News + Updates | Archives: 2020

PPP Update, Employing your child and Free Beer!

Hello all! We can now put this October 15th deadline in the rearview mirror. Today’s topics include an update on PPP loan forgiveness, the benefits of employing your children at an early age, and we’re replacing our usual updates and reminders with a crazy tax deduction story you might enjoy.

PPP Loan Forgiveness

Late last week the SBA issued a new PPP loan forgiveness application. It is called Form 3508-S. The “S” stands for “simple”. The 3508-S application can be used if the PPP loan amount is less than $50,000. The forgiveness is not automatic as the borrower will still need to submit paperwork to their lender proving that they used the PPP loan proceeds for compensation/other forgivable costs. However, with this new form/change there are a few interesting tweaks:

  • The forgiveness amount is not reduced due to a reduction in the salary or hourly rate paid to an employee or due to a reduction of FTE employees.
  • The application requires information related to an EIDL advance, if the borrower received an EIDL loan. However, there is no reference in the instructions for the 3508-S that reduce the forgivable amount for an EIDL advance issued to the borrower. Under previously issued guidance and forgiveness applications, if the borrower received a PPP loan for $50,000 and an EIDL advance for $10,000, the maximum amount that could be forgiven was $40,000. The 3508-S application appears to allow the full $50,000 PPP loan to be forgiven. The SBA may issue new guidance clarifying that the forgiveness amount does need to be reduced for an EIDL advance when filing Form 3508-S.
  • The borrower must initial several bullet points that seem to provide more detailed representation that the funds were spent for authorized purposes.

Previously the idea had been floated that the SBA would implement automatic forgiveness if the loan was less than $150,000. The thought was that automatic forgiveness would be granted by having the borrower sign a statement attesting to using the funds for authorized purposes. With the issuance of the new 3508-S, this idea appears to be in question. Click here to review a copy of the 3508-S.

Employing Your Children

Business owners may be able to obtain significant tax benefits from employing their children. First and foremost, they must be bona fide employees. In other words, they must perform work that is ordinary and necessary for the business, and their pay must be reasonable for the actual services performed. If those criteria are met, you may be able to benefit in a number of ways. Below is a bullet point listing of some of those potential benefits:

  • The business gets to deduct their wages
  • Dependent children may be exempt from payroll taxes
  • Your child may earn up to the standard deduction ($12,400 for 2020) without paying Federal income taxes
  • The earned income may open the door for your child to make retirement plan contributions

Don’t hesitate to call your Bertz, Hess & Co. tax and business advisor to discuss in more detail.

Crazy Tax Deductions

Free Beer – In a promotional scheme in the 1970’s that wouldn’t fly today, a gas station offered free beer instead of trading stamps (the 1970s equivalent of credit card or store points). The owner deducted the beer as an advertising expense, and the IRS said no. But in Sullivan v. Commissioner, the taxpayer won in Tax Court.
Your Bertz, Hess & Co. tax and business advisor will be happy to discuss any of these topics.
Thank you and enjoy the weekend!

Record Retention and Vacation Rentals

Greetings to all as we have put summer behind us and head into fall. Today’s topics include record retention, vacation rentals, as well as some updates and reminders.

Record Retention

Frequently, public accountants are asked, “How long should I keep (insert document here)?” Seems like a simple question that would have a simple answer, but many times that simple question results in that typical accountant answer of “Well, it depends…”. Whether it’s personal financial and tax information, legal documents, insurance contracts, or business-related documents and records, individuals and businesses should know the appropriate amount of time to retain their records. The list of documents and records to consider can be quite vast. Click here for a fairly comprehensive list provided by the Better Business Bureau.

Vacation Rentals

The onset of the COVID-19 pandemic has resulted in some curveballs for owners of vacation rental homes. Owners are faced with issues such as increased personal use due to many other activities being cancelled, additional efforts to sanitize between bookings, cancellations, or actually having increased business due to vacation rentals being seen as less risky than hotels. With these new challenges, we thought it’d be a good idea to highlight some to of the tax rules for owners of vacation rental properties. Below are five rules to consider.

