Treasury, IRS and Labor announce plan to implement Coronavirus-related paid leave for workers and tax credits for small and midsize businesses.
The IRS has announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits provided by the Families First Coronavirus Response Act (the Act). The credits are designed to give businesses with fewer than 500 employees funds to provide coronavirus-related paid leave, either for an employee’s own health needs, or to care for family members. Under the Act, employees receive up to 80 hours of paid sick leave for coronavirus-related reasons and expanded paid child care leave when schools are closed or child care providers are unavailable. To take immediate advantage of the paid leave credits, employers can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released in the near future. News Release IR 2020-57.
Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.
Corona-virus related reasons is a very broad category and does not require the employee to technically be sick. A shelter in place restriction issued by a government entity qualifies.
- Published in Uncategorized
Caronavirus Update: IRS extends Tax Filing deadline to July 15
Late in the evening on Friday, March 20, 2020, the Treasury Department and the IRS issued Notice 2020-18, restating and expanding relief provided in Notice 2020-17. Notice 2020-18 provides guidance on how Affected Taxpayers can defer tax filings AND tax payments due to the coronavirus (COVID-19). The term “person” includes an individual, a trust, estate, partnership, association, company or corporation, as provided in section 7701(a)(1) of the Code. For an Affected Taxpayer, the due date for filing Federal income tax returns and making Federal income tax payments due April 15, 2020, is automatically postponed to July 15, 2020. Affected Taxpayers do not have to file Forms 4868 or 7004. Another significant change is there is no limitation on the amount of the payment that may be postponed. As you may recall the previous release limited the amount of payment deferral to $1,000,000 for individuals and $10,000,000 for corporations.
The relief provided in this section III is available solely with respect to Federal income tax payments (including payments of tax on self-employment income) and Federal income tax returns due on April 15, 2020, in respect of an Affected Taxpayer’s 2019 taxable year, and Federal estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020, for an Affected Taxpayer’s 2020 taxable year.
IMPORTANT NOTE – This does not provide deferral or relief for Affected Taxpayer’s second quarter 2020 estimated tax payment normally due June 15, 2020.
IMPORTANT NOTE – Many states and local municipalities are simultaneously providing, or have already provided, their own relief.
As always we appreciate the opportunity to serve you. If you have any questions or if we may be of any assistance to you please do not hesitate to contact us directly.
- Published in Tax
Coronavirus Tax Relief
Treasury has released insight on the deferral of the payment of any tax due on April 15, 2020. The due date for making Federal income (and individual SE Tax Payments) due April 15, 2020 will be postponed to July 15, 2020. C Corporations and consolidated groups can defer up to $10,000,000 in tax. For all other taxpayers the deferral is up to $1,000,000. This is also good for estimated tax payments due April 15, 2020.
Yesterday afternoon the United States Treasury issued Notice 2020-17 Relief for Taxpayers Affected by Ongoing Disease 2019 Pandemic. Notice 2020-17 provides some payment relief to US taxpayers. This notice provides insight on the deferral of the payment of any tax due on April 15, 2020. The due date for making Federal income (and individual SE Tax Payments) due April 15, 2020 will be postponed to July 15, 2020. C Corporations and consolidated groups can defer up to $10,000,000 in tax. For all other taxpayers (i.e. individuals, trusts, etc.) the deferral is up to $1,000,000. This is also good for estimated tax payments due April 15, 2020. This is a deferral of time to pay, NOT and extension of time to file. All taxpayers will have to file or extend their returns as normal.
While we know many of you may want to push back the payment of taxes until July 15, you may prefer to complete at least a draft of your return so you know what liability lies ahead. Your DRDA team will continue to work towards the completion, or extension, of your tax return as if this change had not been made. Many of you will want to “get the tax filing process off your plate” and complete the process as usual and file and pay what is due by April 15. The financial impact of filing and paying by April 15 is generally minimal as the funds for the tax payment are likely already sitting in cash and will earn very little, given today’s interest rate environment, between April 15 and July 15. We also know some of you will not want to send a payment until absolutely the latest date possible. In these cases, we will finalize and then extend the return so that that payment can be made in July. Our goal is to provide flexibility and service to you while managing our workflow in the most normalized manner possible. The growing fear is the bubble of work that may be looming in June and July if everyone delays the preparation of their returns. As such we encourage you to get your information to us if you have not already done so. We definitely live in interesting times and want to serve you well as we work through all of this.
