prior to December 31, 2019:

  • Paying vendors
  • Paying advertisers
  • Leasing a vehicle
  • All employee bonuses paid before year end
  • Purchasing new equipment

Although all of these options will cost you, it will make a big difference in your tax refund (in a positive way).

Whether you need assistance with tax preparation by getting your bookkeeping in order, or you need the help of a tax services professional, the team at SD Associates in Elkins Park, PA is here for you. Contact us today to schedule your appointment!

IRS Extends Stimulus Check Deadline to November

If you haven’t received a stimulus check yet, you still have time. The IRS has recently extended the deadline to register for your stimulus check to November 21, 2020, five weeks past the previous October 15, 2020 deadline. This can impact over 9 million people across the country, helping to soften the blow of the coronavirus pandemic. The professionals at SD Associates are sharing everything you need to know about the extension and the non-filers stimulus check.

Who Qualifies?

The non-filer stimulus check is typically reserved for those who have not received a stimulus check yet, including low-income families who live in underserved areas or individuals who made little or no money and didn’t have to file. U.S. citizens and U.S. resident aliens are eligible for checks of up to $2,400 if filing joint tax returns and can get up to an extra $500 with qualifying children aged 16 or younger at the end of 2019. To receive the full payment, there are also income limits including:

  • $150,000 for married couples filing joint returns
  • $112,500 for the head of household filers
  • $75,000 for all other eligible individuals

This extended deadline could help millions of people pay rent, cover bills, feed their families, and pay for other essentials.

How to File

To meet the deadline for the stimulus check, individuals should register as quickly as possible using the Non-Filers tool on IRS.gov. It’s important to understand that this tool will not be available after the November 21 deadline because the IRS needs to prepare for the upcoming 2020 tax filing season. IRS Commissioner Chuck Rettig states, “Any further extension beyond November would adversely impact our work on the 2020 and 2021 filing seasons. The non-filers portal has been available since the spring and has been used successfully by many millions of Americans.” According to the IRS, they sent nearly 9 million letters in September reminding people who meet the requirements for the $1,200 Economic Impact Payment but who don’t normally file a tax return to register for their stimulus check.

Individuals should know there is no cost to register. If you do not have access to the internet, the IRS encourages you to file a tax return for 2019 with the IRS or electronically through your tax preparer, tax software provider, or the IRS Free File. To speed up the process, choose to receive your check by direct deposit versus a paper check by mail. You may review the status of your check by using the IRS Get My Payment tool. If you miss the deadline for the stimulus check, you will have to file a 2020 income tax return to claim your credit.

SD Associates is here for you. As the pandemic carries on, our CPAs are here to offer expert tax services at affordable prices to ensure you and your business gain peace of mind and control over your taxes. Whether you’re looking to find eligible tax credits, develop a smart payment plan or you just want to create an effective business strategy, know our team is here to help. Connect with our accountants today and let us help you with all your tax service needs.

October Is Financial Planning Month: Here Are 6 Steps for a Flaw-Free Financial Plan

financial plan puzzle

 

We all want to have financial security, so it’s important to establish a flaw-free financial plan for yourself in order to achieve this. A financial plan is a comprehensive snapshot of your current finances, your long-term financial goals, and the strategies you put in place for yourself to achieve these goals. A good financial plan strategy will allow you to save money, prepare for the future, and achieve long-term goals, like saving for retirement or your child’s college education. Everyone’s financial plan will look different. We are sharing six common steps how to create a financial plan. 

What Is Financial Planning?

Financial planning is an ongoing process that determines how you will achieve your financial goals and objectives. It can help reduce stress and support your current needs while helping you build a nest egg future needs. A financial plan is important because it helps you create a roadmap for your future so you can make the most of your current assets and help ensure your financial future is comfortable. While you can create a financial plan yourself, it’s best to utilize the talents of a certified financial planner.