  •  If you rent out your home for 14 days or fewer during the year, you are not required to report the rental income on your tax return. The home is considered a qualified personal residence so you deduct mortgage interest and property taxes just as you would for your primary home. On the downside, you also cannot take depreciation, utilities, cleaning or any other expenses you would be able to take for rentals reported on your tax return.

  • If you rent out your house for more than 14 days, you become a landlord in the eyes of the IRS. You have to report your rental income and rental expenses are now deductible. It can get complicated because you need to allocate costs between the time the property is used for personal purposes and the time it is rented.

  • If you use the home for personal purposes for more than 14 days or more than 10% of the number of rental days, whichever is greater, the home is considered a personal residence. You can deduct rental expenses up to the level of rental income. But you can’t deduct losses.

  • The definition of “personal use” days is fairly broad. Personal days may include any days you or a family member use the house (even if the family member is paying rent). Personal days also include donated use of the house — say, to a charity auction — or days rented for less than fair market value. If you are staying in the house to make necessary repairs or to ready it for rental, you may not have to include those days as personal days, but you should be aware of the specifics before assuming any action would or would not be considered a personal use day.

  • Generally, if you limit your personal use to 14 days or 10% of the number of days the home is rented, it can be considered a rental business for tax purposes. You can deduct certain expenses and, depending on your income, you may be able to deduct up to $25,000 in losses each year.

Please contact us to determine the tax treatment of your vacation rental.

Updates and Reminders

October 15th Deadline – We just wanted to send a reminder that the extended due date for C-corporation returns and individual returns is October 15th. Please don’t hesitate to reach out to us with any questions.

2020-2021 Per Diem Rates – If you missed it in our last publication, the IRS has recently issued the 2020-2021 per diem rates. The rates are effective from October 1, 2020 through September 30, 2021. You can read more about them here.

Your Bertz, Hess & Co. tax and business advisor will be happy to discuss any of these topics.

 

 

 

 

 

 

 

 

Sales Tax Exposure and Year-End Business Tax Planning

Hello all, and welcome to the twelfth installation of our bi-weekly publications. Today’s topics include sales tax compliance, year-end planning for businesses, as well as several updates and reminders.

Sales Tax Exposure
In today’s growing economy, it has become much easier for businesses to reach customers all over the country and in many cases all over the world. This can create a number of complex tax issues, as it could create “nexus” in multiple taxing jurisdictions. Nexus is the term used to describe a situation where a business has a connection with a particular taxing authority (e.g. a state) that requires it to collect or pay tax. Due to a Supreme Court Ruling from two years ago (South Dakota v. Wayfair, Inc.), many jurisdictions have become more aggressive with implementing their nexus policies with respect to sales tax. As a result, business owners need to be addressing a number of issues including, but not limited to:

  • Varying nexus policies and thresholds across multiple jurisdictions (each state is different)
  • Response to nexus questionnaires
  • Cost/benefit of disputing assessments
  • Use of inventory and fulfillment services (i.e. Amazon)
  • Filing requirements and mitigation of exposure

For more detailed information on sales tax nexus click here to read an article in the Journal of Accountancy. Contact us if you have questions on your specific facts and circumstances.

Business Year-End Tax Planning
As we move into the fall months and business owners have a better picture of how 2020 will shake out, please remember that it is never too early to start thinking about year-end tax planning for your business. There are ways to defer or permanently save tax dollars, but you should evaluate any option carefully before moving forward. Below are just a few ideas to consider:

  • Purchase of property and equipment
  • Year-end bonuses
  • Retirement plan contributions
  • Choice of entity
  • Accounting method changes

Updates and Reminders

October 15th Deadline – Now that the September 15th deadline is behind us, we just wanted to send a reminder that the extended due date for C-corporation returns and individual returns is October 15th. Please don’t hesitate to reach out to us with any questions.

2020-2021 Per Diem Rates – The IRS has recently issued the 2020-2021 per diem rates. The rates are effective from October 1, 2020 through September 30, 2021. You can read more about them here.

Charitable Giving – Just a quick reminder that there is now a deduction available for up to $300 of charitable contributions, even if you do not itemize your deductions.

Your Bertz, Hess & Co. tax and business advisor will be happy to discuss any of these topics.

