Hi All,

The following is reprinted with the permission of my trusted colleague, Flemming Business Services Certified QuickBooks ProAdvisor Suzette Flemming.

Dan

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30 March 2020

Good Morning,

I hope you are well.

As an accounting professional, tax preparer, and member of the small business community, I strive to give the most concise and practical list of items for small business owners and/or taxpayers related to the Federal stimulus package and economic developments from COVID-19.

This email contains a lot of information, so here is a quick table of contents of what will be covered:

✓ IRS Filing Extension to 7/15/2020
✓ Cash payments to individuals ($1,200 per adult + $500 per child)
✓ SBA and Disaster Relief Loans for small businesses
✓ Tax credits, grants, and other helpful resources
✓ Other Misc. Items

Beware of Tax Scams! Protect yourself by filing ASAP

Individual and Corporate (C-Corporations) tax returns for 2019 have been extended to 7/15/2020. The extension is both to file and pay. Either way, I recommend filing an extension by 4/15 to extend the time to file through October 15th, 2020; keep in mind that the payment is still due on 7/15 regardless of the extension of time to file the return.

With that being said, it is imperative that you file your 2019 tax returns ASAP if you can. If you file your tax return promptly, you avoid someone trying to steal your identity by filing it before you. With all the “free money” being touted by the US Government, tax scams will be at an all-time high! Do not worry about whether your 2019 income is higher than 2018 for the purpose of getting your stimulus check, just file your 2019 ASAP if you haven’t done so. I will explain more details about this.

Cash Payments to Individuals

According to the new law, the intention is to give most adult Americans a $1,200 stimulus check to encourage them to stay at home and/or to pay their bills during these difficult times. The check that you may receive is an advance on a tax credit on your 2020 tax return. At the end of 2020, the tax credit will be based on your 2020 income. Here is how it works:

✓ If you are an individual that makes $75,000 or less in 2020 you will get the full $1,200 refundable credit. There will be a $5 reduction of the credit for every additional $100 you make above the $75,000; the phaseout will totally reduce the credit at $99,000;
✓ If you are married filing jointly in 2020 and make $150,000 or less, you will get the full $2,400 refundable tax credit. There will be a $5 reduction of the credit for every additional $100 you make above the $150,000; the phaseout will totally reduce the credit at $198,000;
✓ If you are head of household in 2020 and make $112,500 or less, you will get the full $1,200 refundable tax credit. There will be a phaseout of $5 reduction of the credit for every additional $100 you make above the amount listed above; and
✓ In addition to that, there will be an additional $500 per child under 18 as of 12/31/2020 added to the credit.

Note: The amount of the payment to be advanced during April 2020, will be based on 2018 or 2019’s tax return information. Since it is considered to be a refundable tax credit for the year 2020; your final income for 2020 will determine real eligibility; so if in 2020 your income is higher, you may have to pay back any advance that you receive. If you do not get the money upfront, but still qualify due to income levels, you will get it as a tax refund or reduction of your 2020 income tax liability.

Whether you think you qualify for this or not, I still recommend that you file your 2019 tax returns with direct deposit information ASAP, so the IRS can have your accurate information. Have you moved in the past year? If you need to change your address with the IRS, fill out Form 8822 and mail it to them ASAP.

Note: I am getting bombarded with questions related to these payments, I do NOT have a mechanism to request the money and/or check payment status or verify eligibility. The only thing I can do is file your tax returns to have you compliant.

Disaster Relief - SBA Loans for small businesses

You need to have all your latest tax returns filed, your bookkeeping organized and current, and a sound business plan indicating how the loan will be used.

Depending on the requested loan amount and cash flow requirements, the SBA will offer you the type of loan that seems fitting for your situation (there are two types: 1) “Disaster Relief Loan”, and 2) “Paycheck Protection Loan.”. Right now there is no mechanism to choose the type of loan; however, only the latter may potentially qualify for debt forgiveness. My suggestion is to start the process and apply for whatever is available via the SBA.gov website (there might be some additional guidance in the near future for applying for the two types of loans separately) - either way, it's valuable to start gathering the documentation and required information.

