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COVID-19 Update

(posted: April 13th, 2020)

We wanted to let you know the latest financial and tax updates related to the coronavirus/COVID-19 outbreak:

June 15 Estimates: The IRS has just announced that the June 15, 2020 estimate will now be due on July 15 without penalty. Therefore, all California individuals and corporations will not owe any taxes until July 15 when the balance due on 2019, 1st and 2nd quarter 2020 estimates will be due.

States other than California may have different due dates for the balance due on 2019 and/or 2020 estimates.

The Federal extension of time to file and pay generally now applies 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 can qualify for the extra time to file and make payments.

Stimulus Payments: The IRS also announced their website ( will have a "Get My Payment" application for taxpayers to enter bank account information for direct deposit and to check on the status of their payment that will be available the week of April 13 for anyone who wants to receive their stimulus check as a direct deposit. The Get My Payment link is here, though as of this writing the app is not yet "live". If you received your tax refund via direct deposit, the IRS already has your bank account information.

Charitable Contributions: An individual who doesn't itemize deductions may take an above-the-line qualified charitable contribution of cash up to $300 for the 2020 taxable year. The cap on 60% of AGI for qualified charitable contributions of cash is lifted for 2020. Contributions to a donor advised fund are not eligible.

Net Operating Losses: Requires taxpayers with net operating losses arising in taxable years beginning in 2018, 2019, and 2020 to carry those NOLs back for the five preceding taxable years unless the taxpayer elects to waive or reduce the carryback period.

Bonus Depreciation: As we mentioned in our prior update, bonus depreciation is now available for qualified leasehold improvements retroactive to January 1, 2018. Therefore, it may be necessary to amend your tax return.

Paycheck Protection Program (PPP Loans): If you receive one of these loans, approximately two months after you receive it, you will need to explain to the bank and the Small Business Administration how you spent the money. Your explanation and accounting records will determine how much of the loan is forgiven. See below for guidelines to follow.

Paycheck Protection Program Guidelines to Follow

The documentation required for forgiveness of the loan will probably be rigorous. This is not the time for sloppy records. You should assume that you will have to provide documentation as if you were being audited. Below are some guidelines to follow:

  1. Deposit the funds in a separate bank account. This way you can track all of the transactions from the loan proceeds.
  2. If you use Quickbooks, set up a separate class for the loan proceeds and expenditures. If you do not use accounting software, you should purchase a program or use an online service.
  3. To qualify for forgiveness, you need to use at least 75% of the loan for payroll costs which will need to be well documented. Therefore, if you don't use a payroll service, you should consider using one for the eight-week period following your loan. Your payroll must be accurately accounted for and documented.
  4. Document owner compensation. Use the owner's 2019 compensation to document the owner's salary or draw if a sole proprietor or partnership. The maximum annual salary/draw is $100,000 which equates to $1,923.08 a week. You should take the maximum salary/draw during each eight week period.
  5. The employee payroll should cover the 8 weeks. If your payroll period falls outside the 8-week period, you should run a separate payroll so you have 8 weeks of payroll.
  6. Be sure to document health insurance use checks and electronic payment receipts to prove the dollar amounts and payment dates. You can use the monthly premium statement to prove the deductibility.
  7. Retirement plan contributions should be treated like health insurance.
  8. Rent, mortgage interest and utility services should be documented with the actual checks or electronic payment receipts to document the amounts and dates of payments. These are non- payroll expenditures which need to be in place prior to February 15, 2020 in order to qualify. You will need a copy of the lease and/or mortgage loan. Only the interest on the loan qualifies so you will need the monthly bill that breaks down the interest and principal.
  9. Loan forgiveness is reduced or eliminated if a company lays off workers or salaries are reduced from the prior quarter.
  10. It is quite possible that the SBA will issue additional guidance. If the rules change, you may want to make changes to your payroll or other expenditures in order to optimize your loan forgiveness. Please contact us if you need additional guidance.

If you have questions or need additional clarification please contact us.


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