Uncategorized | Nesteggg Accounting

SBA Loans for Pandemic Rollout

As a small business owner you no doubt jumped at the chance to get your employees back to work and get your business up and running. And you were probably at your computer reading your application the instant CARES Act loans were available.

And now. Wait.

As banks scrambled to make their policies line up with Congress’ guidelines for the loans, they were also inundated with an unprecedented number of applications. Banks struggled to handle the volume even as they awaited clearer guidance and needed forms from the SBA.

As details of how to approve, how to deliver, and how to forgive are hammered out between the SBA and lenders, money will most certainly run out. Congress is currently attempting to pass a bill for more funding.

As this week has unfolded, details about the various programs have emerged. The Economic Injury Disaster Loan Emergency Advance (EIDL), the up to $10,000 available to small businesses, is considered an advance and there are limits. The advance is on the Paycheck Protection Program – so the amount that a business is funded in the EIDL will be subtracted from the amount distributed after approval. The limit is, according to a report by INC, $1,000 per employee. Unfortunately, the emergency response time of three days has been delayed because of overwhelming response.

The upside is that advance can be rolled into the PPP loan and forgiven in full or part. Current information from SBA site states that what will be forgiven of the loan are payroll costs, interest on mortgages, rent, and utilities – at least 75% of the forgiven amount must have been used for payroll. What will happen if businesses don’t meet the 75% threshold or if part of the loan is used for product, say for a restaurant, to get up and running is unclear.

There are also limits as to what payroll is covered. Current advice says businesses can use the funds for payroll as far back as February 15, 2020 but that businesses can use their own date on the application. And funds must be used to hire back employees or replace positions that were vacated due to the pandemic.

Economic Impact Payment

There has been a lot of speculation in the news about when the stimulus checks will arrive. After almost a month of sheltering in place, and many being unemployed for as long, when those payments will arrive has become a vital piece of information.

According to Larry Kudlow, director of the U.S. National Economic Council, and an economic adviser to the President, the checks will start being sent out as early as this week.

Approximately 175 million Americans will receive stimulus payments. When they will arrive is unknown exactly. Treasury has said that any qualifying taxpayers who recently used a bank for direct deposit on their tax return will get them first, automatically into their account.

And if you are wondering exactly how much you will get you can refer to IRS.gov for more information. If your adjusted gross income is less than $75,000 for single filers, and $150,000 for married filers you will receive the full payment of $1200 per adult, $500 per qualifying child.

What is the money? According to the American Enterprise Institute the checks are technically an advance on the refund you would receive on your 2020 tax return. But, so far, it looks like if you do not qualify for a refund you will not be required to pay it back. And it is very likely that Congress will create some sort of disaster relief package for tax filers due to the pandemic in 2020.

New Tax Deadline for Taxpayers

Last week there was word that tax payments would be delayed for taxpayers and late fees and penalties forgiven. Now we have a date and clarification that tax filings are automatically postponed. The decision came from Treasury and the IRS on account of Coronavirus Disease 2019 (COVID-19) emergency.

The Treasury Department and IRS are providing relief to all taxpayers who have Federal income tax returns and Federal income tax payments due on April 15, 2020. The April 15, 2020 deadline is postponed to July 15, 2020. Associated interest, additions to tax, and penalties for late filing or late payment will be suspended until July 15, 2020.

Affected Taxpayers do not have to file Forms 4868 or 7004. There is no limitation on the amount of the payment that may be postponed.

Tax Filing Payment Extension

Every year taxes are due by midnight April 15, unless that date falls out on a weekend or holiday, in which case it’s pushed back a number of days. Who doesn’t remember the lines to the mailbox at 11:58pm? If you can’t make the deadline though you can request an extension, which buys them an additional six months to submit their returns without facing a failure-to-file penalty. That extension request must be received by April 15th however.

But this year, because of the coronavirus response, filers can take an extra three months to pay the IRS any amounts due. That could be a lifeline for the millions of Americans who are currently scrambling to hang onto their paychecks, or those who have already taken a hit on their income. Your filing or extension however it still due by April 15th.

Using one of the IRS resources for preparing and filing your taxes can make it easier. You can go to IRS.gov and find easy ways to file online, find help, find a tax preparer and even links to software so that you can file on your own.

IRS To Increase Visits to High Income Earners

As part of a larger effort to ensure compliance and fairness, the Internal Revenue Service announced that it will step up efforts to visit high-income taxpayers who in prior years have failed to timely file one or more of their tax returns.

Following the recent and ongoing hiring of additional enforcement personnel, IRS revenue officers across the country will increase face-to-face visits with high-income taxpayers who haven’t filed tax returns in 2018 or previous years. These visits are primarily aimed at informing these taxpayers of their tax filing and paying obligations and bringing these taxpayers into compliance.

“The IRS is committed to fairness in the tax system, and we want to remind people across all income categories that they need to file their taxes,” said Paul Mamo, Director of Collection Operations, Small Business/Self Employed Division. “These visits focusing on high-income taxpayers will be taking place across the country. We want to ensure taxpayers know their options to get right with their taxes and avoid bigger issues later.”

