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Maximizing Paycheck Protection Program Loan Forgiveness
Small Business Information
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IRS extends additional federal tax deadlines to cover individuals, trusts, estates, corporations and others
Last month, the IRS announced that taxpayers have until July 15, 2020 to file and pay federal income taxes (originally due on April 15, 2020). On April 9, 2020, the IRS expanded this tax relief effort to additional returns, tax payments and other actions.
As a result, extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020 and before July 15, 2020. Individuals, trusts, estates, corporations and other non-corporate tax filers qualify for the extension. This means that anyone, including Americans who live and work abroad, can now wait until July 15, 2020 to file their 2019 federal income tax return and pay due taxes.
Estimated tax payments
Additionally, any individual or corporation with a quarterly estimated tax payment due on or after April 1, 2020 and before July 15, 2020, can wait until July 15, 2020 to make a payment—without penalty. This means that estimates normally due June 15, 2020 are now due one month later on July 15, 2020.
Extension of time to file beyond July 15
Individual taxpayers who need additional time to file beyond the July 15 deadline can request an extension to October 15, 2020.
Note: This is an extension to file the tax return. It is not an extension to pay taxes owed. Taxes owed are still due by the July 15, 2020 deadline.
March 29, 2020 - last updated (04/03/2020)The following represents a summary of the recently signed into law CARES Act—also referred to as the Stimulus Package. Specifically, we are providing a summary of the Paycheck Protection Program.
Title 1 of the CARES Act, entitled “Keeping American Workers Paid and Employed Act,” provides relief for small businesses and their employees who are adversely affected by the COVID-19 outbreak. The key provision in this Act is the Paycheck Protection Program—an emergency lending facility to provide small business loans on favorable terms to borrowers impacted by the current economic state.
The following offers highlights of the Paycheck Protection Program that small business owners need to be aware of and consider as they move forward:
Note: The loan forgiveness amount can be reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.
Note: To have loan amounts fully forgiven, at least 75% of forgiveness amount calculated must be for payroll costs. (This is a NEW requirement from the Treasury as of 03/31/2020.)
Employee Retention Payroll Tax Credit
Deferral of Employer Social Security Taxes
The deferral of employer social security taxes cannot be used in conjunction with the Payroll Protection Program. This allows an employer to defer their portion of Social Security taxes from March 27, 2020 to January 1, 2021. 50% is due by December 31, 2021 and the remainder by December 31, 2022.
This allows employers to expense qualified improvement property under the section 168 bonus depreciation rules.
March 28, 2020The following represents a summary of the recently signed into law CARES Act—also referred to as the Stimulus Package.
Recovery check distribution amounts—Single taxpayers will receive $1,200 and joint taxpayers will receive $2,400. There is an additional $500 for each qualifying child.
The recovery check is considered a credit for 2020, but paid in advance.
The amount is reduced (but not below zero) by 5% of each dollar a person’s adjusted gross income (AGI) exceeds. Consider the following:
Consider the following example:
Other key details for recovery check eligibility include:
Any employee who was furloughed or part of a layoff is eligible for state unemployment. Details are as follows:
Ability to withdraw up to $100,000 retirement in 2020 for COVID-19-related purposes without 10% penalty—The distribution is taxable over a 3-year period unless electing to pay it back within 3 years. This essentially equates to a loan unless it is not paid back within the 3-year timeframe. This rule applies to individuals:
Waived required minimum distributions (RMD) from individual retirement accounts—The required minimum distribution for 2020 has been waived.
This also applies to retirees who turned 70 1/2 in 2019 and are required to take their RMD by 4/1/20. If the retiree that turned 70 1/2 in 2019 still intends to take their RMD, this must happen by April 1, 2020—otherwise, the same penalty for late withdrawal will be applied.
Above-the-line charitable contribution—For tax year 2020, if a taxpayer does not itemize deductions, they can deduct up to $300 in addition to standard deduction for cash charitable contributions (no stock contributions).
Charitable contribution limitation by AGI—The 60% adjusted gross income limitation has been removed for 2020 (other than from donor advised funds).
In an effort to provide continued clarity around changes to tax law, we are offering this update to our previous tax announcements. As such, we have removed a few of our previous tax update posts.
Below, you will find a list of frequently asked questions in reference to the Internal Revenue Service’s (IRS) Notice 2020-18 (PDF). In this Notice, the Treasury Department and the IRS announced special Federal income tax return filing and payment relief in response to the ongoing COVID-19 emergency.
