Weekly Digest – 25 November 2020 & Wishing You a Safe Happy Thanksgiving
One of the positive side effects of the pandemic has been reduced traffic on interstate highways. A group of amateur race car drivers decided to take advantage of the empty roads to revive the “Cannonball Run,” a highly illegal endurance race from Manhattan to Los Angeles. The object of this race is to make the run faster than anyone else. Teams plan for months, fine-tuning routes to consider traffic light timing, gas stations, rest stops, and construction zones. The first run in 1971 took nearly 41 hours. Subsequent runs whittled that down to just 27 hours and 25 minutes, which requires an average speed exceeding 100 mph. But, in quick succession, with the roads empty during the pandemic, that record was broken this summer, with teams clocking in at 27:54 and 26:38. This article in GQ profiles a solo driver who made the run in just 25 hours and 51 minutes, driving a modified Ford Mustang he rented at the Tulsa airport, with just one stop mid-continent to refuel.
We hope that any holiday travels you may make for the Thanksgiving holiday are at a safer, more leisurely pace, and that you and your loved ones enjoy a few days of rest! For those who are traveling out-of-state, here’s a state-by-state guide to COVID-19 restrictions put together by Forbes.
We had planned to make the 10 hour drive from our home in NYC to share the holidays with my daughter and her husband and his family who live in Michigan; our other daughter who lives in Atlanta would fly in and meet us there. Those plans changed several weeks ago when they saw the number of Covid-19 cases and the severity of those cases rise in the hospital they work in. We are still going to be cooking and spending time together tomorrow via our family thanksgiving zoom.
In an effort to bring families together Zoom announced that they are dropping the 40 minute limitation for free accounts for the Thanksgiving holiday. Click through to sign up for a free Zoom account or read the details and stay safe while enjoying being together while apart from your family and friends this holiday season.
Our A Parness Company family wishes you all a safe and Happy Thanksgiving Holiday
CARES ACT UPDATES
Another stimulus bill?
For months, Congress has been at an impasse in passing an additional stimulus package, but as this video from the Wall Street Journal explains, there are two main forces working for a new agreement, and two forces opposing such an agreement. The current surge in virus cases and the economic hardships brought on by the pandemic plus the expressed wishes of President-elect Biden support an agreement by year-end. But those forces are countered by the large gap between the House and Senate versions of a support package, and continued uncertainty about control of Congress. At any rate, nothing will happen this week. However, without quick action, nearly 12 million Americans will lose unemployment benefits the day after Christmas, when two federal unemployment programs passed as part of the CARES Act expire.
Student loan payments, which have been put on pause for federal programs, may also restart in January if nothing happens before then. Borrowers do have a few options in case no agreement can be made. Requesting deferral or a different repayment plan as soon as possible is encouraged.
Economic Impact Payments (aka Stimulus Checks)
We continue to receive calls and emails from some of our clients who have not yet received the stimulus checks or direct deposits they were expecting to see. Please be reminded that the dual purpose of those checks was to help stimulate the economy in the early days while giving much needed relief to people who were taking a financial hit. These payments represent an advance payment of a 2020 tax credit so for those of you who are/were eligible for the funds but did not receive them, your 2020 tax return will reflect this and your balance due or refund amount will adjusted accordingly.
We have been able to take a breather this week as the efile system just shut down for its annual retooling. We recommend that those of you expecting refunds who did not make the October 15th filing deadline and recent cutoff wait until the efile system reopens in January 2021 to efile those returns, as the paper filing system has a four month backlog.
Even though the IRS and your state efile system are closed for now, the preparation and planning never stops. Just last night I explained to our regular UPS delivery person that he may have owed taxes when he submitted his prior tax returns and may owe money when he files again for 2020 because of his overtime and the elections he made on his W-4, and not because of the tax law. In fact, although we do expect some new legislation to be enacted in 2021 (some which may be retroactive to 2020), it will not impact most taxpayers.
There is a still time to add additional withholding for your last few paychecks and/or bonus checks. In addition there is still time to enact a micro tax minimization plan for the 2020 tax year and make changes for 2021.