- Published in Tax
COVID-19 Business Planning and Financial Reporting Considerations
COVID-19 CLIENT MEMO FOR FINANCIAL REPORTING CONSIDERATIONS
You have asked us for assistance in identifying financial reporting considerations related to the risks and uncertainties associated with the Coronavirus (COVID-19) epidemic. COVID-19 has begun to cause significant disruption in the global economy. The ripple effect is far-reaching across multiple industries, including travel and hotel companies, airline companies, manufacturers, and companies in the supply chain. Companies have begun issuing warnings that revenues may be adversely affected by the virus, and early warnings are important to investors; however, the challenges posed by this virus are unprecedented, and the scope and downstream effects are still unknown. Given the uncertainty of the current environment, reporting entities must balance the accuracy of the information available against the need to provide appropriate, adequate disclosure for investors.
Here are some considerations to keep top of mind while preparing financial statements:
Geographic concentration of business operations. An entity will need to evaluate the extent to which it relies on operations in countries outside the US, especially China, South Korea, Italy, or other areas of the world with confirmed spread of COVID-19. An entity that has business operations in these countries will need to evaluate the risk of a material disruption, which may have to be reported in the 10-K under Item 1A. Risk Factors. These effects may also lead an entity to restructure its operations, which could lead to changes in its business segments under Topic 280, Segment Reporting.
Subsequent events. COVID-19 was first identified in December 2019, so the entity will have to determine what disclosures are required under Topic 855, Subsequent Events, based on the entity’s individual facts and circumstances. It may be necessary to provide additional disclosures or even adjusted financial statements.
Volatility. Asset valuations may be adversely impacted by the uncertainty in the financial markets. This could result in unanticipated losses, which may or may not be unrealized. The entity will have to ensure valuations are correct as of the reporting date, which can be challenging in a highly volatile market.
Credit risk. Entities will have to monitor changes in their customers’ credit risk and decide if credit impairments or loan write-offs are necessary.
Liquidity risk. Entities will have assessed their ability to meet short-term obligations. Expanded liquidity disclosures may be necessary.
Pension and other postretirement plans. Entities will have to monitor pensions and other postretirement plans for potential changes to the funded status.
Hedging. The entity may need to reevaluate its hedging strategies and examine its hedges to determine the extent of hedge ineffectiveness, which must be recorded in earnings. If a hedge is no longer highly effective, then hedge accounting under Topic 815, Derivatives and Hedging, can no longer be applied.
SEC guidance and expectations. In a public statement issued January 30, 2020, Chairman of the SEC Jay Clayton said that the SEC will be monitoring disclosures related to COVID-19. Acknowledging that the effects of COVID-19 are beyond the control of issuers, Mr. Clayton said that issuers can still disclose how they are planning for uncertainty and how they will respond to the unfolding epidemic, which could be material to investors.
Entities have already begun to include information related to the Coronavirus in their 10-K filings:
Norwegian Cruise Line Holdings disclosed the following in Item 1A – Risk Factors of its 10-K for the period ended December 31, 2019:
Public perception about the safety of travel and adverse publicity related to passenger or crew illness, such as incidents of viral illnesses, stomach flu or other contagious diseases may impact demand for cruises and result in cruise cancellations and employee absenteeism. For example, the recent outbreak of the COVID-19 coronavirus has resulted in costs and lost revenue related to customer compensation, itinerary modifications, travel restrictions and advisories, the unavailability of ports and/or destinations, cancellations and redeployments and has impacted consumer sentiment regarding cruise travel. The spread of the COVID-19 coronavirus, particularly in North America, could exacerbate its effect on us. Any future wide-ranging health scares would also likely adversely affect our business, financial condition and results of operations.
United Airlines, Inc. disclosed the following regarding the risks from the Coronavirus in item 1A – Risk Factors and in Note 16 – Subsequent Events of its 10-K for the period ending December 31, 2019:
In December 2019, a novel strain of coronavirus (“COVID-19”) was reported in Wuhan, China. The World Health Organization has declared COVID-19 to constitute a “Public Health Emergency of International Concern.” On January 30, 2020, the U.S. Department of State issued a Level 4 “do not travel” advisory for China. The U.S. government has also implemented enhanced screenings, quarantine requirements and travel restrictions in connection with the COVID-19 outbreak. The Company has suspended its flights between the United States and each of Beijing, Chengdu, Shanghai and Hong Kong through April 24, 2020. These routes represented approximately 5% of the Company’s 2020 planned capacity and the Company’s other trans-Pacific routes represented an additional 10% of the Company’s 2020 planned capacity. As of the date of this report, the Company is experiencing an approximately 100% decline in near-term demand to China and an approximately 75% decline in near-term demand on the rest of the Company’s trans-Pacific routes. The extent of the impact of the COVID-19 on the Company’s operational and financial performance will depend on future developments, including the duration and spread of the outbreak and related travel advisories and restrictions and the impact of the COVID-19 on overall demand for air travel, all of which are highly uncertain and cannot be predicted. If traffic on the Company’s trans-Pacific routes were to remain at these levels for an extended period, and/or routes in other parts of the Company’s network begin to see significant declines in demand, our results of operations for full year 2020 may be materially adversely affected.