 

Social Security Tax Deferral and Home Office Deduction

Greetings to all as we have kicked off another school year and look forward to Labor Day weekend. Today we are covering an update on the social security tax deferral, the home office deduction, as well as our usual updates and reminders.

Social Security Tax Deferral Update

The IRS recently issued Notice 2020-65 regarding the deferral of employees’ social security withholding. The Notice clarified some items mentioned in our last communication, but some areas of concern remain unanswered.

Items that were clarified:

  • The $104,000 annualized compensation is on a per pay by per pay basis. If an employee is paid weekly and they earn $1,999 their wages qualify for postponement. If the next pay period they earn $2,001 the wages paid that pay period don’t qualify.

  • Compensation is defined as gross compensation before any pretax items. If an employee is paid weekly and their gross pay is $2,100 and they defer $150 into their HSA (meaning their taxable SS wages are $1,950) they don’t qualify for deferral because their gross pay is $2,100. However, there is disagreement over how the wage threshold is calculated. More to come on this topic.

  • An employer must withhold and deposit any taxes deferred under this Notice pro rata during pay periods paid between January 1, 2021 and April 30, 2021. 

Areas of concern:

  • The deferral window started September 1. Many companies already have their payroll completed for this week and it is highly unlikely their software contained the update to defer employee SS tax.

  • The Notice does not adequately indicate if the deferral is optional for employers and/or employees – can one or both elect out of the deferral?

  • If employment is terminated, the employer is responsible for the deferred amount and would need to recover it from the former employee. That could be an administrative nightmare and burden to employers. Also, if the employer is unable to recover the amount, it would be considered taxable wages to the former employee.

  • As was mentioned in our previous communication, the elimination of the obligation to repay the deferred taxes will still require Congressional action.

  • There was no mention of self-employed individuals.

Finally, if social security taxes are deferred, we recommend that the employer have the employee sign a statement to authorize the tax deferral and acknowledge that the deferred tax will be withheld in 2021. The statement should also explain repayment if employment is terminated before all the deferred taxes are recovered.

Home Office Deduction

In today’s world, people are working from home more than ever. This has many individuals inquiring on the availability of the home office deduction. Below are some bullet points regarding that deduction.

  • There must be a dedicated area of the home used exclusively for conducting business on a regular basis.

  • For an employee, this deduction falls in the category of “Miscellaneous Itemized Deductions.” These deductions were suspended until 2025 under the Tax Cuts and Jobs Act of 2017, so absent new legislation, most taxpayers are unable to benefit from this deduction until 2026.

  • Partners in partnerships and businesses reported on Schedule C can benefit from deducting home office expenses. Thorough records must be kept to substantiate the amounts.

For more details, click here to read an article from the Journal of Accountancy.

Updates and Reminders

September 15th Deadline – As mentioned in our previous communications, the extended due date for calendar year end partnerships and S-corporations is right around the corner. Also, don’t forget that many third quarter estimated payments are due on September 15th. Please don’t hesitate to reach out to us with any questions.

Individual Year-end Planning – It’s never too early to think about year-end planning and projections. Below are some items for individuals to think about:

1. Retirement plan contributions
2. Charitable giving
2. Gifting
4. Education funding

Your Bertz, Hess & Co. tax and business advisor will be happy to discuss any of these topics.

Executive Order and Unemployment Compensation

Welcome to another delightful week in South-Central PA!  Today, we will be covering the President’s recent Executive Order/Memorandum, unemployment compensation issues and our usual updates and reminders.

President’s Executive Order/Memorandum

You may have seen or heard about the POTUS signing an Executive Order (EO) roughly 10 days ago.  On August 8 he signed one EO covering housing and he also issued three Memorandums.  One of the Memorandums he issued proposed deferring the withholding of the 6.2% employee Social Security tax.  Below are some of the details of the Memorandum:

  • Covers wages paid beginning Sept. 1, 2020 and ending December 31, 2020. 
  • Only covers wages paid to employees who earn less than $4,000 bi-weekly ($104,000 annual).  
  • Only DEFERS the withholding of the 6.2% SS tax and the deposit/payment of that tax by the employer.  It does not remove the requirement to eventually have the taxes withheld; however, see the next point.
  • The Memorandum directs the Treasury Secretary to “explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum”.