 

Set Financial Goals

The first step in creating your financial plan is setting specific goals that will help you stay on track. These goals will be your foundation for financial success. Your goals can include short- or long-term objectives, like paying off student loans or buying a new car. Avoid having grand, lofty goals like, “I want to be rich” and instead focus on smaller objectives like, “I want a college fund for my kids” so you don’t feel overwhelmed trying to accomplish them. Once well-defined and prioritized, your goals will be the driving force behind your financial plan.

 

Track Your Financial Activity

One of the more important aspects of financial planning is creating a budget and tracking where your money goes. Having a sense of your monthly cash flow (expenses/savings/income) can help give you an accurate picture of where your money comes and goes each month and help you establish short, medium, and long-term plans. Once you begin to see where your money goes, you can adjust it to better achieve your goals. For an immediate plan of action, try developing a simple budget. You can create one by:

 

  • Tracking your income and expenses.
  • Using a budgeting app.
  • Utilizing the 50/30/20 budget method. This includes putting 50% of your take-home income toward essentials like housing, utilities, food, and other recurring payments. 30% then goes toward wants like dining out and entertainment. The last 20% goes toward savings and debt payment.

 

Minimizing credit card debt is an example of a medium-term plan and retirement planning is a typical long-term plan.

 

Start Saving

After your major goals are set and you’ve been keeping track of income and expenses, it’s time to start saving! Refer to your budget and re-examine your spending accordingly. You can start immediately saving more by cutting your expenses and increasing your income. First, begin by determining where you’ve been spending too much, such as entertainment or dining out. Then, look for ways to save. Next, find out ways to increase your income. This can be accomplished through a second job, asking for a raise, or even a career change. Once your extra income is flowing, ensure you’re putting it into a savings account.

 

Emergency Expenses

It’s a smart idea to be prepared in the event of an emergency. One of your goals should include putting away extra cash for emergency expenses. Start small—$500 to cover a home repair—and make sure to increase this amount over time to be able to cover a month’s basic living expenses, and so on.

 

Tackle Debt

Unfortunately, you can’t begin your road to financial success if you’re carrying a large amount of high-interest debt. Between large debt with minimum monthly payments with high-interest rates this could take too many years to pay down as well as damaging to your credit score. It’s important to start paying down this type of debt as soon as feasibly possible. Try creating a debt pay-off strategy and be consistent. Slowly reduce credit card balances and other loans and you’ll feel much better about your financial future.

 

Review Your Plan Constantly

Plans change, especially when they involve your finances. It’s important to periodically review your financial situation. Quarterly, ask yourself:

 

  • Have my goals changed?
  • Has my income (or debt) gone up or down?
  • What are the current needs of my health or my family? Have they changed?

 

If anything has changed, it’s simple to alter your goals to handle these unexpected hurdles. Checking in quarterly can help you stay on track and keep plans from derailing.

 

We all want to be financially independent and build wealth, and at SD Associates, our goal is to help you achieve this. Deciding to embark on a journey toward financial independence can be scary and you might not know how to create a financial plan that aligns with your future, but with our guidance, we can help create a fresh beginning with your finances and change your life for the better. Contact us today to get started.

 

Paycheck Protection Program: Current FAQ For Small Business Owners About Loan Forgiveness

 

up close picture of payment protection program

The financial environment and the current state of the economy are ever-changing. For small business owners navigating these difficult waters, we understand the hardships you may have come across this year. With new rules, requirements, protocols, and processes that change almost every day, we know there may be some lingering questions regarding the Paycheck Protection Program which was enacted by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the related loan forgiveness process.

 

As of August 11th, 2020, the Small Business Administration alongside the U.S. Treasury issued new guidance through Frequently Asked Questions (FAQs) aimed at helping business owners who participated in the Paycheck Protection Program. These FAQs discuss simplified PPP loan forgiveness guidelines and help borrowers navigate maximum loan forgiveness.

