Zaher Fallahi; Coronavirus Aid, Relief and Economic Security (CARES) Act

As the Coronavirus (COVID-19) continues to affect local communities and global economies, you may have concerns about your company’s financial well-being as well as the well-being of your employees. Or you may be wondering about how the recently passed legislation impacts you and your business. Below is a summary of some of the key provisions impacting individuals:

Economic Stimulus Payments to Individuals

Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child. The Treasury had initially announced that some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.However, per Treasury’s latest announcement, Social Security recipients who do not typically file tax returns will not have to file a return to receive stimulus payments.

Who is Eligible for the Economic Impact Payment?
Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

Relief Available to Businesses

There are several recently enacted tax changes that might be helpful to you.

I.                   Income Tax Filing and Payment Deadlines

(a)   The IRS extended the April 15, 2020 filing and federal income tax payment deadline to July 15, 2020. However, we continue to work on filing returns as soon as possible.

(b)   First quarter estimated tax payments usually due April 15, 2020 are now extended to July 15, 2020.

(c)   California conforms to the above law.

II.                Economic Injury Disaster Loan (EIDL) Emergency Advance

Small businesses are eligible to apply for an Economic Injury Disaster Loan grant of up to $10,000. Funds should be made available within three days of a successful application, and this grant will not have to be repaid. Economic Injury Disaster Loan (EIDL) Emergency Advance

Comment: Generally, all businesses including independent contractors, have been impacted by the disaster and qualify for the $10,000 grant. Therefore, you are encouraged to file this as soon as possible. You need to have your online bank account information when you file. You need to have the exact name of your entity, federal tax ID, and prior year gross receipt and total expenses.

III.             Paycheck Protection Program (PPP)

Small businesses may also apply for a loan through the Payroll Protection Program, which is designed to help provide capital to cover the cost of retaining employees. If certain criteria are met, the loan can be forgiven.  Paycheck Protection Program (PPP).

 Comment: Presumably, all businesses including independent contractors, have been impacted by the disaster and are eligible for this loan. The amount of loan is 2.5 times your monthly average payroll for the prior year, adjusted for a few items. For example, the annual highest salary per person is limited to $100,000. Provided that the funds are spent on payroll (at least 75%), rents, utilities, etc., this loan will be forgiven. Otherwise, it accrues 1% interest per annum.

These applications are filed with clients’ banks, with which they have online banking. Businesses could file these applications starting on April 3, 2020, and independent contractors and sole proprietors could start filing them on April 10, 2020.

IV.             Employee Retention Credit

The Treasury Department and the Internal Revenue Service have launched the Employee Retention Credit, designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer to each employee between March 13, 2020 and December 31, 2020, and is available to all employers regardless of size, including tax-exempt organizations. Qualifying employers must fall into one of two categories:

(a)   The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter, or

(b)   The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter. These measures are calculated each calendar quarter. IRS Employee Retention Credit .

Comment: This tax credit requires extreme hardship and not many businesses may be eligible for it, but it is a great tax relief.

V.                                  Deferment of Employer Payroll Tax Payments

This provision allows employers and self-employed individuals to delay paying their share of the Social Security payroll tax (6.2% up to $137,700 for 2020) on their employees’ compensation between March 27, 2020 and December 31, 2020. It requires that the deferred employment tax be paid over the following two years, with 50% of the amount by December 31, 2021 and the other 50% by December 31, 2022.

Comment: This is a temporary tax relief and helps businesses with their cash flow.

VI.             Protecting our Clients and Staff

There are limitations on our physical work environment due to COVID-19; however, we’re working to minimize disruptions and impacts to you so that we can still offer the level of service and support you have come to expect from our team.

We have implemented procedures to protect the health and safety of our staff, clients and community, including restricting access to our offices, limiting travel, providing health education and guidelines to keep our staff well, limiting the size of meetings, providing remote working solutions, implementing the use of client portals, and adding virtual communication channels to stay connected continuously.

VII.          Our Firm is Open and Ready to Serve You

Our firm remains open and available during our normal business hours to serve you both in Los Angeles and Orange County. If you need our assistance, please review the underlying links and let us know. We will discuss your eligibility, documentation, and the process. We strongly recommend you take prompt action.

VIII.       Our Commitment to You

If you have legal, tax, accounting, or estate planning questions, or need advice on ways to navigate the expanded benefits outlined above, we’re here for you. If you have any questions or concerns, please contact us at (310) 719-1040, (714) 546-4272, our toll-free number (877) 687-7558, or via our email: taxattorney@zfcpa.com. Please include your cell phone # via your email, because Zaher checks all after hour emails and returns the calls to the extent feasible.

During this unpredictable and challenging time, it’s more important than ever to stay connected. We’re in this together and our thoughts go out to all who have been impacted by this unprecedented and tragic situation. Rest assured, we’re here to help with your questions and this too shall pass.

We wish all of you good health and safety. 

Sincerely,

Zaher Fallahi and staff