You can review the IRS page for additional information here.
Frequently Asked Questions:
Any person with a Federal income tax return or payment due on April 15, 2020 is eligible for relief under the Notice. “Person” includes any type of taxpayer such as an individual, a trust, an estate, a corporation or any type of unincorporated business entity. The payment due refers to both 2019 Federal income tax payments (including payments of tax on self-employment income) and 2020 estimated Federal income tax payments (including payments of tax on self-employment income)—regardless of the amount owed. The return or payment must be due on April 15, 2020—this relief does not apply to Federal income tax returns and payments due on any other date.
No, you do not have to be sick, quarantined or have any other impact from COVID-19 to qualify for relief. You only need to have a Federal income tax return or payment due on April 15, 2020 as described above.
Yes, the relief provided in the Notice applies to Federal income tax returns and payments in respect of an Affected Taxpayer’s 2019 taxable year and postpones those 2019 return filings and payments due on April 15, 2020 until July 15, 2020. If your Federal income tax return for your fiscal year ending during 2019 is due on April 15, 2020, whether that is the original due date or the due date on extension, your due date is postponed to July 15, 2020.
No, this relief applies only to Federal income tax payments. State filing and payment deadlines vary and are not always the same as the Federal filing and payment deadline. We urge you to check with your state tax agencies for those details. More information is available here.
Nothing, except file and pay any tax due with your return by July 15. You don’t need to file any additional forms or call the IRS to qualify for this automatic Federal tax filing and payment relief. If you expect a refund, you are encouraged to file your return as soon as you can so that you can receive your refund. Filing electronically with direct deposit is the quickest way to get refunds. If you need more time beyond July 15 to file your return, request an automatic extension of time to file as described next.
If you are an individual, you can request an automatic extension to file your Federal income tax return if you can’t file by the July 15, 2020 deadline. The easiest and fastest way to request a filing extension is to electronically file Form 4868 through your tax professional, tax software or using the Free File link on IRS.gov. Businesses, including trusts, must file Form 7004.
You must request the automatic extension by July 15, 2020. If you properly estimate your 2019 tax liability using the information available to you and file an extension form by July 15, 2020, your tax return will be due on October 15, 2020. To avoid interest and penalties when filing your tax return after July 15, 2020, pay the tax you estimate as due with your extension request.
To avoid interest and penalties, pay your taxes in full by July 15, 2020. If you filed Form 1040 or Form 1040-SR, the tax payment amount can be found on line 23. If you filed Form 1040-NR, the tax payment amount can be found on line 75. For a corporation filing Form 1120, the tax payment amount can be found on line 35.
Interest and penalties will begin to be charged after July 15 for any amount remaining unpaid by that date.
No, the payment will not be automatically rescheduled to July 15, 2020. If you do nothing, the payment will be made on the date you chose. Here is information on how to cancel and reschedule your payment:
No, second quarter 2020 estimated income tax payments are still due on June 15, 2020. First quarter 2020 estimated income tax payments are postponed from April 15 to July 15, 2020.
Yes. Contributions can be made to your IRA for a particular year at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns has been postponed to July 15, 2020, the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020. For more details on IRA contributions, see Publication 590-A - Contributions to Individual Retirement Arrangements (IRAs).
March 21, 2020
Under the recently enacted Coronavirus Preparedness and Response Supplemental Appropriations Act (the Act), small businesses that have suffered substantial economic injury as a result of COVID-19 can apply for low-interest federal disaster loans through SBA. Small businesses and nonprofits can apply for working capital loans of up to $2 million.
We’ve highlighted the following key details of the Act for you here, but you can also learn more by visiting the COVID-19 disaster assistance page on SBA’s website.
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.
If you have questions, be sure to reach out to us. Our entire team is here to support and guide you!
March 20, 2020
“The Families First Coronavirus Response Act” (FFCRA), which goes into effect April 2, 2020 and expires December 31, 2020, responds to the coronavirus outbreak by providing additional assistance in the areas of COVID-19 testing, sick leave, food assistance and more. We’ve compiled key details of FFCRA that we believe you need to know.
In summary, the Act:
More specifically, here’s what FFCRA means for both business owners and employees in the areas of sick leave and expanded family and medical leave.
Department of Labor Links: