Our federal and state legislators have made a number of changes that impact all taxpayers. Virtually all of the changes were put in place to ease the financial and administrative burden of filing and paying taxes. They’ve also instituted financial support and incentives for those businesses impacted by COVID-19 and the related shelter in place order.

Filing Deadlines – Partnerships

The federal partnership filing deadline was not changed and it remained March 16, 2020.  If your partnership returns were not completed by the deadline then they’re on extension until September 15th.

However, California delayed the filing deadline and, more importantly, the payment deadline to July 15th. This applies to the following:

• 2019 tax returns

• 2019 tax return payments

• 2020 1st AND 2nd quarter estimate payments

Partnerships and LLCs generally do not pay federal income tax.  California imposes a minimum tax of $800 for LLC and LPs and LLCs pay a graduated gross receipts fee.

As far as we’re aware, most, if not all, states have extended their filing and payment deadlines to July 15th.

Personal Income Tax Filing

Tax Day is now July 15th.   Your individual income tax returns are due on that date.  You still have the ability to file an extension to October 15th.  The extension is due July 15th.  This also means that any tax payments due for 2019 AND your 1st quarter 2020 estimated tax payment is not due until July 15th.  As it stands, your federal 2020 2nd quarter estimated tax payment is still due June 15th.

Many firms are prioritizing preparing returns for clients that are expecting refunds.  Those expecting refunds should file as soon as possible.

Tax Law Changes

On Friday, March 27, 2020 the Coronavirus Aid, Relief, and Economic Security Act (CARES) was signed into law.  This law includes the following:

• Stimulus checks for individual ($1,200) and joint ($2,400) tax filers.  The amount paid phases out based on your 2019 (or 2018 if 2019 is unfiled) Adjusted Gross Income.  The phase out starts at $75k of income for individual filers and $150k for joint filers.  An additional $500 per dependent child under the age of 17 is available.

• Increase in unemployment benefits

• For those affected by COVID-19, penalty waiver for early withdrawal during 2020 from retirement and the income (up to $100,000) is reportable over three years.  Also, it can be rolled back during that time tax free.

• Delay of Social Security payroll for employers through the end of the year.

• Retroactive (to 2018) fix for Qualified Improvement Property.  This allows bonus depreciation to be applied to non residential property improvements for 2018 and 2019.

The Families First Coronavirus Response Act (FFCRA) was passed on March 18, 2020.  This applies to businesses with fewer than 500 employees and will require employers to provide up to 10 weeks of paid FMLA for those employees, or family members, that are impacted by COVID-19.  There are expanded sick leave payment requirements as well.  Payroll tax credits are available to help employers cover the cost of additional sick leave.  Here is an excellent article on the new requirements www.uschamber.com/co/start/strategy/families-first-coronavirus-response-act-guide.

Economic Stimulus

Some of you may be experiencing significant adverse affects as a result of this crisis.  The federal government, through the SBA, has made money available for businesses through the following:

• Economic Injury Disaster Loans.  Loans available up to $2 million with terms up to 30 year and interest rates at 3.75%.  This program has been around for a while but it now applies to those impacted by COVID-19.  This was expanded by the CARES Act passed on March 27, 2020 to include loans up to $200k without personal guarantees and $10,000 emergency cash grants.  See www.sba.gov/coronavirus for more details. Applications are filed directly with SBA.

• Paycheck Protection Program Loan Guarantee.  This program is offered to businesses with fewer than 500 employees.  Loans are given up to a maximum of the lesser of $10 million, or 2.5 times the average monthly payroll costs (cap at $100k per employee) during the 1 year period before the loan is approved.  Maximum interest rate is 4% and the loan term is up to 10 years. No personal guarantees or collateral and payments can be deferred up to 12 months. There are opportunities for loan forgiveness if employees are maintained with the company through June 30th.  You’ll need to apply through a traditional SBA lender for this type of loan.

There is expected to be tremendous demand for these programs so we strongly recommend that you apply right away if you think you may qualify.