There are many unanswered questions related to the Memorandum.  Below are a few of the bigger issues:

  • What happens if an employee is paid weekly and earns less than $2,000 one week and then earns more than $2,000 the next?
  • There is confusion on the $4,000 bi-weekly limit – is that wages earned before any eligible pre-tax items are deducted or is it the amount of taxable Social Security wages?
  • The Memorandum indicates the deferral should be “available” to employees who qualify.  Does that mean employees who are eligible can elect to not participate?  If someone is earning $1,000 per week, do they have any interest in receiving an extra $62 in their net pay for the 17 paychecks they receive if they have to eventually pay back the $1,054 that wasn’t withheld?
  • The Memorandum calls for a deferral of taxes, not a cut in taxes.  That means the taxes not withheld will eventually need to be withheld, unless Congress will agree to make the tax deferral a permanent tax cut.  This seems highly unlikely, given the current climate of cooperation in Congress. 

Receiving Unemployment Compensation? Taxes being withheld?

Many taxpayers are receiving unemployment compensation for the first time.  As a reminder, unemployment compensation benefits are included in federal taxable income and taxed at ordinary income tax rates.  Each recipient will receive a Form 1099-G in January 2021 from the state that paid the unemployment benefits.

Federal income tax is not required to be withheld from unemployment compensation benefits.  In order to avoid unexpected taxes due in April 2021, taxpayers can elect to withhold income tax at a rate of 10% from each payment by completing Form W-4V and filing it with the agency making the payments.  Another option is to file quarterly estimated tax payments.    There is some good news!   Unemployment compensation benefits are not taxable for PA personal income tax or the PA local earned income tax.

Your Bertz, Hess tax professional can assist you in determining any amounts that should be paid in to avoid an underpayment penalty or to help you plan for an amount due on your 2020 tax return.  If you have any questions on unemployment compensation or its taxability in states other than PA, please contact us.

Updates and Reminders

Form 1041 (Estates and Trusts) Notices – The IRS is generating a number of notices indicating balances are owed for 2019 1041 tax returns.  The problem is that the IRS is lagging behind in processing 1041 payments, but they are timely processing tax returns, which results in the computer generating a balance due notice.  Please reach out to us if you receive one of these notices. 

September 15th Deadline – As mentioned in our previous communication, the extended due date for calendar year end partnerships and S-corporations is right around the corner.  Also, don’t forget that many third quarter estimated payments are also due on September 15th.  Please don’t hesitate to reach out to us with any questions.

Where’s my Economic Impact Payment? – Still waiting on your Economic Impact Payment?  You can click  here to check the status and payment type.

Where’s my Refund? – For those of you still waiting on your refund, don’t forget that you can check the status here.  With refunds being delayed, many taxpayers are receiving their refunds plus interest!

Your Bertz, Hess & Co. tax and business advisor will be happy to discuss any of these topics.

PPP Loan and Employee Retention Tax Credit Update

It’s now August and we are on the verge of kicking off a new school year that will look like no other. As Congress moves closer to a second COVID-19 relief package, we will be covering some news on the Paycheck Protection Program (PPP), Employee Retention Tax Credits (ERTC) and of course, more updates and reminders.

PPP Loan Forgiveness Applications

As a follow-up to our last communication, there is no need to rush to apply for PPP loan forgiveness at this time. There are a number of reasons to exercise some patience here, not the least of which is the expected second round of COVID-19 relief, which could include changes to the loan forgiveness requirements. Further, it will take lenders some time to get their own portals properly set up to accept applications from borrowers. Finally, you have 10 months from the time your covered period ends to submit the application. This allows plenty of time to plan for the maximum amount of loan forgiveness. More details on this can found here in a recent article in the Journal of Accountancy. Additionally, the Small Business Administration has just issued a new set of FAQ’s here this past Tuesday.

Employee Retention Tax Credit

If your business did not receive a PPP loan, you may still benefit from the ERTC. The credit is equal to 50% of each employee’s qualified wages up to $10,000 (maximum credit of $5,000 per employee). The wages must be earned between March 12, 2020 and January 1, 2021. To qualify for the credit, the business must experience either a full or partial suspension of operations during any calendar quarter due to COVID-19, or a significant decline in gross receipts. A significant decline begins when gross receipts for a 2020 calendar year quarter are less than 50% of gross receipts for the same quarter in 2019. For more on the ERTC, click here.

