COVID-19 Weekly Update – September 2nd 2020
Shutting down economies around the world to fight the coronavirus has been a blunt and costly instrument, as this piece in the Wall Street Journal describes. Taiwan, South Korea and Hong Kong demonstrated that it was possible to reduce infection rates by widespread testing, contact tracing, cutting off travel with China and adopting masks. Such stringent controls were not possible in most states in the U.S., so instead we resorted to widespread lockdowns. As new research seems to indicate, a better approach might be targeted lockdowns and mandating the use of masks. For example, in the German city of Jena, after mask-wearing was mandated in public places, on transit and work, new infections nearly disappeared.
We’re still not out of the danger zone, so let’s work together to keep each other safe!
CARES ACT UPDATES
Executive Actions for Pandemic Relief
With President Trump’s executive memorandum deferring withholding and payment of certain payroll taxes set to begin on September 1, employers have been anxiously awaiting guidance from the IRS on implementation. The payroll taxes deferred under the executive action are the employees’ share of social security taxes (6.2%) for employees who are paid less than $4,000 per biweekly pay period. Finally, late on Friday, August 28, the IRS released a brief notice. I have written several blog posts on this and have updated my latest one click through here for the post which includes related links. Here are the highlights from the IRS notice:
- Eligibility of employees for deferral of withholding of taxes will be determined on a pay-period by pay-period basis.
- Employers who defer the withholding of payroll taxes will be required to withhold and pay the deferred taxes between January 1, 2021 and April 30, 2021, or they will be assessed late payment penalties and interest. This means that employees will be paying in “double” for those weeks in a future time where we do not know what the economic conditions will be.
- Employers may make other arrangements to collect those deferred taxes from affected employees.
- The memorandum delays only the withholding of payroll taxes, not the timing of the employers’ payment of those taxes.
- Employers must still follow the usual requirements for timely payment of any taxes withheld from employees’ paychecks
However, the guidance omits many of the clarifications sought by the AICPA, as discussed in this podcast (with transcript). For example, what should be the process for employees and employers to elect participating in this program?
What am I recommending? Let’s hurry up and wait yet again for better guidance and specifics as to a REAL possibility for forgiveness, if no forgiveness then this is just “kicking the can down the road yet again”.
Economic Impact Payments (aka Stimulus Checks)
About 50,000 people did not receive the full amount of the economic impact payment they were entitled to because their spouse was behind on child support. The IRS is in the process of making these people whole. Any person who included Form 8379, Injured Spouse Allocation, with their 2019 or 2018 tax return will automatically receive a payment from the IRS that covers the portion of their EIP which was diverted to pay their spouse’s past-due child support. No action needs to be taken by those affected.
Paycheck Protection Program (PPP)
On August 25, the SBA released another interim final rule regarding PPP loan forgiveness covering two issues. First, the SBA clarified that the compensation of S-corporation owner-employees who own less than 5% of the corporation is not included under the constraints limit the forgivable compensation of S-corporation owners to either eight weeks of their 2019 compensation, up to $15,385, for an 8-week covered period, or 2.5 months of their 2019 compensation, up to $20,833, for a 24-week covered period.
The second issue deals with self-rental expenses. Entities that rent property from a related party can only include the amount of self-rental expense that would cover mortgage interest paid during the covered period. This is to level the playing field between entities that hold real estate in that same entity and those that hold real estate in a separate entity.
What am I recommending? Let’s hurry up and wait yet again for better guidance and specifics as to FINAL agreement as to the deductability for expenses paid with forgiveness funds. We are calculating business and individual estimate #3 due September 15th with incomplete guidance.
Recently, some taxpayers received notices from the IRS regarding unpaid taxes, even though they had sent payment to the IRS. Due to the IRS shutdown, an estimated 12 million pieces of mail piled up in IRS facilities, but the IRS tax collection machine continued to crank out notices of taxes due, with interest and penalties. Fortunately, on August 21, the IRS has stopped sending out some of those payment due notices. If you receive one of those notices, and have already mailed a check, don’t cancel or void that check. Eventually, all those payments should get matched up with tax returns. Calling the IRS is discouraged due to long wait times. If you still need to send payment to the IRS, consider making your payment electronically.
This is a real concern of ours and as such I have addressed this in a prior newsletter:
If you have received a notice, please contact us immediately with a copy of that notice and the check number and date of mailing. Then follow up with us as soon as you see the payment hit your account. In some cases the IRS has deposited the funds but has not yet applied it to the proper account. If this is the case for you, also send us a copy of the front and back of the cancelled check. It is our process to log all of the details and correspondence into your digital file so we can follow up until the “case” is closed to our satisfaction. So take a deep breath, then upload the notice to your portal, email the details then let us follow up for you.
WORKING FROM HOME
For workers who faced long commutes in the pre-COVID-19 era, working from home saves time and money. This article from Upwork quantifies the time and money savings when people work at home. For example, back in 2018, Americans spent an average of 54.2 minutes per day commuting, which adds up to 9.5 full days a year. Today, those working remotely report saving on average 49.6 minutes per day. This adds up nearly $22 billion saved on direct commuting costs since the pandemic began. Adding in the costs from lost lives and property and pollution plus the value of that time means that collectively we have saved $90 billion in commuting costs in the last few months.
Working at home can mean squishy boundaries between work and home, unexpected disruptions at home, and putting in more time on the clock than anticipated. All of that can lead to burnout. This piece in Fast Company has ideas for employers who want to help employees avoid or heal from burnout. Taking breaks during the day, establishing regular start and end points to the workday, and getting a change of scenery can all do wonders. Making time to socialize, even in a remote world, can also help maintain balance.
Each of the 50 states in the U.S. has slightly different – or in some cases, vastly different – laws regarding income tax. Before the pandemic, figuring out what states remote workers had to pay taxes in was already complex, but with so many more people working remotely and in different states than their employers, that problem has become more complex. For those who have moved temporarily, keeping track of how many days you spend living and working in a different state is a big part of determining which states get to tax which income. People who move permanently to a different state should make sure they take actions to bolster their residency in a new state, such as registering to vote or getting a new driver’s license.
LIVING WITH AND AFTER THE PANDEMIC
Work in the post-pandemic world
This “experiment” with remote work during the pandemic is changing the minds of CEOs about the need for expensive office space. According to a recent survey, 68% of large company CEOs are planning on downsizing their office footprint. Besides the obvious savings on rent, companies have access to a talent pool as broad as the country, or even as broad as the globe. Some companies may give their office space a face lift to make it more suitable to a hybrid approach, where the office is one of several places people get their work done.
Rental Real Estate Owners and Tenants
A recent NYT article cited the concern of the C.D.C. if evicted tenants are forced into shelters. On August 8th the White House announced an executive order to bar evictions for most renters for the rest of the year. Click through to read the full NYT article “U.S. Orders Eviction Moratorium for Most Through Year’s End”.
Back to school
Many schools are distributing Chromebooks to students as part of their remote learning strategy. Google’s new Family Link app lets parents set up parental controls for their kids, but there are some tricks, as this piece in the Wall Street Journal explains.
Last spring, parents thought that remote learning would just be a short-time experience. But with virus outbreaks continuing, many parents are once again trying to figure out how to make it work. National Geographic spoke to veteran homeschoolers to get their advice for parents. Setting rules, such as staying logged in for the whole class and not opening another browser window to surf the net or play games during an online class can help.
- 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
- 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
- The Red Cross has pointers to help young adults stay safe
- Entrepreneur put together a listing of free tech resources for remote work
- Kiplinger has a state-by-state guide to absentee ballot voting.
- 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
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!