Of course, you must evaluate the effects of the Coronavirus on your own business based on your unique facts and circumstances and tailor your disclosures accordingly. If you have any questions or concerns – Please email us direct at laurian@drdacpa.com or mickey@drdacpa.com
- Published in Uncategorized
Coronavirus and Your Tax Filing and Compliance
Beneath the headlines of an outbreak, fatalities in the thousands and infecting tens of thousands worldwide sits other news: panic buying at grocery stores, whipsawing on Wall Street, and the specter of unprecedented disruption to everyday lives and business — all with less than five weeks to go before Tax Day.
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So, how is DRDA planning on dealing with coronavirus just as the season heats up?
“We are taking a proactive approach to dealing with this issue,” said Doug Dickey, CPA, CEPA, Principle Partner of DRDA. “Like any other Hazard Preparedness or Disaster and Emergency Planning, we are committed to having a system in place to ensure the safety and security of our staff and clients with minimal disruption to our services.”
Being prepared to prevent, respond to, and recover rapidly from public health threats can save lives and protect the health and safety of the public. Though some people feel it is impossible to be prepared for unexpected events, the truth is that taking preparedness actions helps anyone deal with hazards of all types more effectively when they do occur.
The IRS is taking a wait-and-see approach: “Our internal working group will continue to closely watch this and promptly respond to any emerging situations to protect our employees and taxpayers interacting with the agency,” the agency said in a statement. “Normal IRS operations are continuing, and we are seeing a strong, smooth filing season for the nation.”
More than likely the IRS is developing contingency plans, as they did with the government shutdown. Historically they have developed a hierarchy of essential and non-essential services. Our belief is that return filing and the collection of tax due will be at the top of their essential service list.
Taking it seriously
“DRDA has had remote employees and work from home employees for years. We are ensuring that everyone on our Team is set to work from home if needed,” said Doug Dickey, CPA, CEPA. “
“Different” might be one word to describe the potential disruption. Living on the Texas Gulf Coast we think ahead in detail for weather or power outages. A new and largely unknown virus is a new and different disruption. Since there is very little known of COVID-19, it is being treated as a disaster or an event that would require a business to invoke their Emergency Plan. It is imperative to be prepared with a contingency plan for any natural or systemic challenge.
In the event of a citywide mandate for public safety which would require the staff to stay home; we will continue to serve you by enabling our staff with home workstations, along with constant communication with the entire firm and our clients. Our computer and phone systems have been in the cloud and VOIP for years. There is no difference in access from home or office.
Digital exchange
Tax prep also often depends on face-to-face conferences with clients with little more than the width of a desk between us.
Most preparers complete hundreds of individual returns per year and have face-to-face meetings with about ten percent of the clients. The trend in our industry for the more substantial firms has been leading to digital productivity and remote access. As stated previously DRDA has been digitally in the cloud for years so the impact to our business will be minimal. Almost everything we do can be conducted remotely via phone, video conferencing, email, fax, secure portals and remote electronic signatures.
We encourage our clients who normally come in for an interview or drop off, pick up or mail their documents to upload their information through the secure client portal if you can. With less interviews, and traditional mailing routes, there would be less contact and increased safety for all. We are all human and human safety and well-being is always our first concern.
Technology will help
We have encouraged clients to use the portal and upload their documents since the beginning of Tax Season (click here to access our secure portal). We believe in these times, if more clients utilize this approach, it will foster a safer and better document delivery and acknowledgment process for everyone. We are currently enhancing our website with even more detailed information about how to use the portal if you choose this option (click here for help with our secure portal).
To make certain we can continue to serve you, DRDA has incorporated applications from the cloud, with two-factor authentication. In the event of a virus emergency, the firm’s e-workflow would involve alerts to clients in case of quarantine; instructions to use the firm’s encrypted portal; staff scheduling and payroll; monitoring of each stage of work; shipment to the client for e-signature and electronic payment; and e-filing.
Rest assured we are working diligently to ensure a seamless transition in the event of an emergency happening. Our primary endeavor is the safety and security of our staff, clients and community while serving you.
If you have any questions or concerns, please do not hesitate to contact us directly.
- Published in Tax, Uncategorized