Updates and Reminders

September 15th Deadline – It’s hard to believe, but the extended due date for calendar year end partnerships and S-corporations is right around the corner. Also, don’t forget that many third quarter estimated payments are also due on September 15th. Please don’t hesitate to reach out to us with any questions.

Where’s my Economic Impact Payment? – Still waiting on your Economic Impact Payment? You can click here to check the status and payment type.

Where’s my Refund? – For those of you still waiting on your refund, don’t forget that you can check the status here.  With refunds being delayed, many taxpayers are receiving their refunds plus interest!

Your Bertz, Hess & Co. tax and business advisor will be happy to discuss any of these topics.

Summertime Opportunities!

Greetings again from the Bertz, Hess Professional Service Team! The tax deadline is finally behind us, and was surely the hottest one on record with it being a July 15th due date. Today we are covering the tax benefits of cost segregation studies, PPP loan forgiveness applications and more updates and reminders.

Cost Segregation Opportunities

Do you own real estate? Are you looking to purchase or construct a new building? As you may already know, the cost of a building is required to be deducted over its depreciable life. For federal income tax purposes, the IRS requires 27.5 years for residential properties and 39 years for commercial properties. This leaves property owners with a couple problems. First, that is an awful long time to recover the cost of a building. Second, a building is not always just “sticks and bricks”. Many times, the cost includes several different types of property that may have significantly shorter depreciable lives which would potentially qualify the property for immediate expensing through bonus depreciation and section 179 provisions. Examples of this would be furniture, equipment, and land improvements just to name a few. A cost segregation involves bringing in experienced professionals who can break down the cost of a building into its various components. This often results in 27.5-year and 39-year property being classified as 5-year, 7-year, or 15-year property. With depreciation being accelerated by several years, the net present value savings is often quite significant. Additionally, this is not just available on new construction. Cost segregation studies can also be performed on property that was purchased in a previous tax year. In this situation, a “catch-up” depreciation deduction can be taken into account for depreciation that would have been taken in prior years. While cost segregation studies can offer significant tax savings, consideration needs to be given to the taxpayer’s entire tax situation. Be sure to consult with our Bertz, Hess & Co. professional team before making a final decision on pursuing a cost segregation.

PPP Loan Forgiveness Applications

The Small Business Administration (SBA) recently issued an interim final rule regarding PPP loans that addresses early applications for loan forgiveness. While many small businesses are seeking to apply early, it could actually come at a cost. By applying early, the safe-harbor provision allowing them to restore wages by December 31 is forfeited. Read more about it here

In addition, before the lenders can complete their forgiveness application, the SBA still needs to issue final guidance to them. After the lenders receive final guidance from the SBA, they will need to update their loan forgiveness application process and then it will be possible to complete the application.

Updates and Reminders

Should you adjust your tax withholding? – This is a good time of the year to review the amount of federal income tax being withheld from your wages or pension payments. If you owed tax to the IRS when your 2019 return was completed and you haven’t increased your 2020 estimated tax payments or you haven’t changed your withholding by filing an updated W-4 there is a good chance you will owe the IRS money when your 2020 return is completed. The IRS updated and revised the W-4 Form in December of 2019. Unfortunately, when they revised the W-4 they dramatically increased the level of difficulty involved in completing the form. Don’t hesitate to reach out to our team for help!

Where’s my Economic Impact Payment? – Still waiting on your Economic Impact Payment? You can click here to check the status and payment type.

Where’s my Refund? – For those of you still waiting on your refund, don’t forget that you can check the status at here.  With refunds being delayed, many taxpayers are receiving their refunds plus interest!

Your Bertz, Hess & Co. tax and business advisor will be happy to discuss any of these topics.

The Professional Service Team at Bertz, Hess & Co., LLP

 

New Rollover Rules for 2020 RMDs

Happy Fourth of July from the Bertz, Hess Professional Service Team!  We are going to keep things very brief as we are all looking forward to kicking off the holiday weekend.  Today we are covering an update on 2020 Required Minimum Distributions (RMDs) and a few other reminders. 

