April 15 Income Tax Filing and Payment Deadlines Extended to July 15, 2020

(a)   The IRS extended the April 15, 2020 filing and federal income tax payment deadline to July 15, 2020.

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

(c)   California conforms to the above law.

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.  Deferral of employment tax payments

IRS 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.

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 could start filing them on April 10, 2020. On April 3, 2020, there was a lot of confusion about the processing of these applications and many banks were unable to accept them.

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 up to $10,000 grant; $1,000 per employee. 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.

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. Click here for more information; Coronavirus Economic Impact Payments

Guidance on PPP Loans and FAQ

Secretary/Administrator
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Use 2018 tax return to estimate 2019 withholding

Source: IRS Tax Tip

Millions of taxpayers have filed their 2018 tax return, making this a prime time to consider whether their tax situation came out as expected. If not, taxpayers can use their  completed 2018 return and the Tax Withholding Estimator to do a Paycheck Checkup ASAP, and adjust their 2019 withholding. Having their 2018 return handy can make it easier for taxpayers to estimate deductions, credits and other amounts for 2019. A Paycheck Checkup is a good idea for anyone who:

1- Adjusted their withholding in 2018, especially those who did so later in the year.

2- Owed additional tax when filed their 2018 tax return.

3- Had refunds larger or smaller than expected.

4- Had marriage, childbirth, adoption, buying a new home or income changes.

Since most people are affected by the Tax Cuts and Jobs Act (TCJA) all taxpayers should check their withholding. They should do a checkup even if they did one in 2018. This especially includes taxpayers who:

1- Have children and claim credits such as the Child Tax Credit.

2- Have older dependents or children age 17 or older.

3- Have 2019 changes to itemized deductions.

4- Itemized deductions in the past.

5- Are two-income earners.

6- Have two or more jobs simultaneously.

7- Work part only.

8- Have high income or a complex tax return.

This Tax Withholding Estimator works for most taxpayers. Those with more complex situations may need to use Publication 505, Tax Withholding and Estimated Tax, instead of the Tax Withholding Estimator. This includes taxpayers who owe alternative minimum tax or certain other taxes, and people with long-term capital gains or qualified dividends.

Taxpayers can use the results from the above calculation to revise their Form W-4, Employee’s Withholding Allowance Certificate, and submit it to their employer. In some instances, the calculator may recommend they have an additional flat-dollar amount withheld each pay period. Taxpayers give this form to their employer and do not send this form to the IRS.

 Zaher Fallahi Certified Public Accountant (CPA) Tax CPA  income tax returns preparer. As a tax attorney, he represents taxpayers before the IRS Tax Defense Attorney nationwide. Toll free 1-(877) 687-7558, LA (310) 719-1040, and Orange County (714) 546-4272, E-mail   taxattorney@zfcpa.com