Check back to get IRS updates on COVID-19
During this unprecedented public heath emergency surrounding the Coronavirus (COVID-19), we want to keep you informed about ways to can do handle your tax filings. You don't need an appointment to do your taxes. You can mail, upload, or deliver your information to us. We can conduct an interview by phone so we can complete your tax returns for the 2019 year. That way, we are keeping you and our staff safe.
Also, we highly recommend that you visit the Utah Department of Health. You will receive current guidelines on good hygiene practices and business practices to help prevent the spread of COVID-19.
Lastly, the damage the Coronavirus has done on the economy has been enormous. There are untold billions of dollars lost because our daily routine has been disrupted. Our local merchants and restaurateurs have been especially hard hit. Most small businesses simply don't have resources to be shut down for an extended time. If you are in a able to do so, please support local merchants and local restaurants in any way possible.
Due Date for individual tax returns has been moved to May 17, 2021
On March 17, 2021 -- The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.
Summary of American Rescue Plan Act of 2021 for Individuals
Below is a summary of the American Rescue Plan Act of 2021 (H.R. 1319) for individuals. The bill was signed into law on 3/11/2021.
Special information that may impact individuals who received unemployment in 2020:
For taxpayers who received unemployment in 2020 and have an Adjusted Gross Income of $150,000 or less, the first $10,200 of unemployment received is considered non-taxable. Adjusted Gross Income determination is made without including the unemployment received.
**Our firm will provide future guidance to our clients that may be impacted.**
**This is only in effect for 2020. This does not impact your unemployment benefits received in 2021.**
Individual tax provisions in 2021
Many of these tax provisions are for Tax Year 2021 only. Continuation of these items will require congress to extend these provisions.
2021 Recovery Rebates
As many individuals received Economic Impact Payments (stimulus checks) in 2020 and early 2021, another round of rebates will be distributed in the coming weeks. The eligible credit is $1,400 for single taxpayers and $2,800 for married filing joint filers. A credit of $1,400 is also available for eligible dependents. The income limits and phaseout for the recovery rebates will be determined by your 2020 tax return (if it has been filed), otherwise will default to income on your 2019 tax return.
There are a number of online calculators that can be used to determine the projected amount of the third stimulus check. If your 2020 return has been filed, you will need your Adjusted Gross Income amount, which can be found on line 11 of Form 1040. Otherwise, you will need your 2019 Adjusted Gross Income, which can be found on line 8b of Form 1040.
Here is a link to a calculator to calculate your recovery rebate: https://www.forbes.com/advisor/personal-finance/third-stimulus-check-calculator/
Child Tax Credit (currently in place for 2021 only)
The Child Tax Credit has been increased to $3,000 per child ($3,600 for certain children under 6). The child tax credit is now applicable to children under 18. The child tax credit in 2020 was $2,000 and applicable for children under 17.
Advance Payments of the Child Tax Credit
Along with changes increasing the Child Tax Credit, the Department of Treasury will also begin sending advance payments of the credit. This means you will get a monthly amount during the year instead of getting the full credit when doing your tax return.
**This means your traditional tax refund may be lower starting in 2021 or the amount you traditionally owe may be more than usual.**
**The IRS will send you a tax form reporting all advance payments you received. This form will be required to complete your return.**
**For children born during the tax year, you will not receive an Advance Payment in the first year, you will receive the credit with your tax return.**
Dependent Care Benefits (currently in place for 2021 only)
The Dependent Care Credit has multiple changes in place for 2021.
The calculation of the credit is now 50 percent of the eligible expenses.The calculation traditionally has been 35 percent of eligible expenses.
- The amount of eligible expenses is now $8,000 for one qualifying child or $16,000 for two or more qualifying children.
- The amount of eligible expenses was $3,000 for one qualifying child or $6,000 for two or more qualifying children.
There is still an income phaseout for the credit. It was increased from starting to phase out at $15,000, to beginning to phase out at $125,000.
Starting in 2021, the credit is now a refundable credit. The credit traditionally was only allowed if the taxpayer had sufficient tax liability. Starting in 2021, the amount in excess of the tax liability will be included in the tax refund.
