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Weekly Digests

Weekly Digest – March 10th 2021

Today could be the day! Congress is expected to vote on the 1.9 trillion Covid-19 relief bill today, Wednesday March 10th, just before the expanded unemployment insurance benefits end.  As per the Associated Press morning wire :

A dominant feature of the bill is initiatives making it one of the biggest federal thrusts in years to assist lower- and middle-income families. Included are expanded tax credits over the next year for children, child care and family leave plus spending for renters, feeding programs and people’s utility bills.”

A summary is below, but according to what I have read, the ability to receive funds on a monthly basis will enable families to budget and use that monthly payment towards child care.

As we reach the one year mark of our “pandemic normal” there have been posts of stories and photographs of how we made it through.  For me it’s been the ability to get out in the morning for a walk or to work-out in my “home gym”, then go to my work space.  It’s also been key that my staff has been able to work remotely as we helped our clients through their PPP1 and now PPP2 loan applications and forgiveness strategies, while continuing the regular work of tax season and beyond.  An article I contributed to  “Working Remotely: How do You Draw the Line Between Work and Home”  was published this week with comments from myself and several other accountants.  Feel free to read through our tips.

And here is my choice for photo of the week, taken this weekend at sunrise at the beginning of my run/walk on Rockaway Beach:

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This one is pretty cool too, taken Tuesday morning at Jacob Riis Park as the suns ray’s broke through the clouds:

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And finally my “wildlife photo” pick of a seagull in flight:

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When will the pandemic be over? That’s the question that Alexis Madrigal of The Atlantic asked prominent public health experts. While “the end of the pandemic” means “when transmission of COVID-19 ceases” to most non-scientists, that threshold likely won’t be met anytime soon, if ever. One threshold is less than 5,000 new cases and less than 100 COVID deaths per day. By that standard, we have a long way to go, as the U.S. has been averaging 60,000 cases and 2,000 deaths per day. Vaccination rates of 80% for those over 65, and 70% to 80% for everyone else. The experts also warn that easing off on restrictions too soon may extend the date that we can truly say the pandemic is over.

According to new guidance from the CDC, fully vaccinated people can gather indoors without masks. However, the CDC also recommends that fully vaccinated people continue to wear masks, practice social distancing, and avoid large crowds.

STIMULUS UPDATES

The New Stimulus Plan

After a marathon weekend of debate, the Senate passed its version of a new stimulus plan, and it heads to the House today for another round of discussion and a final vote. Here’s what’s in the new plan:

  • A third stimulus payment of up to $1,400 for each eligible person. Single taxpayers with income under $75,000 will receive a full payment, and joint filers with combined incomes under $150,000 will each receive a payment of $1,400. New income ceilings mean that many people who previously received payments in the first two rounds will not receive one this time around. Single filers with incomes of $80,000 or more will not receive anything; for joint filers, that no-payment ceiling is $160,000. Children and adult dependents, including college students, will also receive a payment of $1,400 each. Payments of $1,400 for dependents are also included. This payment calculator from Kiplinger will help estimate how much you could receive.
  • Expanded federal unemployment benefits of up to $300 per week through September 6th.
  • For 2020, the first $10,200 of unemployment benefits will not be taxable for those making under $150,000.  This provision will require an update to the current tax return forms and will probably result in an extension of the 2021 tax filing season to June or July.
  • Expanded child tax credit of up to $3,600 per child under age 6 and $3,000 for each child aged 17 or under. The plan includes the option to make the payments periodic rather than paid out as a tax refund, similar to the treatment for other countries.
  • Funds to help schools reopen safely.
  • Funding to help state, local, and tribal governments.

As congress is scheduled to vote today, the next round of stimulus payments will likely start going out within days of Biden’s signature on this bill.

Economic Impact Payments (aka Stimulus Checks)

According to the IRS, all first and second round payments have been sent out. If you didn’t receive one or both of those payments, check with the IRS Get My Payment tool.

If you’re eligible for the second round of payments but did not receive one, you can receive the additional stimulus payment as a Rebate Recovery Credit on your 2020 tax return.  In order to make sure you receive the proper benefit, please complete the worksheet we supplied as well as copies of the bank statements with the full or partial payment you received circled.  This will enable us to include the stimulus rebate reconciliation as part of your return.

Once this new bill is passed we expect to receive guidance about the ability to request this rebate as process similar to that for the first and second round, or as part of your 2020 tax return stimulus rebate reconciliation as well.

Paycheck Protection Program (PPP)

When Congress enacted this program, the intent was that proceeds from forgiven PPP loans would be tax-free, and that any expenses paid with PPP proceeds would also be deductible. This is contrary to the usual treatment of forgiven loans, which treats loan forgiveness as taxable income. Some states, but not all, are in conformity with the federal government’s treatment of PPP proceeds. The Tax Foundation has a map and chart that shows how PPP loan proceeds will be taxed across the U.S.

The SBA recently released new guidance for self-employed Schedule C filers that allows for PPP loans based on gross revenue instead of net income, as explained in the Journal of Accountancy. This guidance will allow self-employed persons to receive larger loans than under the previous rules. This expansion is available only for new first- and second-draw loans on a go-forward basis.

Just yesterday Elizabeth and I met with our AICPA funding portal partner representative to discuss some of the loans we are following and to hear about the update to the portal which will allow us to apply for the newly enhanced loans for our schedule C  tax clients.  We were also interviewed for quotes and background stories to be used as the AICPA meets with the House Ways and Means Committee to request an extension of time to apply for these funds.  Right now the deadline to apply is March 31st.  We also requested they relate our reasons for requesting an extension of the 2020 tax filing and payment deadline through July 15th.

Tax Issues

Under the CARES Act, required minimum distributions (RMDs) from retirement plans were suspended for 2020. As a reminder, RMDs are required for 2021, unless the Biden administration decides otherwise. Legislation passed in 2019 increased the age to start RMDs from 70 ½ to 72 for anyone turning 70 ½ in 2020 or later. People who turned 70 ½ in 2019 were supposed to take their first RMD by April 1, 2020, but with the CARES Act suspension of RMDs, that deadline is now April 1, 2021.

Additionally under the bill that is now passing through congress and onto President Biden for signature, the first $10,200 of 2020 state unemployment benefit payments may be exempt from tax at the federal level.  If this occurs we will need guidance as to how these funds will be taxed at the state level and this can differ from state to state.  For those who withheld taxes on your benefits, they will be reported as withholding payments on your 2020 tax return and you may be entitled to a tax refund.

Employee Retention Credit

The Employee Retention Credit was passed as part of the CARES Act of 2020, and grants employers who suffered either a shutdown in their business or a decline in gross receipts due to the COVID-19 pandemic a refundable tax credit of 50% of wages paid, up to a maximum credit of $5,000. The IRS recently released guidance on claiming the ERC and how this credit interacts with the PPP. Originally, employers had to pick either the ERC or the PPP, but changes made by Congress on December 27th allow both. Employers can receive funds under both programs but cannot use the same wages for both programs. The rules are complex, so please consult our office for assistance.

REMOTE WORK

Leading a remote company requires more empathy so that employees know that they are valued. This article in Fast Company outlines five things that emotionally intelligent leaders do to retain their remote workers. Briefly, these leaders establish strong relationships and don’t assume that all is well. Regular video calls aren’t as good as in-person conversations, but they do help with connection. They check in regularly with open-ended questions and listening without micromanaging. Supportive networks of fellow employees or outside resources help connect team members with similar problems. Virtual celebrations of important milestones and team accomplishments also help keep team members connected and engaged.

Collaboration software Around lets users’ heads appear as small bubbles floating over wherever a team is working, such as a shared Google Doc. The startup has received $15.2 million in funding so far and says it’s experienced 30% week-to-week growth.

LIVING WITH THE PANDEMIC

As the coronavirus vaccine rolls out slowly across the country, companies are trying to figure out when – and if – employees should return to work. Besides vaccination levels, companies need to coordinate with school opening schedules and employee preferences. Some companies are setting firm dates as early as April or as late as September for all employees to return to the office, while others are limiting the number of people allowed back in the office. Some require all employees who want to return to be vaccinated, while others are encouraging vaccination rather than requiring it. Some are planning for hybrid remote and on-site work, while others want all employees to eventually return.

GENERAL RESOURCES

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

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