Tax-Free Rollover of 2020 RMDs

As we have discussed in our previous communication, the CARES Act has waived the 2020 RMD requirement for IRAs and other qualified retirement plans.  With the Act being passed in March of 2020, many individuals may have already begun taking their RMDs.  Not only that, the IRS typically allowed a grace period of 60 days to roll the distribution back into their plans.  For many individuals, this grace period had also expired prior to the passing of the CARES Act.

In response to that, the IRS has recently extended the 60-day period to August 31, 2020 in an effort to help those who had already taken their RMD.  This gives the individual the ability to continue to defer the tax if they choose.  Historically, individuals were only allowed one 60-day rollover per 12 months.  These repayments under the CARES Act will not count towards that one instance.  One thing to keep in mind is that plan documents would need to be updated for any of the changes mentioned above. 

Updates and Reminders

July 15th deadline – Yes, we are mentioning it again! There could be a number of income tax payments due on July 15th.  Given the impact of COVID-19 on many small businesses, take some time and consult with our Bertz, Hess & Co. professional team on what makes sense for your 2020 estimated payments.

Where’s my Refund? – For those of you still waiting on your refund, don’t forget that you can check the status at https://sa.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp With refunds being delayed, many taxpayers are receiving their refunds plus interest!

Your Bertz, Hess & Co. tax and business advisor will be happy to discuss the options involved with your 2020 RMDs and any other questions that you have!

Thank you and enjoy the holiday weekend! 

The Professional Service Team at Bertz, Hess & Co., LLP

Elimination of the Required Minimum Distribution rules for 2020 – “The IFs”

Greetings again from the Bertz, Hess Professional Service Team! This week we will kick it off with a few updates and reminders, followed by a more robust discussion on the new rules for Required Minimum Distribution (RMD) in 2020.

Updates and Reminders

July 15th deadline – As mentioned in our previous communications, there could be a number of income tax payments due on July 15th. Given the impact of COVID-19 on many small businesses, take some time and consult with our Bertz, Hess & Company professional team on what makes sense for your 2020 estimated payments.

PPP Flexibility Act Highlights – Another topic we wanted to reference from last week are these updates to the PPP Loan program.

  1. Increasing the 8-week timeline to use the loan to 24 weeks
  2. Increasing the amount of allowable non-payroll expenses from 25% to 40%
  3. Increasing the term of the loan from 2 years to 5 years in certain cases

RMD Rules for 2020

The CARES Act waived the requirement to take an RMD from certain defined contribution plans and IRAs for the calendar year 2020. This waiver includes RMDs from Traditional IRAs, rollover retirement accounts and inherited IRAs.

If you do not take part or all of your RMD in 2020, the reduction in income could result in the following potential tax benefits:

  1. Less overall tax on your 2020 tax return.
  2. Less taxable Social Security benefits
  3. Lower cost for your 2022 Medicare coverage.
  4. Increased deduction on Schedule A for out-of-pocket medical expenses.
    Less income taxed on IRS Form 8960 – Net Investment Income Tax.
  5. If you do not take a distribution in 2020 you do not need to take an extra distribution in 2021 or any other future year.

If you normally depend on some or all of your RMD proceeds to pay your living expenses and you have a non-retirement investment account it is possible for you to take advantage of the RMD waiver. You can take the money you need for living expenses from your non-retirement investment account. The money you receive from a non-retirement investment account would be taxable only to the extent that there are gains on the investments sold in order to generate the funds distributed to you. Most likely those gains would be taxed at the lower capital gain rate while IRA distributions are taxed at the higher ordinary tax rates.

If you have not received your RMD for 2020 and you want to take advantage of the RMD waiver you should contact the financial institution who holds your IRA to determine what you need to do to block your RMD for 2020 from being distributed.

If you normally do part of your charitable giving from your IRA by having the contribution sent directly from your IRA to a charitable organization that option is still available for 2020. This distribution is called a Qualified Charitable Distribution (QCD). However, there may be a reason, which is too technical to explain in this brief overview, for you to delay those QCDs until 2021 and then doing double the amount in 2021.

