COVID-19 Weekly Update – April 28th 2021
A year into the pandemic, and we’d all like to see it behind us. But there are disquieting signs that the virus may part of our lives for longer than we want. The longer the virus can spread through a non-immunized population, the more chances it has to mutate into strains that are more contagious or more dangerous. Although vaccination rates are still far below what is needed to slow that spread through herd immunity, there are signs that demand for vaccination is slowing. Despite surges in local infections, especially in schools, there is little appetite for a return to lockdowns. Existing vaccines are not as effective against the South African variant. But by vaccinating as many people as possible now, we have the opportunity to minimize the role that COVID-19 will play in our lives over the long term.
It was great to get away from the office last week for a break. I had expected to see and be able to share some cool wildlife photo’s from Little Cottonwood Canyon outside of Salt Lake City. I didn’t even see any snow bunnies. My daughter Jessie pitched in with these as she took a side trip to Bryce Canyon on her way back to Atlanta…
Next week it’s back to the beach for me…
THE AMERICAN RECOVERY PLAN ACT (ARPA)
Economic Impact Payments (aka Stimulus Checks)
The IRS has been sending out a flurry of automated letters regarding stimulus payments and Rebate Recovery Credits. If you received one of those letters, or have questions about how and whether to claim the credit on your tax return, check out this article on the IRS website. If you made a mistake with the credit on your tax return, the IRS will fix it for you. However, if you disagree with their recalculation, you may need to contact the IRS. If you are eligible for the Rebate Recovery Credit but did not include it on your 2020 tax return, you’ll need to file an amended return.
The best way to track your payment is using the IRS Get My Payment tool which has been updated for third round payments.
Again for the 2020 and 2021 stimulus funds, if you are eligible for these stimulus payments but did not receive the full amount you’re entitled to, you’ll receive the additional stimulus payment as a Rebate Recovery Credit when you file your 2020 and/or tax return.
Restaurant Revitalization Fund
The SBA has not yet launched this program, but the $28.6 billion fund will offer grants of up to $5 million to restaurants, bars, caterers, and other food and beverage providers once it does launch. The SBA has posted an application and information about the program on its website so that companies can start gathering the necessary information. When the program does launch, days 1-21 will be reserved for applicants from priority groups: businesses owned by women, veterans, and socially disadvantaged. The program also sets aside $5 billion for businesses with 2019 gross receipts under $500,000.
Shuttered Venue Operators Grants (SVOG)
The SBA opened the portal for the SVOG on Monday, April 26. The first 14 days will be reserved for businesses that suffered more than a 90% loss in business, with succeeding application windows for businesses with smaller losses. Grants are available for 45% of 2019 gross revenue, up to a maximum of $10 million. The SBA has a dedicated webpage for the SVOG program, which includes eligibility requirements, video tutorials for the application process, and allowable uses of funds. You can check out this Journal of Accountancy article with the details as well.
Paycheck Protection Program (PPP)
Initially, the IRS disallowed business deductions for expenses paid with proceeds of a PPP loan, but late in 2020, Congress specifically authorized those deductions. However, some businesses filed tax returns relying on the initial guidance from the IRS. The IRS has now released a safe harbor mechanism that allows businesses that did not deduct those expenses on their 2020 tax returns to deduct them on their 2021 tax returns. This allows businesses to reap the benefit of those deductions without filing an amended tax return.
Our firm has been using the AICPA funding portal which is linked to a fintech bank this time around the system allows us to follow the application as it progresses through the submission\approval\funding process. We have seen the approvals and funding go a bit smoother for most of our clients however, we are still seeing some applications got caught up in the SBA error code system which was enhanced in order to prevent more fraud. Fingers crossed that these get resolved before the funds run out again.
Supplemental Targeted Advances
Last Thursday, the SBA opened a new round of Economic Injury Disaster Loan assistance, to provide $5 billion in extra help to a million small businesses and nonprofits that have been the most severely affected by the economic impact of the pandemic. The Supplemental Targeted Advance program is a new SBA relief program that offers an extra $5,000 in grant funds for the most hard-hit businesses. It was included as part of the American Rescue Plan Act that President Biden signed into law last month.