 

General Loan Forgiveness

Small business owners have been dealt a lot this year, from storefront closings, layoffs, and the paycheck protection program. With the need for clarity on PPP loan forgiveness guidelines, we’re reporting the key highlights of the ten pages of Treasury FAQs below.

 

  • Self-employed individuals, sole proprietors, and independent contractors with no employees at the time of the PPP loan application and who did not include any employee’s salaries in the total of average monthly payroll in the application form automatically qualify to use Form 3508EZ or lender equivalent.
  • The FAQ addresses a common question regarding making payments while awaiting forgiveness. The answer is no. If the borrower submits an application within 10 months of the end of the Covered Period, the borrower is not required to make any payments until the loan amount is sent to the lender by the SBA. If the loan is fully forgiven, the borrower will not be responsible for any payments. If only part of the loan is forgiven, the remaining balance must be paid in full by the borrower on or before the maturity date of the loan.
  • The Covered Period refers to the 24-week period beginning on the date the PPP loan payment date or if the borrower received the loan before June 5, 2020, the borrower could choose an alternate 8-week period.

Loan Forgiveness Payroll Costs

There are various questions surrounding payroll costs and we’re sharing some of the most important elements of Loan Forgiveness Payroll Costs FAQ:

 

  • Payroll costs that were incurred during the Covered Period or the Alternative Payroll Covered Period but paid after the Covered Period or the Alternative Payroll Covered Period are eligible for loan forgiveness if the payroll costs are paid on or before the next regular payroll date after the Covered Period or Alternative Payroll Covered Period.
  • Borrowers must calculate payroll costs for partial pay periods.
  • When computing compensation, borrowers need to use the gross amount before deductions and not the net amount paid to the employees.
  • Payroll costs include all forms of compensation paid to the employees, including commissions, hazard pay, and tips.
  • Expenses for employee group health care benefits that are paid by the employer can be considered payroll costs that are eligible for loan forgiveness. Expenses paid by the employee are not included in payroll costs.
  • Employer contributions for retirement benefits that are paid or incurred by the borrower during the Covered Period or Alternative Payroll Covered Period qualify as payroll costs and are eligible for loan forgiveness.

 

Calculating Non-Payroll Costs

Non-payroll costs include rent, utilities, and interest on loans incurred before the Covered Period, yet paid during, are eligible as part of the loan forgiveness. Other key points to consider include:

 

  • Non-payroll costs incurred during the Covered Period and paid on or before the next regular billing date, even if this date is after the Covered Period are eligible for forgiveness.
  • Payments made on recently renewed leases on payments on refinanced mortgage loans are eligible for loan forgiveness if the original lease or mortgage existed before February 15th, 2020, and the payments are made following the renewed lease during the Covered Period.
  • Another utility payment eligible for forgiveness includes a “payment for a service for the distribution of . . . transportation” under the CARES Act. This refers to transportation utility fees assessed by state and local governments.

 

Reduction in Work or Wages

Layoffs and the inability to rehire or hire new employees has brought about many complicated issues within the PPP program. Recent regulations have changed and the FAQ states:

 

  • A borrower may exclude any reduction in FTE (full-time equivalent) employees if the borrower can document the inability to rehire individuals employed on February 15th, 2020, and similarly qualified individuals for unfilled positions on or before December 31st, 2020. Borrowers are required to inform the unemployment insurance office of any rejected rehires within 30 days of the rejection.
  • Seasonal employers who use a 12-week period between May 1st, 2019, and September 15th, 2019 to calculate their maximum PPP loan amount must use the same 12-week period as the reference period for the calculation of any reduction in the amount of forgiveness.
  • Certain pay reductions that arose for employees during the Covered Period or the Alternative Payroll Covered Period may reduce the amount of loan forgiveness.

 

If you need assistance with the paycheck protection program or have further questions about the small business loan forgiveness, do not hesitate to contact our team of CPAs. The professionals at SD Associates are here to offer you and your small business the best financial services possible to help you successfully navigate these difficult and uncertain times. Call us today at (215) 517-5600 or contact us here.

7 Signs You Should Invest in a Bookkeeping Service

invest in bookkeeping servicesAs a small business owner, you probably wear many hats within your business. You may be preparing invoices one day and dealing with the bank the next. As an entrepreneur, it only makes sense that you want to keep a watchful eye on all the activities of your business. In the beginning, this can be quite resourceful and can help minimize costs. However, over time, this can lead to deeper problems for your company. One of the main culprits, is poor bookkeeping services. When it comes to, it’s best to leave this job to the professionals. Whether you’re looking for long-term success, internal growth, or a more sustained profit, the experts at SD Associates are sharing why bookkeepers are essential and eight signs you should invest in a bookkeeping service.

 

Books are outdated

Your company’s general ledger should always be kept up to date. Outdated books and records can equal bad news for your business. You’ll have trouble understanding your cash flow needs and as well as not maintaining a firm handle on your finances. So, if you have paperwork scattered across your dinner table and shoeboxes filled with untracked receipts, it’s time to call in a professional to help you better keep track of your business transactions.

 

Set of books has never been maintained before

You’re an entrepreneur, which probably means you may have not gone to school for finance, and that’s okay! While you may prefer to handle most aspects of your business yourself, if you’ve never tackled bookkeeping before, now is not the time to start. Running a business and trying to learn a whole new field of study can cause some major bumps in the road that will end up costing you more than it saves you.

 

Just too busy

As your business grows, so does your list of responsibilities. Your DIY approach to your bookkeeping will begin to become unsuitable. If you can’t find the time to get everything done, it’s time to reprioritize and outsource your bookkeeping services to help your business continue to grow.

 

Bills are being paid late

With the paperwork piling up and your lack of time, bills are bound to fall through the cracks. Late payments not only make you look unprofessional, but it can also tarnish your business’s reputation. Professional bookkeeping services include proper time management to ensure you never miss a beat (or a bill).

 

Missed out on tax deductions

Just as bills can fall through the cracks, so can tax deductions. Employing a professional bookkeeper can make sure your many business expenses such as digital downloads, phone bills, and online subscriptions never go undocumented. These deductibles can be used to offset the total income owned come tax time each year.

 

Unpredictable cash flow

Have you ever scrambled at the end of the month to cover your expenses due to a lack of cash? While this can happen because of several different scenarios, the bottom line is you have a cash flow problem. When you hire a professional to perform your bookkeeping services, they can track your accounts payable and receivable, ensuring you are always on top of your cash flow needs.

 

Bookkeeping software being used as a replacement

You should never completely replace your general ledger with a bookkeeping software service. While smart tools like QuickBooks can make your process more efficient and streamlined, a computer program can never substitute for a true professional.

 

If you’re ready to grow your business, increase profits, and streamline productivity, it’s time to consider hiring a professional bookkeeper. As your business grows, your DIY approach to managing your finances will become counterproductive. At SD Associates, we can assist you in managing your books and day-to-day financial transactions, so you have more time to make sound business decisions without the added stress of bookkeeping. Call us today at (215) 517-5600 or contact us here.

 

4 Important Things to Know Before the July 15th Tax Deadline

July 15th Tax DeadlineAs part of the CARES Act enacted earlier in the year, the April 15th Tax deadline has been pushed back to July 15th. Unfortunately, there’s more to the story than just pushing the deadline back three months. For some people, this actuality might not make much of a difference in their day to day lives, but for others, July 15th could be a financial nightmare. As with most years, taxpayers who are unable to file this year’s deadline can file a request for extension to October 15, 2020. Understandably, the deadline to file the request itself was moved to July 15. It should be noted that the extension to October 15th is only an extension to file and does not extend the time to pay federal or state income taxes beyond July 15, 2020. The CPA’s at SD Associates are here to help you with tax preparation and are sharing four important things you should know before the July 15th tax deadline.

 

Everything That’s Due on July 15th

In addition to postponing Tax Deadline, the IRS also postponed the first two 2020 quarterly estimated tax payments. The first two 2020 quarterly payments are normally due by April 15th and June 15th. These were both extended to July 15th as well. These payments affect independent contractors and other self-employed individuals. Because of the postponement, it’s possible that these individuals may owe half of their estimated taxes in addition to any taxes owed from their 2019 tax return. This could be a disaster for individuals who have been affected by the economic shutdown or hardships due to the pandemic.

 

How to Avoid the Penalty

Anyone with taxable income is required to pay estimated taxes, even if you’re an independent contractor, self-employed or a retiree. Individuals who are self-employed or are a contractor are required to pay quarterly taxes in April, June, September, and January. To avoid IRS penalties, you must owe less than $1,000 in taxes for the year and pay at least 90% of taxes owed in 2020 or 100% of taxes you paid for in 2019, whichever amount is smaller. If you don’t pay enough, IRS Form 2210 can help you see how much you owe in penalties for underpaying. It’s too early to know whether the penalties will be waived, or the safe-harbor percentages will be lowered in 2020, but sources are suggesting it will “probably be considered.”

 

Stimulus Payments and the PPP Loan Program

What is required to file taxes in 2020? Stimulus checks, loans from the PPP and unemployment benefits will all need to be considered when compiling required documents, which could contribute to further complications. For individuals who received the COVID-19 stimulus check, many wonder if this payment will be treated as taxable income. If so, it needs to be considered for estimated taxes. While the IRS has stated that “the payment is not included in gross income and, therefore, taxpayers will not pay tax on it,” you will still need to report it when you file your 2020 tax return. Experts are advising that it shouldn’t affect the amount of taxes owed or the amount you receive from your refund next year.

 

As for small businesses who received funding from the Payment Protection Program, you may be wondering what is required to file taxes for your business in 2020. In Notice 2020-32, provided by the IRS, no tax deductions are permitted for expenses that are funded by the PPP loan. This can affect the estimated tax calculation for individuals who pass their income through an S Corporation, LLC, or sole proprietorship. This means that your 2020 taxable income could be potentially higher.

 

Unemployment Benefits

Unemployment claims have surpassed 40 million since the start of the pandemic. If you are one of the millions of individuals who have filed for benefits, chances are this is the first time in your life you’ve ever had to do so. You’re not alone, and some confusion has arisen about the tax treatment. Unemployment benefits are taxable by the IRS and states that have income tax. Because of this, you will need to make estimated-tax payments on this income unless you have elected to have federal income taxes withheld using Form W-4V.

 

Our environment is ever changing in the wake of COVID-19. At SD Associates, we want you to know that we are here for you, providing everything you need to file your taxes this year. From consultation services to our helpful tax preparation services, we will be here with you every step of the way if you need help navigating these uncertain waters. Call us today (215) 517-5600 or contact us here.

Round Two of Payment Protection Program: Here’s What You Need to Know

How To Apply For Small Business Loan Corona Virus
Sticky Note With Handwritten “Apply”

Small businesses across the United States have all been impacted in some way by coronavirus (COVID-19) pandemic. Forced closures, reduced hours and layoffs have affected employees and employers everywhere. In an attempt to provide some relief and help for small businesses. The CARES Act was enacted to provide much needed help to individuals, business and others in response the economic distress. One of the programs, is called the Paycheck Protection Program. The loan program will allow businesses suffering due to the coronavirus outbreak to borrow money for a variety of qualified costs related to employee compensation and benefits. The CARES Act calls for a portion of the above-mentioned paycheck protection loans to be forgiven on a tax-free basis.

The initial round, in late March 2020 of funding, provided nearly $350 billion guaranteed paycheck protection loans for small businesses. However, these funds ran out extremely quickly. With a passage of the paycheck protection program and health care enhancement act which was recently signed provides additional relief by providing an additional $310 billion more in funding. Here’s additional information you need to know about the second funding of the coronavirus relief loans for small businesses.

