|Happy New Year! While no one seems too sad to see the back of 2020, there is much to tackle as we head into 2021.
Though more COVID-19 federal economic relief is still expected, measures passed at the end of 2020 and subsequent guidance have provided individuals and businesses with some assistance. Meanwhile, we are entering tax season as the pandemic continues to impact us all, and we expect there may be a few twists and turns yet ahead.
In trying to keep up with the ongoing changes, provide guidance for clients, and answer questions you may have, we have put together a FAQ to address some pressing concerns. Please review the list to see if any of these questions are relevant to your situation.
BUMPERS & COMPANY CLIENT FAQ: January 2020
2020 Taxes, COVID Relief, PPP & more
1. Should I have received another stimulus check? If so, where is it?
Perhaps. If your 2019 tax return reflected adjusted gross income up to $75,000 for individuals or up to $150,000 for married couples filing joint returns, you should have received the full stimulus amount ($600 for individuals, $1200 married couples and up to $600 for each qualifying child). If your AGI was more than the above amounts, you may have received a reduced payment. Most payments were sent as a direct deposit, or as a check or debit card in the mail. For more information: https://www.irs.gov/newsroom/treasury-and-irs-begin-delivering-second-round-of-economic-impact-payments-to-millions-of-americans .
If you are not sure what the status of your payment is and/or did not receive it, the IRS is requesting that you go to https://www.irs.gov/coronavirus/get-my-payment rather than contacting them via the phone. There, you can check on the status of your payment to see if it may be in the mail, or if there has been an error. We can vouch that phone is not a good option for contacting them right now, and wait times to speak with a representative that may not be able to assist you are quite long. Unfortunately, as a public accounting firm, we do not have any special access or additional ways to check on this information for our clients. If you do not receive your expected relief payments, you should be eligible for the Recovery Rebate Credit when you file your 2020 taxes. For details on the Recovery Rebate Credit: https://www.irs.gov/newsroom/recovery-rebate-credit.
2. 2020 Taxes? – “I still have not received my 2019 refund!” or “I sent the IRS a check – Why haven’t they cashed it?”, What should I do?
The IRS is admittedly rather backed-up. With issues stemming from the prolonged tax season last year, mail delays, and restrictions on IRS staff working under current social distancing and other limitations, both refunds and payment processing are behind in many areas. The IRS is requesting that taxpayers respond to any requests for additional information or corrections promptly, but that taxpayers do not contact the IRS about the status of a refund or a return. While the IRS is currently stating that they should now be able to process any checks within 60 days of their arrival, they are reminding taxpayers to not cancel checks and make sure there are funds in your account to cover the checks. If needed, please visit https://www.irs.gov/payments for alternative ways to make payment. Please note, that states are also behind on some of their processing activities. We recommend visiting individual state websites for information on how to best contact them.
3. I heard on the news that the IRS delayed Tax Season until February 12th – is that true?
The IRS has decided that February 12th will be the first day they will accept 2020 Tax Returns. The reasoning they have provided for making it later than normal this year has been related to adapting to the recent stimulus payments and making sure their programming is updated and accurate before processing any returns. Given the issues discussed in question 2, this development is not surprising.
4. Given this delay, should I wait to forward my tax documents, organizer, information, etc. to Bumpers & Company?
No! Absolutely, Definitely not. The IRS is encouraging taxpayers to have returns ready to file and file them quickly once the filing season opens, in order to get refunds in a timely fashion. They currently estimate that after this delay, 9 out of 10 taxpayers will receive their refund within 21 days of filing with direct deposit. W2s, 1099s and other employer forms are still all due on February 1st, 2021, so once you have your organizer completed and information is received, please forward it to us. As always, returns are completed on a first come, first served basis. If you can get to the front of the line, do it.