**Example of how this impacts an individual. The credit now goes from a max of $1,050 for one qualifying child (35 percent of $3,000) or $2,100 for two or more qualifying children (35 percent of $6,000) to $4,000 for one qualifying child (50 percent of $8,000) and $8,000 (50 percent of $16,000).**
Employer Provided Dependent Care Benefits (currently in place for 2021 only)
Dependent care benefits offered through an employer (reducing taxable income) have been increased for 2021. The amount of dependent care benefits that can be excluded has been increased from $5,000 to $10,500 per family.
Earned Income Tax Credit Expanded (currently in place for 2021 only)
The Earned Income Tax Credit has been expanded to most individuals 19 and over instead of 25 and older and will no longer have a maximum age of 65.
Summary of American Rescue Plan Act of 2021 for Businesses
Below is a summary of the American Rescue Plan Act of 2021 (H.R. 1319) for businesses. The bill was signed into law on 3/11/2021.
Grants for restaurants and other food businesses (Restaurant Revitalization Grants)
Grants will be available in the near future for restaurants and other food and beverage businesses that are impacted by current economic conditions. These grants will be processed through the Small Business Administration (SBA).
Extension and expansion of the Families First Coronavirus Response Act (FFCRA) Sick/Leave Pay
- The period that is available to claim the FFCRA Sick/Leave Pay has been extended from March 31, 2021 to September 30, 2021.
- The credit can now include the employer’s share of Social Security and Medicare Tax.
- The amount of wages an employer may claim per employee increased from $10,000 to $12,000.
- The sick/leave time now includes a provision to allow employees to obtain the COVID-19 vaccine.
Extension and adjustments to the Employee Retention Credit (ERC)
- The Employee Retention Credit has been extended from June 30, 2021 to December 31, 2021.
- Clarifies that the ERC is not available for wages paid with PPP or PPP round two funds, shuttered venue assistance, or the Restaurant Revitalization Grants.
Taxation clarification on Restaurant Revitalization Grants or EIDL Advance
HR 1319 clarifies that Restaurant Revitalization Grants and the EIDL Advance are generally excluded from gross income and other tax-related calculations.
Shuttered Venue Operators Grant (SVOG)
HR 1319 includes an additional $1.25 billion for the Shuttered Venue Operators Grant (SVOG) program. It also allows eligible entities that receive a first or second draw PPP loan after December 27, 2020 to receive a grant. Previously, receiving or having open applications for both programs had been prohibited. With the passage of the new law, it is possible for venue operators to receive both a PPP loan and an SVOG, as long as the amount of the SVOG is reduced by the amount of PPP funds approved. SVOG eligibility requirements can be found through the SBA’s website: https://www.sba.gov/sites/default/files/2021-03/SVOG%20Eligibility%20Requirements-508.pdf
Overview of Pandemic Relief Bill for businesses
Below is a summary of the stimulus relief for businesses that is part of the Consolidated Appropriations Act, 2021 (H.R. 133) which was signed into law on 12/27/2020.
Paycheck Protection Program second draw
Congress has created a PPP second draw available to smaller businesses that can show their business has been impacted by the pandemic. The second draw offers a similar package to the PPP offered out of the Cares Act earlier in 2020. There have been some changes and limitations put in place for the second draw including, (this is not all inclusive):
● Company size is smaller. Instead of 500 or less employees as it was in the Cares Act, the employee limits are reduced to 300.
● Companies will have to show a 25% or more reduction in revenue for an individual quarter in 2020 compared to 2019. This requires comparing quarterly financials for each quarter of 2020 to each quarter in 2019.
● Businesses that have 20% or more ownership by Individuals or other entities based in China or Hong Kong are ineligible for the PPP second draw.
● Additional ineligible businesses include, (this is not all inclusive):
○ Passive businesses owned by developers and landlords that do not actively use or occupy the assets
○ Pyramid sale distribution businesses
○ Private clubs that limit membership to members for any reason other than capacity
○ Businesses that have an associate that is incarcerated, on parole or probation, or has been indicted for a felony or crime or moral turpitude
○ Businesses that have defaulted on a federal loan or federally assisted financing
Calculation of loan: The loan calculation follows the same rules as it did under the Cares Act with the exception that you can choose to use payroll amounts from the calendar year 2019 or the 12 months immediately preceding the date of the loan application.
Deductibility of expenses forgiven under the PPP and PPP second draw
Under original guidance from the Department of Treasury, the expenses paid with funds from the PPP loans were not deductible. The passing of this new bill has clarified that the treatment of the forgiveness will be as tax-exempt income. The forgiveness amount will not add-back the forgiveness as income or result in any reduction in expenses paid.
