COVID-19 Weekly Update – April 7th 2021
Rapid vaccine rollout across the U.S. is helping the economy here recover months ahead of European economies, as a Reuters study of data across many platforms shows. Bookings on OpenTable show that the U.S. is gradually returning to nearly normal, while those in Europe are still flatlining. Air travel is increasing, and commercial activity is also improving, especially as stimulus payments hit bank accounts.
I am so grateful to have received my second shot of the Modena Vaccine last Wednesday afternoon, and although I experienced some side effects from my shot, I understand that was a sign that my body was producing anti-bodies…
I followed general advice and drank warm tea, homemade chicken soup and rested.
Evidently horseshoe crabs have been around for more than 300 million years, this one posed for me as my “wildlife photo” of the week.
This sunrise is my choice for “photo” of the week, I am so grateful to be able to get out on the beach several times a week and now it really feels like spring. I am hoping you are able to take time out for yourself each day as well.
THE AMERICAN RECOVERY PLAN ACT (ARPA)
Economic Impact Payments (aka Stimulus Checks)
The IRS continues to update its EIP FAQ pages for the third wave of payments. Recent updates include reconciling the payments on your 2020 tax return. If you didn’t receive a third payment or didn’t receive the full amount, you will need to include this on your tax return so you can get the remaining amount as a Rebate Recovery Credit. Like the previous two payments, the third payment is not taxable income, and you do not need to pay it back if you receive more than you are eligible for based on your 2020 income.
According to the IRS, if you didn’t receive your EIP payment as a direct deposit by March 24, you’ll be receiving it in the mail as either a prepaid debit card or a check. Checks and debit cards began going out March 19 and will continue over the next weeks. The best way to track your payment is using the IRS Get My Payment tool which has been updated for third round payments.
As we work with our clients on their tax returns we see that most have received the correct amounts. For those who have not, we prepare the reconciliation and request the additional funds as a refund or Rebate Recovery Credit on their 2020 tax return along with their regular refund.
Unemployment Benefits and Taxes
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. If you filed your tax return before ARPA passed, the IRS has announced that it will be issuing refunds for those returns beginning in May. The IRS will start with simple returns where only one person received unemployment benefits and continue progressing through the more complex returns. Some people may become newly eligible for the Earned Income Tax Credit, or for a larger EITC refund. Those changes will also happen automatically. Of course, as I like to say “The IRS is NOT your friend” and will not test scenarios to make sure you are filing the most beneficial way. If you want to take action on your own, you can do so by filing a corrected tax return before the due date of May 17th 2021.
Not all states follow the same rules for taxing unemployment compensation as the federal government, so Kiplinger put together a state-by-state guide on unemployment. We here in New York are waiting to see the final vote on the budget which may happen this afternoon and contain 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!
Paycheck Protection Program (PPP)
On March 30, President Biden signed the legislation to extend the PPP to May 31. No additional funds were added to the program, but funds are still available and should be through mid-April. As of March 28, the SBA has disbursed a total of $734 billion in loans for the entire program. So far in 2021, nearly $212 billion in loans have gone out. Of the total amount of loans, $209 billion has so far been forgiven.
Tax Deadline Extended
Last week, the IRS posted guidance on additional extensions to May 17th, besides the individual 1040s, which are normally due April 15th. IRAs, HSAs, MSAs, and Coverdell ESAs for the 2020 tax year have all been extended to May 17 and anyone who has not filed a 2017 tax return and who is owed a refund on that return has until May 17, or the refund will be gone forever. This extension is automatic for all taxpayers.
The due date for first quarter estimated tax payments for 2021 as well as annual Gift Tax returns and calendar year Trust and Estate tax returns have not been extended and are still April 15th, so please be sure to continue working on putting together your tax documents as you normally would.
This list from the AICPA explains which states have extended their income tax return due dates so far.
Other Tax Matters
Many small businesses receive payments from customers who pay by credit card. Starting in 2022, more of those payments will be reported to the IRS on Form 1099-K. Under current law, credit card processers did not have to provide information to the IRS until a business received at least $20,000 in total credit card payments in 200 or more separate transactions. However, a provision in ARPA requires that starting in 2022, that threshold will drop to $600. This means that more people who sell through platforms such as Etsy or Ebay may be receiving a Form 1099-K in early 2023 with amounts that need to be reported on their 2022 tax returns.
If you resent the quasi-mandatory Zoom happy hours that many workplaces have substituted for in-person gatherings at a local watering hole, you’re not alone. Holding a remote happy hour may seem like a decent team building activity, but the characteristics of Zoom make it impossible to have the kinds of intimate, small-group discussions that really do build connections. Often these become extensions of the workday with most conversation centered around work, and so become nearly mandatory. But as researchers in Australia found, the benefits of team-building exercises vanish if they’re not truly voluntary. A better approach may be to encourage but not require team members to engage in small groups.
LIFE IN THE POST-PANDEMIC ERA
The connection between social isolation and poor health has been known for decades, but what is not yet known is what happens in our brains during isolation. Experiments that subject people to complete isolation have demonstrated detrimental cognitive impacts, but only recently have researchers been able to tap into the reasons why loneliness seems to be so damaging. The need for social contact seems to trigger a response akin to the craving for food or drink. What is also not known is whether the pandemic-induced isolation will have any long-term impacts, particularly on the social development of young people.
What will happen with schools in fall? While most schools plan to open back up to in-person learning in fall, it won’t be back to normal for everyone. Mask mandates and social distancing rules will likely still be in place. Some districts will open their cafeterias, while some will require that children eat in classrooms. Many schools are planning to continue remote learning, at least as a fallback option, or because some parents aren’t ready for their children to return to buildings that they feel are unsafe. What will happen in each school depends on local pandemic conditions, local and state decisions, and the concerns of teachers and parents.
Is it better for the leader of a company to be loved or to be feared? Perhaps a bit of both, but with a greater emphasis on direct and effective feedback and communication, as the CEO of Numerated discovered during the pandemic. As soon as Dan O’Malley began providing blunt feedback and simultaneously offering resources to help team members, his startup thrived. Transparent communication delivered with the goal of making the business operate more effectively helped his team members truly step into their roles.
- 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.