The program represents the latest form of help that the SBA is giving to small businesses, we are currently reviewing the eligibility requirements and seeking guidance related to the impact of these funds on 2021 federal and state business tax returns. As we have seen these programs are quite helpful but their effect can be far more wide reaching than just a nice deposit into your bank account. Given the relatively small fund amount it is unlikely to be available as widely as the more popular Paycheck Protection Program.
Targeted EIDL Advance
The SBA is launching a new round of Economic Injury Disaster Loan (EIDL) Advances, the Targeted EIDL Advance. This program comes with it’s own set of eligibility rules and a new application. Those businesses who received the EIDL Advance last year in an amount less than $10,000, may be eligible to receive the difference up to the full $10,000. The combined amount of the Targeted EIDL Advance and any previously received Advance will not exceed $10,000.
Businesses eligible for the Targeted EIDL Advance must meet ALL the following eligibility criteria:
- Located in a low-income community, as defined in section 45D(e) of the Internal Revenue Code. The SBA will map your business address to determine if you are in a low-income community when you submit your Targeted EIDL Advance application.
- Suffered economic loss greater than 30 percent, as demonstrated by an 8-week period beginning on March 2, 2020, or later, compared to the previous year. You will be required to provide the total amount of monthly gross receipts from January 2019 to the current month-to-date.
- Must have 300 or fewer employees. Business entities normally eligible for the EIDL program are eligible, including sole proprietors, independent contractors, and private, nonprofit organizations. However, agricultural enterprises, such as farmers and ranchers, are not eligible to receive the Targeted EIDL Advance.
Expanded Child Tax Credit
Under ARPA, families with children may be eligible for a tax credit of up to $3,600 per child, which they may begin receiving in monthly installments of up to $300 per child, starting in July. The initial amounts will be estimated based on 2020 tax return data. However, if your income increases substantially during 2021 or if your eligibility otherwise changes, you may have to pay back some of the credit. If you received a larger credit than you’re entitled to, that excess will reduce your 2021 tax refund. The IRS plans to open a portal on July 1 that will give taxpayers the ability to opt out of receiving the monthly payments and to update their information. However, payments are scheduled to start going out on that same day – July 1 – so quick action may be needed to avoid an unpleasant tax surprise on your 2021 tax return.
Tax Refund Delays
In normal times, the IRS generally issues tax refunds within 21 days. However, many people are waiting six to eight weeks or even longer to receive refunds from their 2020 tax returns. In addition to rapidly rolling out payments for three waves of stimulus payments, the IRS is still scrambling to administer complex tax changes while processing millions of 2019 tax returns received by mail during summer and fall, plus the deluge of 2020 tax returns filed already. Some refunds are being delayed because the mid-tax-season changes in ARPA may require manual adjustments to returns filed early, while other recent tax changes require additional verification. The best source of information is the IRS Where’s My Refund tool, although some of the responses are not terribly helpful. Contacting the IRS for help can be an exercise in futility: at present, the agency is answering only 7 in 100 phone calls.
Other Tax Matters
The filing deadline for 2020 individual tax returns has been extended to May 17th, for those of you procrastinators, please remember that we need all of your information as well as final guidance from the IRS in order to prepare your returns. That being said on Monday we started preparing extensions and will need you to forward your completed worksheets and original documents through our secure portal. As of several years ago, we need to include your valid driver’s license in order to submit either your return or extension via the file system.
A reminder there is still time through May 17th for those of you who are intending to make IRA contributions for your 2020 tax return (even if you are going on extension). Please check with us as to your eligibility for traditional deductible, non-deductible, or ROTH IRA contributions.
Tax-Friendly States are Like Free Lunches
Many retirees move to a new state for financial reasons. However, as this article on Yahoo points out, “tax-free states are like free lunches. There’s no such thing.” States must raise revenue somehow, so states with low or no state income tax may have high property tax or sales tax rates. Some states tax Social Security and other retirement income, while others do not, or tax it at a reduced rate. Before considering a move to a “low-tax” state, do your homework, and investigate the entire picture of a state’s tax environment.
State Taxes and Unemployment Income
As discussed in prior blogs and newsletters, under ARPA, the first $10,200 of unemployment benefits is not subject to federal income tax if your MODIFIED ADJUSTED GROSS INCOME is under $150,000. Those who filed early, before ARPA was passed in March, will get an automatic adjustment to their federal refund.
However, not all states align with the federal tax-free treatment of unemployment income. Depending on where you live and when you filed your tax return, you may need to file an amended state tax return to get the benefit of this tax break, or to add that income back for states that fully or partially tax unemployment income. We here in New York are still waiting for the final vote on the legislative bill S512A which would render a final determination if NY will follow the same exclusion rule as the IRS. Fingers crossed for those who will surely appreciate this added tax relief!
Now that around half of Americans have received at least one dose of the COVID-19 vaccine, more companies are considering bringing employees back to work. However, research from a Harvard Business School remote work expert encourages companies to carefully consider seven factors before bringing everyone back or developing the company’s remote work policy. For example, both Millennials and women tend to prefer the option of remote work, but for different reasons. Millennials tend to seek out flexible work arrangements, while women’s careers have often been sidelined when a couple relocates for the husband’s work. Also, not all employees have the same preferences for remote or in-person work.
LIFE IN THE POST-PANDEMIC ERA
What will the “new normal” for work be like? About all anyone can say is that it will be different from the way it was before the pandemic. For many people, the pandemic put a pause on their career trajectory, and reshaping it over the coming months and years may require careful thought and strategic actions in three specific areas. First, consider how and where you work best. Is all-remote best for you, or do you prefer being in the office some or all of the time? Second, the pandemic clearly differentiated between great leaders and poor leaders. This may be a perfect time to seek out a great leader if your current one didn’t do well under the stress of the pandemic. Third, the importance of a strong and supportive professional network was made clear. Making the connections to strategically grow and strengthen your professional network new will pay big dividends in the future.
When the architects who popularized the open office say that the open office is dead, it may be truly time to redesign workspaces so that they provide employees the kinds of spaces they need. Clive Wilkinson Architects suggests three basic models that may be appropriate. One example is the Library, which includes both large tables and private nooks for focused work, with an overall expectation for quiet and hushed conversation. Another choice is the Plaza, a casual setting for lunch and snacks, which encourages employees to sit and chat rather than grab a drink and sandwich and head back to their desks. The third option is the Avenue, which transforms hallways into spots for serendipitous conversations with bar-like tables and stools.
- IRS resources for stimulus payments:
- The best source for up-to-date and accurate health information is the Center for Disease Control (CDC)
- The CDC also has recommendations for businesses and employers
- Our Covid-19 Resource Center with relevant blog posts, videos and prior weekly newsletters
- Payroll, HR and benefits company Gusto has put together An Employer’s Guide to Navigating the Coronavirus
- Accounting Today has a special page for articles on COVID-19
- Intuit QuickBooks has a dedicated page to help small businesses
- Entrepreneur put together a listing of free tech resources for remote work
- The Consumer Financial Protection Bureau has warnings about COVID-related scams
- Fast Company has a listing of the best productivity apps for 2020
- The New York Times has an online newsletter on K-12 and higher education
- The Wall Street Journal has a collection of articles on education
- The Atlantic has a state-by-state coronavirus tracker
We sincerely hope that you and your family are well and remain well. If you have any questions or concerns, don’t hesitate to reach out to us. We are all in this together!
Complementary Discovery Session
If you need help with your accounting, want to create a tax minimization plan, want to discuss your business growth plan or your finances, are concerned about retirement goals or need to be held accountable for your 90 day action plan, contact us for a complimentary discovery session or an appointment to just get started.