Assistance for Smaller Businesses
Of the $310 billion, $60 billion will be specifically set aside for smaller banks and credit unions. The law also expands the Economic Injury Disaster Loan (EIDL) program by $60 billion: $10 billion for grants and $50 billion for loans. This is welcome news for businesses that desperately need funding to weather the economic uncertainty created by the COVID-19 pandemic. The legislation greatly expands the number of businesses, including individuals who operate as a sole proprietor, or independent contractor (including non-profits). Each business can qualify for a loan to pay employees and other payroll costs and cover other non-payroll expenses like mortgage interest, rent and lease payments as well as utilities. All loans granted will have a 1% fixed interest rate and will be 100% forgiven if the money is used appropriately and within the guidelines set by the SBA.

How Much Money Can I Receive?
The maximum amount you can receive is your businesses’ monthly average payroll cost in 2019, multiplied by 2.5 with a maximum of up to $10 million. If you are a newer business, existing after June 30th, 2019, the SBA lender will look at costs from January and February 2020. Seasonal employers’ costs will be calculated differently, using a 12-week period beginning in either February or March 2019 and ending June 30th, 2019.

In an effort to provide the necessary help for small businesses, the goal of these government issued loans is to keep people employed during the span of the pandemic. The loans will be seen as grants from the government as long as the requirements mentioned above are met. The forgivenesses will be reduced, and businesses will be expected to repay the loan if employee counts and employee salaries are reduced by more than 25% under the Protection Payment Program. If you rehire or restore decreased salaries before June 30th, 2020 you will not be penalized or expected to pay back the loan. Adequate record keeping to prove your expenses will be required and your business will need to have spent at a minimum 75% of your loan on payroll to qualify for forgiveness.

We understand that our environment is constantly changing due to COVID-19 and at SD Associates in Elkins Park, PA, we want you to know that we are here for you. From questions about the Payment Protection Program for your small business to financial guidance and payroll assistance, our accountants are here to help you navigate these constantly changing waters. Contact us today for all your needs.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) is Enacted into Law

On March 25, 2020, the Senate unanimously passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The CARES Act provides much needed stimulus to individuals, businesses, and hospitals in response to the economic distress caused by the coronavirus (COVID-19) pandemic. On March 27, 2020, the House of Representatives passed the CARES Act by voice vote. President Trump signed the bill into law that same day.

Here are some of the major takeaways for the CARES Act:

 

Paycheck Protection Program
The Paycheck Protection Loan Program covers the period February 15, 2020 through June 30, 2020.  The loan program will allow businesses suffering due to the coronavirus outbreak to borrow money for a variety of qualified costs related to employee compensation and benefits, including payroll costs, mortgage interest obligations, rent, continuation of health care benefits, employee compensation (of those making less than $100K), and utilities incurred before the covered period.

The legislation greatly expands the number of businesses, including individuals who operate as a sole proprietor, or independent contractor (including non-profits). The loans are fully guaranteed by the federal government  through December 31, 2020 and are generally limited to the lessor of the average monthly payroll costs for the 1 year period ending on the date the loan was made ( an alternative calculation is available for seasonal employers) multiplied by 2.5 or up to $10 million.

The loans will have a maximum maturity of 10 years and in interest rate not to exceed 4%. In addition, the standard fees imposed under section 7 of the Small Business Act are waived, and no personal guarantee is required by the business  owner.

The CARES Act calls for a portion of the above-mentioned paycheck protection loans to be forgiven on a tax-free basis.   Amounts to be considered for forgiveness  is the sum of payments that were made by the borrower that are considered qualified costs, during the 8-week period following the date of the loan. The loan forgiveness cannot exceed the principal.