PPP simplified forgiveness application
A simplified application (one-page) will be released for loans of $150,000 or less in the coming weeks. Currently, applications exist for loans of $50,000 or less only. We will provide more details when the Department of Treasury releases the new application.
Tax deduction for 100 percent of business meals starting January 1, 2021
Currently, a business may take a tax deduction of 50% of business meals. Starting on January 1, 2021 and ending on December 31, 2022, all meals from restaurants will be 100% tax deductible.
Employee Retention Tax Credit extension and changes
Changes have been made to the Employee Retention Tax Credit including:
● The credit is now allowed for wages paid through July 1, 2021. The original credit was due to expire on January 1, 2021.
● The credit limit of $10,000 per employee has been changed to $10,000 per employee per quarter.
● The credit limitation has been changed from 50% of qualified wages to 70% of qualified wages.
● The gross receipts test has been changed to comparing the respective quarter in the current year.
● The credit can also be taken if the payroll for the Employee Retention Tax Credit was not paid with forgiven (or forgivable) PPP funds.
● The changes to this tax credit are retroactive to the original Cares Act date of March, 12, 2020.
Extension of Families First Coronavirus Response Act sick and family leave
The FFCRA sick and leave pay has been extended for qualified employees until March 31, 2021. The original Act was set to expire on December 31, 2020. All the same requirements will remain in place with the exception of date extension.
Overview of Pandemic Relief Bill for individuals
Below is a summary of the stimulus relief for individuals that is part of the Consolidated Appropriations Act, 2021 (H.R. 133) which was signed into law on 12/27/2020.
Second round of stimulus checks/direct deposits
Stimulus payments should start being processed in the coming week(s). Stimulus payments are $600 for each individual ($1200 per couple) and $600 for children age 17 and under. The amount of the stimulus payment will start to phase out at incomes of $75,000 (Single), $112,500 (Head of household) and $150,000 (Married filing joint or surviving spouse).
There are a number of online calculators that can be used to determine the projected amount of the second stimulus check. You will need your 2019 Adjusted Gross Income, which can be found on line 8b of form 1040.
Here is a calculator from Forbes: https://www.forbes.com/advisor/personal-finance/second-stimulus-check-calculator-payments/
Enhanced unemployment benefits
Individuals on unemployment can receive an extra $300 per week for up to 11 weeks starting on December 26, 2020. The $300 is not retroactive and is good through March 14, 2021.
Earned Income Tax Credit changes for 2020 tax returns
Taxpayers that qualify for Earned Income Tax Credit, who have less earned income in 2020 than in 2019, can use their 2019 Earned Income to calculate their Earned Income Tax Credit.
Rollover of Flexible Spending Accounts (FSA)
The bill allows taxpayers to carry over amounts in their FSA to 2021 (from 2020), and then again into 2022 (from 2021). This covers both healthcare and dependent care FSAs.
Tax Year 2021 – Removal of Tuition and Fees Deduction
Starting in 2021, the Tuition and Fees Deduction has been eliminated. It has been replaced with a higher phase-out limit of the Lifetime Learning Credit. The new phase-out limits are $80,000 for single and $160,000 for joint returns.
Tax Year 2021 – Charitable deductions
Starting in Tax Year 2021, an individual who does not itemize deductions can also get an above-the-line deduction of $300 per return ($600 for a joint return) for cash donations. The suspension of cash donation limits was also extended through 2021.
Tax Year 2021 – Medical Expense deductions
Starting in 2021, to be able to claim medical expenses, the floor is officially 7.5%. This number has vacillated between 10% and 7.5%, but is now permanent at 7.5%.
Announcement: Easier Loan Forgiveness Application for PPP loans of $50k or less
On October 8, 2020, the Department of Treasury introduced an easier Loan Forgiveness Application for businesses that received PPP loans of $50,000 or less. This new application does not require any calculations for Loan Forgiveness and borrowers are not subject to any wage or FTE reductions. All relevant payroll reports and records of other qualified expenses should still be kept on file, as they could be requested in the future by the SBA.
Links are provided below to access these new, simpler forms. Our firm is here to help if you have questions about your PPP Loan Forgiveness.