CARES ACT UPDATES
Paycheck Protection Program (PPP)
Just last week the IRS released two new notices 2020-75, and 2020-27, reaffirming IRS Notice 2020-32, which was released on May 2, 2020. These notices state that the expenses paid with forgiven PPP funds would not be deductible and now go one step further to state that the same holds true if you have a reasonable expectation of obtaining loan forgiveness. This treatment is consistent with Section 265(a) of the Internal Revenue Code, which states that otherwise allowable deductions are disallowed if the expenses are allocable to a “class” of income that is either exempt from tax or excluded from income (i.e., paid with grant or forgiven loans funds).
While we were expecting that the states would decouple from the federal rules if these expenses are allowed at the federal level, we are still hoping that we get supporting legislation soon, or at least at the beginning of 2021 that clarifies and reaffirms the intent as stated in the C.A.R.E.S. act allowing grant recipients to exclude the grant funds from income while deducting the expenses paid with those funds.
Provider Relief Fund Reporting Requirements
(CARES #1-#2-#3 which applies to medical practitioners)
This is an area where guidelines are still in flux, however we are scheduling meetings with our clients who are medical practitioners so we can address the basics and help guide them in this process which will require gathering the data necessary for the scheduled reporting:
Who does this apply to?
- Anyone who received at least $10,000 in PRF. For many medical providers the relief came based upon Medicare receipts from either 2018 or 2019. For most providers, these funds were paid via HHS Medicaid and you submitted documentation and applications three times so far (#1-#2-#3).
When is reporting due?
- January 15, 2021: Reporting portal opens for providers
- February 15, 2021: First reporting deadline for the use of PF funds for all providers
- July 31, 2021: Final reporting deadline for providers who did not fully expend PRF funds prior to 12/31/20
What expenses qualify?
- Expenses attributable to ” prevent, prepare for, and respond to coronavirus” that are not reimbursed or obligated to be reimbursed from other sources (from any source, including insurer payments for PPE). The two main categories of expenses for those that received $500k or less are “General & Administrative” and “Healthcare Related Operating Expenses”.
- Lost revenues, as represented by a change in net patient care operating income. As of now, these should be calculated on a calendar year basis.
- The summation of expenses and lost revenue will be offset by other assistance received in 2020 including PPP loans, Local/State assistance or any other program directed towards COVID related expenses.
A few extra notes –
- Focus on direct expenses first as they will help reduce the amount of lost revenues that must be identified and reported.
- You must be able to show the incremental change in expenses for COVID related items. For instance, you can’t just include all of your invoices for PPE; rather, you will need to reasonably quantify changes in your 2020 expenditures.
- For equipment purchased, clarification may be required as to whether you can capture the entire amount or just a normal depreciable amount. For example, if you purchased a new sterilization machine that was over $2,500 we may only be able to capture the number of months the item was depreciated in 2020 over its total depreciable life. The guidance suggests that certain equipment ‘directly’ related to COVID such as ventilators could be deducted, but there is room for interpretation.
- Further guidance may also be necessary to consider productivity reductions. For example, your office may still have been collecting on existing receivables in 2020 but may see a considerable reduction in receivables due in future years
FAQs are being released weekly related to PRF, but it is important that you begin identifying these expenses sooner than later if you hope to properly report these items in early 2021. We will help with the process, but you know your situation better than anyone else.
Help for small businesses
While the Paycheck Protection Program ended in August, there are still other resources available for small businesses. The SBA’s Economic Injury Disaster Loan program is still accepting applications, and various state and local governments still have grants and loans available. Crowdfunding sources may also have funds available.
- 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
- Intuit QuickBooks has a dedicated page to help small businesses
- The Red Cross has pointers to help young adults stay safe
- 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
We sincerely hope that you and your family are well and remain well and we wish you a HAPPY THANKSGIVING HOLIDAY. If you have any questions or concerns, don’t hesitate to reach out to us. We are all in this together!