Please find this link to the US Chamber of Commerce and its guide and checklist.

https://www.uschamber.com/sites/default/files/023595_comm_corona_virus_smallbiz_loan_final_revised.pdf

 

Emergency Government Disaster Loan and Grant
The CARES Act  expanded the Economic Injury Disaster Loans to include businesses under 500 employees but also sole proprietors.  Loans under $200,000 made under this program before December 31, 2020 will have no personal guarantees. This permits a disaster loan to be taken out between January 31, 2020 and the date on which a paycheck protection loan is available for reasons “other than payroll costs”.

 

Individual Stimulus Payments
The individual stimulus payment or “2020 recovery rebate for individuals” , the government will start to distribute  checks directly to taxpayers.  “Eligible individuals” can benefit from a tax credit equal to the sum of  $1,200 for single filers and $2,400 for those filing a joint return plus an amount equal to $500 multiplied by the number of qualifying children. However, the aforementioned tax credits will be “phased-out” by $5 dollars of your payment for every $100 your adjusted gross income (AGI) exceeds the following thresholds: $150,000 for joint-filers, $112,500 for heads of household, and $75,000 for single filers.

The IRS will determine the eligibility by reviewing your 2019 return, or if not available they will use your 2018 return to determine your AGI. If you weren’t required  to filed for example, you collect social security and did not have enough taxable income to necessitate the filing of a return, the IRS will review your social security benefit statement. The payments will be made between now and December 31, 2020 and in many cases will be made electronically if you have provided direct deposit information on either your 2018 or 2019 returns. It’s important to note that these payments received act as an advance payment of a credit towards your 2020 taxes and will be recalculated when that return is filed in 2021.

 

Distributions from Retirement funds
Coronavirus-related distributions (i.e. those who are directly afflicted with the disease, spouse or dependent  or who experiences adverse financial consequences as a result of being quarantined, laid off or being unable to work due to lack of child care) made from both eligible employer sponsored retirement plans and individual retirement accounts  are exempt from the 10% early distribution penalty tax. These distributions can be made up to $100,000. These distributions are subject to regular income tax, although it may be spread over three years.

The CARES Act temporarily waives the minimum distribution requirements for qualified plans and other individual retirements account (IRA).  This applies for all required minimum distributions that otherwise would have been required to be made in 2020.

 

Tax Treatment of Charitable Donation
Beginning in 2020, the  CARES Act allows taxpayers to take an “above-the-line” deduction for qualified charitable contributions of up to $300 in computing their adjusted gross income.  This deduction is only available to a taxpayer who does not itemize their deductions such as mortgage interest, real estate taxes and medical expenses.

 

Employer Payment of Student Loan Debt
The CARES Act permits an employer to pay up to $5,250 in 2020 of an employee’s student loan or other qualified educational expenses (master’s program), with the payments being tax-free to the employee.  To the extent that the employee’s student loan is paid, the employee cannot deduct the interest on the related debt under Section 221.

 

Unemployment Compensation
The CARES Act extends unemployment insurance to workers who are not normally eligible for such benefits at the state level so long as their unemployment is connected to COVID-19. Those who will now be eligible include part-time employees, independent contractors, the self-employed, freelancers and gig workers. In addition, the federal government will provide $600/week to individuals who are eligible for unemployment insurance for up to four months, through July 31, 2020, which will complement existing state unemployment benefits. The CARES Act also extends state-level unemployment insurance by an additional 13 weeks (from 26 to 39 weeks in Pennsylvania) through December 31, 2020.

 

Qualified Improvement Property Fix
As part of the CARES Act, it corrects a much-needed technical correction in the Tax Cuts Act and Jobs Act of 2017 (TCJA), whereby changing the life on certain “qualified improvement property” (QIP). The depreciation life on QIP property was reduced from 39 years to 15 years and thus enables companies to have 100% bonus depreciation  being available for all assets with lives less than 20 years. This change is retroactive to January 1, 2018, thus, enabling taxpayers to file amended returns for the benefit of this accelerated depreciation.

 

Delay of Payment of Employer Payroll Taxes
The CARES Act will allow for most employers to defer paying their share of applicable employment taxes from the time the CARES Act is signed into law through December 31, 2020. Half of this deferred amount would be due on December 31, 2021 and the other half by December 31, 2022 under Section 1109.

 

Changes to Net Operating  Loss Rules
The CARES Act temporarily reversed the TCJA, whereas post 2017 net operating losses were disallowed to be carried back and provided for an indefinite carryforward period.  The CARES Act permits losses from years 2018, 2019 and 2020 to be carried back for a period of 5 years. As  was the previous case, a taxpayer can forgo the carryback and instead elect to carry the loss forward.

As a result, the taxpayers can file an amended return to claim a refund.

 

Limitation on Business Interest
The CARES Act temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation of adjusted taxable income (as imposed under the Tax Cuts and Jobs Act) to 50 percent of adjusted taxable income (with adjustments) for 2019 and 2020. A partnership does not get to use the 50% limited adjusted taxable income, instead and disallowed interest is passed out to the partners and is suspended at the partner level under normal rules.  In 2020, 50% of the suspended interest will be permitted to be freed up and will be fully deductible. The remainder is suspended until the partnership allocates excess taxable income or excess interest income to the partner.

Understanding the Coronavirus (COVID-19) and Your Taxes

The novel coronavirus, COVID-19, is fast making its way across the United States. The global health pandemic has been impacting major corporations to local businesses and everyone in between. In response to everyone feeling the effects of COVID-19, the IRS, United States Treasury and the federal government have recently announced several changes that could impact you and your business. You may have heard about the 90-day tax extension plan, but are not sure who—or what—that covers. The experts at SD Associates are sharing everything you need to know about the tax deadline extension and are here to help you navigate the changes with ease. The IRS will continue to monitor issues related to the COVID-19 virus, and updated information will be posted on a special coronavirus page on IRS.gov.

As of March 20th, 2020, the Treasury Department announced that Tax Day this year will now fall on July 15th, 2020.
Normally, all tax returns and anything you owe are due by April 15th, 2020. With this new extension, you now have an additional 90 days to file and pay your 2019 taxes. You will not need to file an extension to file past April 15th, 2020. The new July 15th, 2020 tax deadline is applied automatically to all taxpayers. If you need more time to file, you can request an extension to October 15th, 2020. 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.

The deadline for taxpayers who make quarterly income tax payments (self-employed) is also extended to July 15th, 2020.
This means that estimated payments that were due for the first quarter of 2020 are due on July 15th, 2020.

Pennsylvania’s state taxes are also extended.
Many states are adopting the federal extension of July 15th, 2020 and Pennsylvania is included.

If you owe taxes for 2019, you can delay your payment to the IRS until the extension date.
You will not incur any penalties or interests until July 15th, 2020.

Who is eligible for the extension deadline?
Individuals who use Form 1040, corporations who use Form 1120, partnership, associations and trusts and states who use Form 1041. While uncommon, fiscal year partnerships, associations and companies that also recognized the April 15th, 2020 filing deadline are also eligible for the extension.

If you have a tax payment and already filed and scheduled your payment, you will need to reschedule.
If you have filed and scheduled your payment for April 15th, 2020, you will need to cancel your payment and reschedule it. All changes to payments must be completed two days prior to the extension deadline of July 15th, 2020.

Families First Coronavirus Response Act
This legislation provides additional relief for individuals, self-employed and businesses impacted by COVID-19 including emergency and paid sick leave.

During this extension period, SD Associates in Elkins Park, P.A., is here to help you every step of the way and answer all of your questions. We’re all navigating uncertain waters together, and that’s why we want to provide you with the most up-to-date-information available. We understand how important your refund is now more than ever and we’re here to help you maximize your tax return. Contact us today for all your tax needs.