Link to application: https://www.sba.gov/document/sba-form-3508s-ppp-loan-forgiveness-form-3508s
Link to instructions: https://www.sba.gov/document/support-ppp-loan-forgiveness-form-3508s-instructions
Payroll Tax Deferral
Under guidance issued by the IRS on August 28, 2020, payroll tax deferral (based on presidential memorandum and IRS notice 2020-65) enables employers to stop withholding Social Security payroll taxes from paychecks from September 1, 2020 through December 31, 2020.
Before diving into key details, be advised that, Evans & Associates, Inc. advises against following, utilizing, or entering into the Payroll Tax Deferral Program.
The following provides a summary of IRS Notice 2020-65:
Payroll tax deferral:
● Any employee who makes less than $4,000 pre-tax wages in a bi-weekly pay period qualifies to have their Social Security Tax (6.2%) deferred.
● The deferral covers paychecks starting on September 1, 2020, and the deferral ends on December 31, 2020.
● This deferral enables employees to keep more of their money during the defined pay periods.
● The determination for the $4,000 wage limit is done on a bi-weekly pay period basis. This means that an employee could qualify for deferral during some pay periods and not others, depending on the pay amount during a given period.
Payroll tax repayment:
● Employers must pay deferred taxes no later than April 30, 2021. Otherwise, penalties and interest will start to accrue on taxes owed.
● Employers will need to increase the employee social security tax for current employees between January 1, 2021 and April 30, 2021 to recover the amount deferred during 2020. This means that employees can expect reduced paychecks in 2021 to repay the deferred taxes.
● For employees who are no longer with a business and had taxes deferred, the employer will need to make arrangements with the employee to recover the deferral amounts (details pending on this process).
Items awaiting clarification:
● The process to collect former employees’ deferred taxes.
● The type of recordkeeping or other items required for compliance on this deferral.
SBA Beginning to Accept PPP Loan Forgiveness Applications
August 10, 2020 -- The SBA has announced that they will begin acceptance PPP loan forgiveness applications. While the date has been set by the SBA, more than likely, the lender will have a different date for accepting PPP forgiveness applications.
Just so you are are aware, there is potential legislation that could allow automatic forgiveness of loans that are $150,000 or less. We are hoping that this legislation will pass and that the President will sign the legislation.
Paycheck Protection Program Flexibility Act
June 5, 2020 -- Today, the Paycheck Protection Program Flexibility Act, (HR 7010) was signed into law. Below are six key provisions that may apply.
- Social Security payments can be deferred -- In the original Cares Act, employers who received PPP money could not defer the employer social security tax payments. This bill changes that. A business that has any social security payments between March 27, 2020 and December 31, 2020 can pay half of the amount due by the end of 2021 and the reminder by the end of 2022.
- Covered time extended -- The time period to use the PPP money was originally 8 weeks. It is now 24 weeks. More time has been granted to maximize and utilize the PPP funds for forgiveness.
- Loan payment deferral -- In the original CARES Act, the deferral of your first payment was 6 months. This has now been extended to 10 months. Payments are required on the amount not forgiven with qualifying expenses.
- The 75% payroll threshold adjusted -- Originally, the SBA and the IRS had made a determination that at least 75% of the funds had to be used for qualifying expenses. This bill changes that threshold to 60%.
- Loan term date extended -- All new PPP loans will have a five-year loan after the passing of the HR 7010. If you would like the 5 year term, you will need to work with your lender to amend your the terms of your loan.
- Safe harbor date extended -- When the CARES Act was initially passed, you where required to rehire or restore your full-time employees by June 30, 2020. This date has know be extended to December 31, 2020.
This is a constantly changing area of tax law. We will keep you updated as this changes. We expect more changes and clarifications to be made coming weeks.
IRS announces its People First Initiative
March 25, 2020 -- Today, the IRS announced its People First Initiative. This initiative provides relief on a variety of issues ranging from postponing compliance actions to easing payment guidelines. In the press release, the IRS states that during this period of time, they will generally not start new field, office, and correspondence examinations. In addition, for taxpayers under an existing Installment Agreement with the IRS, payments due between April 1 and July 15, 2020, are suspended. Although, the IRS, will still accrue interest on any unpaid balance. For more information refer to the IRS press release.
US Department of Labor
March 23, 2020 -- The US Department of Labor has released and resources regarding COVID-19.