If you have already received some or all of your RMD in 2020 there is potentially a way to undo those distributions based on the date distributed:

  1. If the distribution occurred in January of 2020 currently there is no way to undo those distributions.
  2. If the distribution occurred between 2/1/2020 and 5/15/2020 the distribution would need to be undone by 7/15/2020.
  3. If the distribution occurred after 5/15/2020 the distribution would need to be undone with 60 days after the date of the distribution.

If the distribution you already received was from an inherited IRA there is currently no way to undo a distribution from an inherited IRA.

If you have tax withheld from your IRA distribution and you decide to take advantage of the RMD waiver for 2020 you may need to make estimated tax payments. On the other hand, if you normally pay your tax by making estimated tax payments and you decide to take advantage of the RMD waiver for 2020 you may want to reduce your estimated tax payments.

As you can see the CARES Act waiving the RMD requirements for 2020 created many options for you. Your Bertz, Hess & Co. tax and business advisor will be happy to discuss the benefits of waiving your 2020 RMD and any other questions that you have!

Thank you and enjoy your weekend!

The Professional Service Team at Bertz, Hess & Co., LLP

Employee Retention Credit and More Options

Hello from the Bertz, Hess Professional Service Team! We are excited to reach out to you as we head into the summer months. The school year has ended for many of our children and Lancaster County is moving to Yellow!

This week we will cover the Employee Retention Credit, and many other significant updates and reminders.

Updates and Reminders

Paycheck Protection Plan Loans – Just last evening both the House and Senate signed off on several proposed changes to the PPP Loan program. Major changes include:

  1. Increasing the 8-week timeline to use the loan to 24 weeks
  2. Increasing the amount of allowable non-payroll expenses from 25% to 40%
  3. Increasing the term of the loan from 2 years to 5 years in certain cases

At this point, the President just needs to sign the bill. More to come on this once the President signs!

July 15th deadline – We covered this in our last communication, but it is worth mentioning again. The July 15th deadline is sneaking up on us. For many taxpayers that means as many as three different payments could be due (any amount due with the 2019 tax return, and first and second quarter estimated payments for 2020). If you include state and local estimates, it may be as many as nine different payments due on July 15th. These payments could have a significant impact on cash flow, and many times estimated payments are calculated based on prior year income. Given the impact of COVID-19 on many small businesses, take some time and consult with our Bertz, Hess & Company professional team on what makes sense for your 2020 estimated payments.

Also, keep in mind that not all states extended the second quarter estimated payment to July 15th like Pennsylvania. Among our neighboring states that did not extend the second quarter estimate due date are: New York, New Jersey, Delaware, District of Columbia, Virginia (in addition, Virginia first quarter 2020 estimate was due 6/1/20).

All of the states above have second quarter estimate due dates of June 15, 2020 and first quarter due dates of July 15th with the exception of Virginia as shown. There are many other states that did not extend the estimate dates at all. Again, be sure to consult with one of our professionals so nothing gets missed!

CHECK YOUR MAIL! – Many Economic Impact Payments are being issued on prepaid debit cards. The cards are being mailed in plain white envelopes from “Money Network Cardholder Services”, so be diligent in going through your mail. The envelope will also include instructions with a phone number to call where you establish a PIN and activate the card. If the card is not activated, you will not be able to use it.

Employee Retention Credit

One provision of the CARES Act that we have not spent much time on is the Employee Retention Credit. This credit is available to eligible employers and equals 50% of wages paid to employees during the period of March 13th, 2020 through December 31, 2020. The maximum amount available is capped at $10,000 of qualified wages per employee, which results in a credit of $5,000 per employee. The credit is then applied to the employer’s portion social security taxes. Eligible employers are required to meet the following two criteria.

  1. Operations must be fully or partially suspended during the calendar quarter as a result of orders from an appropriate government authority due to COVID 19; or
  2. Gross receipts for the quarter are 50% less than gross receipts for the same quarter in the prior year.

While the credit is available to employers of any size, it is not available to employers who receive Paycheck Protection Loan. For more detail on this credit, you can review the FAQs at https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

If you should have any questions, please reach out to your Bertz, Hess & Co. tax and business advisor and we will be happy to help.

Thank you and enjoy your weekend!

The Professional Service Team at Bertz, Hess & Co., LLP

2020