Notes on “Debt Forgiveness” from these loans:
There is language in the law that some of these SBA loans will qualify for forgiveness up to the amounts used to pay payroll, keep employees on staff, and pay essential expenses to “keep the doors open they are calling this Paycheck Protection Program (PPP). There is no official federal government website with the specific mechanics on how debt forgiveness will work, or how to apply for this - those details are coming soon. My recommendation is to start the application process with the SBA first; always get the loan with the intention to pay it back.

The PPP loans will be limited to 2.5x your monthly payroll and related costs: direct employee benefits, rent, utilities, and essential payables prior to the covered period. The period that will be reviewed is February 15th through June 30th, 2020. You must have had employees prior to Feb 15th. Right now clean and complete accounting records are of the essence to apply for these loans.

The US Chamber of commerce has a great summary in PDF on SBA Loans, Payroll requirements, and debt forgiveness.

Tax Credits, Grants and other helpful resources

For small businesses with employees, there will be a payroll tax credit applied to future 941 forms, that will allow the small business to keep the 6.2% portion of the social security tax paid by the employer. In addition, employers will be able to delay these payments through 2021, essentially giving the small business an interest-free loan on the payroll taxes. The instructions, forms, and/or mechanisms to do this are not yet available from the IRS. If I manage your payroll, rest assured I will be on top of these credits. If you outsource your payroll with a payroll service, make sure you lean on them for guidance on this and MAKE SURE they are being proactive with this. You should not feel that you need to chase them down for these credits. What we do know, is that you would need to keep your employees and/or not reduce the overall wages in order to get these credits. I also know that this will be an either/or situation where you can either take the payroll tax credit OR the Loan Debt Forgiveness as described above.

Specifically for government grants, I am not aware of any specific grants or “free money” out there for distressed individuals, communities, or businesses or at least the ones in which an accountant would have the mechanism to arrange on their client’s behalf.

Other Misc. Tips and Resources

Be aware of the surge of cyber-attacks and phishing emails roaming around, hackers/scammers know that many people are working from home, connecting to their office computers remotely, and using many new telecommunications apps for the first time. New users are much more susceptible to confusion and/or not knowing which legitimate communication apps to use and what features are appropriate. Do not open emails you do not recognize! Do not download any new apps without consulting a competent IT professional. Scammers want to steal your identity and/or install ransomware on your computers. Google “ransomware” and you will see what we are talking about.

Additionally, beware of “SBA Loan Officers” that contact you, there will be a stream of people claiming to work for the SBA, the Government, or a Lending institution to help you secure a loan or grant linked to the stimulus package that just passed. Do not give your financial info, tax returns, etc. to just anyone. Do not upload those documents to any random website unless you use your Bank’s secure portal or SBA.gov directly.

If you are struggling to make ends meet, proactively call all your vendors and debtors, tell them you are temporarily strapped for cash... or simply say: “do you have any programs to reduce my services to a minimum?”, “How can I pause my services?”, or “How can I defer my payments for the moment?” - You will be surprised how many of your vendors will be flexible and go through great lengths to keep you as a customer!

I apologize in advance that I am not going to have all the answers regarding this stimulus package. If you ask a question for which I do not have the answer, I will be brutally honest and tell you. If a new important development arises, I will be proactive with a follow-up email.

Lastly, no amount of money is worth a life... stay home and stay safe!

You can contact me anytime for any questions and/or to just chat about the issues you might be going through.

P.S. Please feel free to forward this to anyone that you feel may benefit from the information. I'm happy to answer their questions as well.

Suzette Flemming

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Certified QuickBooks ProAdvisor
http://www.FlemmingBusinessServices.com
suzette@flemmingbusinessservices.com
Phone: (406) 781-2726

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