Utah State Workforce Services issues COVID-19 FAQ's
March 23, 2020 -- The Department of Workforce Services (unemployment), has released guidance for employers and employees during this health crisis. Please visit their website to get additional information regarding employment issues.
March 23, 2022 -- For users of the myPaysolutions, please refer to the following info to answer questions in regards to any payroll questions you may have.
Latest Federal Government Updates
Marcy 21, 2020 -- Under the enacted Coronavirus Preparedness and Response Supplemental Appropriations Act (the Act), small businesses that have suffered substantial economic injury can apply for low-interest federal disaster loans through the SBA. Small businesses and nonprofits can apply for working capital loans of up to $2 million.
Below are important details, but you can also learn more by visiting the COVID-19 page on SBA’s website.
State governors must first request access to the Economic Injury Disaster Loan program. Once the declaration is made, information on the application process for disaster loan assistance will be made available to affected small businesses within the given state.
Loans carry an interest rate of 3.75% for small businesses and 2.75% for nonprofits.
Loans can be used to cover accounts payable, debts, payroll and other bills.
Loans can be offered with long-term repayments in order to keep payments affordable—up to a maximum of 30 years. Terms are determined on a case-by-case basis.
Businesses will apply for loans online and select “Economic Injury” as the reason for seeking assistance.
SBA offers disaster assistance via its customer service center. If you have questions or want to check if your state is eligible, contact U.S. Small Business Administration via phone at 800-659-2955 (TTY: 800-877-8339) or e-mail firstname.lastname@example.org.
The Coronavirus situation is changing rapidly, as are the updates to various relief efforts. We will continue to monitor news and keep you updated as clarification is provided.
Family and Medical Leave Act (FMLA) expanded to grant relief to those
affected by COVID-19
March 20, 2020 -- The Families First Coronavirus Response Act (FFCRA), goes into effect April 2, 2020 and expires December 31, 2020. The FFCRA, responds to the coronavirus outbreak by providing additional assistance in the areas of COVID-19 testing, sick leave, food assistance, and more. Below are details of FFCRA that we believe you need.
- Requires insurance plans to provide free COVID-19 testing
- Requires employers to provide emergency paid sick leave to workers affected by COVID-19 and expands family and medical leave.
- Offers increased funding for state unemployment insurance, food stamp, and nutritional programs.
Specifically, this is what FFCRA means for both business owners and employees in the areas of sick leave and expanded family and medical leave.
- Employees are eligible for up to two weeks of sick leave (full pay for self, 2/3 pay for family care) for illness, quarantine or school closures.
- Employees are eligible for up to 12 weeks of FMLA leave for school closures (10 days unpaid and then up to 10 weeks at 2/3 pay).
FMLA expansion covers:
- Employers with fewer than 500 employees
- Employees who have been employed for at least 30 calendar days (some exclusions may apply)
- Employees who must care for children under the age of 18 in the event of school and place-of-care closures or if care provider is unavailable due to a public health emergency with respect to COVID-19.
Emergency paid sick leave covers:
- Employers with fewer than 500 employees
- All employees no matter the length of employment (some exclusions may apply)
- Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
The Coronavirus situation is changing constantly. We will continue to post additional information as updates are released.
Utah will follow Federal filing and payments to July 15, 2020
March 20, 2020 -- The State of Utah has announced they will follow the Federal filing and tax payment rules for individual returns to July 15, 2020.
The IRS extends the filing deadline to July 15, 2020
March 20, 2020 -- Secretary Mnuchin announced Notice 2020-18 that the tax filing deadline and payments has been extended to July 15, 2020. All taxpayers and businesses will have additional time to file and make payments to July 15, 2020, without interest and penalties.
This is an supersedes IRS Notice 2020-17 which had only extended tax payments to July 15, 2020.
For relief of state filing and paying requirements, please monitor the AICPA website.
The IRS defers tax payments to July 15, 2020
March 19, 2020 -- The IRS release Notice 2020-17 which announced special payment relief in response to the coronavirus outbreak.
- Tax returns are still due April 15, 2020.
- The tax payment deadline is July 15, 2020 for up to $1 million in 2019 taxes.
- The payment extension applies to all individual returns including Schedule "C" filers.
- Federal 1040ES taxes are also included in the July 15, 2020 payment relief.
- The deferred payments only apply to Federal Returns. Each state will set their own rules regarding filing requirements and payment due dates.
If there are changes to this IRS announcement, we will update to keep you informed.