For the current tax season, the IRS reminds taxpayers that everyone should file their 2019 tax return by the April 15 filing deadline regardless of whether they can pay in full. Six-month filing extensions are also available, although that does not extend the April deadline for paying any taxes owed.

“Taxpayers having delinquent filing or payment obligations should consult a competent tax advisor before waiting to be contacted by an IRS revenue officer, Mamo said. “It is always worthwhile to take advantage of various methods of getting back into filing or payment compliance before being personally contacted by the IRS.”

For the new visits taking place, high-income non-filers taxpayers are those who generally received income in excess of $100,000 during a tax year and did not file a tax return with the IRS. Taxpayers who exercise their best efforts in filing their tax returns and paying or entering into agreements to pay their taxes deserve to know that the IRS is aggressively pursuing others who have failed to satisfy their filing and payment obligations.

During the visits, IRS revenue officers will share information and work with the taxpayer to hopefully resolve the tax issue.

Beware of these top scams

Each year the FTC receives millions of reports of fraud. Last year they got well over three million of them. They looked at those reports and here is what they found were the most common.

Imposter scams were the number one fraud reported. People reported losing more than $667 million to imposters, who often pretended to be calling from the government or a well-known business, a romantic interest, or a family member with an emergency. When people lost money, they most frequently reported paying scammers with a gift card.
Social Security imposters were the top government imposter scam reported. There were 166,190 reports about the Social Security scam, and the median individual loss was $1,500.
Phone calls were the number one way people reported being contacted by scammers. While most people said they hung up on those calls, those who lost money reported a median loss of $1,000 in 2019.

Legalization Domino Effect?

With the Health subcommittee of the U.S. House Committee on Energy and Commerce holding hearings on cannabis last week, and Presidential candidates like Pete Buttigieg finding a work around the legalization question in the idea to revamp the criminal justice system, could there be a domino effect happening in 2020?

New York Gov. Andrew Cuomo (D) included marijuana legalization in his budget proposal on Tuesday. A new poll shows that voter support for ending cannabis prohibition is at its highest level ever in the state.

According to the new proposal, New York stands to receive $20 million in revenue for the 2021 fiscal year and $63 million in 2022, according to the governor’s projections. By 2025, the amount is expected to rise to $188 million.

Supreme Court says no, may be a win for industry

When the U.S. Supreme Court’s declined to consider a Colorado Supreme Court ruling on a tax fine it could have had a positive impact on the Eighth Amendment arguments around 280E rules. That coupled with dissenting opinions in a recent case involving a California medical marijuana company might be the wedge the cannabis industry is needing.

The decision that a Colorado Department of Labor levy against Dami Hospitality was an excessive fine or penalty under the Eighth Amendment to the U.S. Constitution which disallows excessive penalties and fees – a case the cannabis industry has been trying to make for years.

The two rulings together appear to have somewhat weakened 280E, which potentially is good news for the cannabis industry. Here’s why:

By not hearing the Colorado case, the U.S. Supreme Court decision could open the door to challenges to 280E. If such challenges are eventually successful, it would be a boon to the marijuana industry since that IRS provision states a business involved in the trafficking of a federally controlled substance, such as cannabis, cannot take tax deductions or credits even though it must pay taxes on income.
The dissenting opinions in the California case further cast doubt about 280E, with one judge contending it is unconstitutional under the Eighth Amendment.

Click here for more detail on the cases.

State of Legal Cannabis

Libertarian candidates for President don’t normally get a lot of press but they can change the conversation. Former Rhode Island Governor Lincoln Chafee has just filed as a Libertarian candidate for President. One of his messages during his press conference to announce his candidacy was that of decriminalization of drugs, siting the “war on drugs” as a failure.

Meanwhile, the Senate has yet to schedule a vote on the Secure and Fair Enforcement (SAFE) Banking Act which passed the House late last year. While there has been some speculation about the Republican controlled Senate moving instead to re-schedule cannabis. All bets are probably off though until the matter of impeachment is settled.

For now legal cannabis is coming to the U.S. on a state by state basis. The scale is tipping however now that over half the States allow sales of either medical marijuana or recreational or both. And even in a few states like Nebraska and Mississippi, though the pendulum has not swung to legal sales as yet, there are moves to decriminalize or reduce penalties for marijuana possession.

Ever Wonder Where We Are Going?

If you ever wondered where we Americans are moving from and to within the United States IRS.gov has you covered. Newly released data for 2017-2018 lists by state and even by county.

The State- and county-level migration data for 2017-2018 for the United States are now available on SOI’s Tax Stats Web page. These data show the migration between both States and counties in separate datasets. The data include migration flows at the State level, by size of adjusted gross income and age of the primary taxpayer, and are based on year-to-year address changes reported on individual income tax returns filed with the IRS. The data present migration patterns by State or county for the entire United States and are available for inflows (the number of new residents who moved to a State or county and where they migrated from) and outflows (the number of residents who left a State or county and where they moved to.