5. Bumpers & Company usually prepares my individual return, but I did not receive a tax organizer. What now?
Tax Organizers for returning clients were mailed out beginning in mid to late December and continuing through the first week of 2021. Due to the postal service delays we are all experiencing, it is possible yours may not have reached you yet. If you do not receive it and are otherwise ready to turn in your tax documents, you can request a copy to be resent, picked up or emailed to you by contacting email@example.com. If requesting a mailed copy, please confirm your mailing address.
6. 2020 has been a tough year. Why might my tax preparation bill be going up?
Some clients may notice an increase in tax preparation fees this year. Bumpers & Company provides excellent service and high quality work. We also are mindful of making sure our clients are charged fair and appropriate prices for the work we do and the services we provide. As many businesses have faced increased operating and overhead expenses due to COVID-19, so have we. We also face steadily increasing costs related directly to processing returns, through software subscriptions, licensing and filing fees. Bills will only be increased where these additional costs cannot be absorbed into our current pricing models, and we will keep increases to a minimum wherever possible, out of sensitivity for the economic challenges our clients may be facing.
7. My company received a PPP Loan in 2020. Is there anything new I need to be aware of? How might my business return or personal return be impacted?
Based on the year-end legislation and subsequent guidance form the IRS, the major PPP impact you should be aware of is that businesses that got their Paycheck Protection Program loans forgiven may now write off expenses paid for with that money, and claim deductions for wages, rent, utilities, etc. While the original CARES Act made it seem this should be the case, the IRS previously followed existing code and regulations and issued guidance stating the expenses could not be deducted. While the new legislative action has caused the IRS to reverse that guidance, the now-approved PPP related expense write-offs could interact with other planned-for tax breaks or credits, so the benefits for some businesses may ultimately not be as advantageous as they could have been had this been resolved sooner. This may subsequently impact those with pass-through entities that affect individual returns.
8. A new round of PPP Loans are now available: Should my business apply for the first time? To increase my original loan? For a second loan?
There may now be some circumstances wherein you may re-apply for funds on your initial loan and/or request to increase the amount of an original PPP loan. This could impact some Partnerships, Seasonal Employers, Farmers and Ranchers, Eligible Borrowers that fully repaid a First Draw PPP Loan before December 27, 2020, Borrowers that returned part of a First Draw PPP Loan before December 27, 2020, and Borrowers that did not accept the full amount of a First Draw PPP Loan for which they were approved. There are parameters and guidelines for this detailed in a SBA Procedural Notice: https://www.sba.gov/sites/default/files/2021-01/5000-20076.pdf
For all considering applying for a second draw loan, find more information here: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program/second-draw-ppp-loans and pay special attention to the following qualification: The borrower must demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020.
If your business missed out on the first round of PPP loans, you now have another chance to apply. Please review the details, qualifications and application procedures here: https://www.sba.gov/document/support-top-line-overview-first-draw-ppp
9. As an employer, do I still need to pay employees for time off under the FFCRA (Families First Coronavirus Response Act)? How could this impact my 2021 taxes? What about the Employee Retention Credit?
If you are an employer that was covered by the paid time off provisions of the FFCRA, you do not need to pay for time off under this act in 2021. You should check with your local states, municipalities, and any overriding laws that may govern paid or unpaid time for further guidance, however. Though the paid time off provisions of the FFCRA have expired, the tax credit for paying covered employees for time off has been extended through March 31, 2021, so there are advantages to continuing to pay for time that qualifies for these credits. For more about FFCRA: https://www.dol.gov/agencies/whd/ffcra
In addition to the FFCRA tax credits, employers are still eligible for the CARES Act Employee Retention Credit through June 30, 2021. The IRS has not yet updated guidance for this based on the new legislation, but you can start here https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act to determine if you may qualify for this credit in 2021.
10. What do I need to know about the Taxpayer Certainty and Disaster Tax Relief Act of 2020?
We do not know what (if any) additional relief, tax provisions or other developments will occur in the early days of the incoming administration, but we do know that we will continue to stay on top of any changes that could impact your 2020 or 2021 taxes, as well as the health of your business, and work with you to ensure the best possible outcomes.