A message about Coronavirus (COVID-19) from Alisa Na, CPA

As Gov. Jay Inslee announced new restrictions until 12/14/20,  we remain committed to protecting the health of our clients and employees. With this in mind, our office will continue to provide services remotely as our physical building is closed to the public. 

Please note the following guidelines.


Consultation Meeting

  • We’re currently accepting new clients.
  • Consultation meetings will be done virtually and can be scheduled. Initial consultation fee is $250 and additional consulting is billed at $250/hr.
  • For service inquiries or questions, or to schedule a consultation meeting, please call 425-744-2742 or contact us via email at service@alisanacpa.com.


Income Taxes

We will continue to provide income tax services virtually with electronic uploads, virtual meetings and e-signatures.

  • For tax documents, please send electronically via our secure link (PDF, word or excel):  Click here to upload files.
  • When the draft is ready, we will reach out to you to schedule a virtual meeting for review.
  • Document signing will be done electronically.
  • In lieu of a check, payments for our invoice can be made online: Click here to make an online payment.
  • Electronic copy of your tax return will be available to download upon your e-sign completion.
  • Please note that a request for a printed tax return will be subject to a $35 processing fee to cover postage and administrative time.

If drop-offs are necessary:

  • Hard documents will require additional processing time. 
  • Please call our office ahead of the drop-off to notify a member of our team.
  • A locked black mail box is available along the front curb. Please label the envelope with your name and phone number.
  • Please note that the return of documents will be subject to a $35 processing fee to cover postage and administrative time.


For Scheduled Office Visits

  • In lieu of in-person meetings, only virtual meetings are scheduled currently, 

For service inquiries or questions, please contact us via email: service@alisanacpa.com and we will be happy to assist you.


Our Firm’s Policy on Assisting SBA EIDL and PPP Loan Applications

As our office is experiencing high volume of inquiries and requests related to SBA EIDL and PPP applications, please understand that we will do our best to respond as promptly as possible. For a service fee, we are happy to assist our clients with the following:

  • Preparation and submittal of the initial SBA EIDL online application (for up to 10k advance)
  • Preparation of SBA EIDL’s supporting and other required forms
  • Preparation of the PPP application and other supporting forms as required by your bank

For service inquiries or questions, please contact us via email: service@alisanacpa.com

If you are self-preparing for the EIDL application, follow the online application instructions on the SBA website: Click here for the online application.

Confused about the difference between EIDL and PPP and if one or both loans are right for you? Check out this useful comparison chart.


Below is information we’ve gathered to help you navigate Federal and Washington state updates regarding EIDL and PPP loan and other relief information. As information is changing rapidly, we will continue to provide updates and make changes as needed.

We hope everyone stays safe and healthy. Thank you for your cooperation and the privilege of serving you.

Sincerely,
Alisa Na, CPA


DISCLAIMER: This communication is intended to provide general information on legislative COVID-19 relief measures as of the date of this communication and may reference information from reputable sources. Although our firm has made every reasonable effort to ensure that the information provided is accurate, we make no warranties, expressed or implied, on the information provided. As legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that may modify some of the provisions in this communication. Some of those modifications may be significant. As such, be aware that this is not a comprehensive analysis of the subject matter covered and is not intended to provide specific recommendations to you or your business with respect to the matters addressed.




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Page Content Overview



Federal Updates


Helpful Links »

Direct links to calculate your stimulus payment, PPP and EIDL loan applications, and other SBA forms for those who are self-preparing


CARES Act for Businesses »

Key points of the CARES Act for Businesses and the Paycheck Protection Program (PPP)


CARES Act for Individuals »

Key points of the CARES Act for Individual taxpayers


Tax Update Announcement »

Updated tax announcement, including FAQs from the IRS website


U.S. Small Business Administration (SBA) offering disaster assistance in response to COVID-19 »

Summary of SBA’s disaster recovery loan program, including Economic Injury Disaster Loan (EIDL)


Family and Medical Leave Act (FMLA) expanded to provide relief to those affected by COVID-19 »

Summary of updates to FMLA



WA State Updates


Additional Resources »

Links to resources for WA state and local relief efforts




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Helpful Links


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CARES Act for Businesses

June 5, 2020

Recent legislation (titled HR7010) has passed, offering adjustments to PPP loans—particularly regarding forgiveness calculations. Key changes are as follows:

  • Covered time period extended—The period of time to use loan money has been extended from 8 to 24 weeks. This means that you have more time to apply funds to qualified expenses that maximize loan forgiveness.
  • Social Security payments deferred—Originally under the Cares Act, employers who received the PPP Loan could not also defer employer social security tax payments. HR7010 adjusted this. Now, any employer with social security payments due between March 27, 2020 and December 31, 2020 can pay half of the amount due by the end of 2021 and the remainder by the end of 2022.
  • Loan payment deferral extended—The original 6-month deferral for repayment of PPP loans has been extended to 10 months. Payments are only required on the amount of the loan that is not forgiven.
  • Payroll threshold adjusted—Originally, the Department of Treasury and the SBA determined that 75 percent of a PPP loan had to be used for payroll in order for the loan to be forgiven. The 75 percent threshold has been adjusted to 60 percent. Loan forgiveness will only be granted if 60 percent of funds are used for payroll. This could still be subject to change; we will keep you posted.
  • Safe harbor date extended—The original Cares Act included safe harbor exceptions to restore or attempt to restore full-time employees and any pay reductions by June 30, 2020. These exceptions still exist, but the date to restore has been adjusted to December 31, 2020.
  • Loan term date extended—All new PPP loans effective after the passing of HR7010 will have a five-year term. Businesses that received a loan prior to the new legislation can adjust the loan term from two to five years. Individuals will need to work with their lender to amend loan terms.


March 29, 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.


PAYCHECK PROTECTION PROGRAM – KEY POINTS

Starting April 3, 2020, small businesses and sole proprietorships can apply for the Paycheck Protection Program (PPP) loan through existing SBA lenders. Starting April 10, 2020, independent contractors and self-employed individuals can apply for the PPP loan through existing SBA lenders. Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.

You can apply for the Paycheck Protection Program by downloading the form: Click here to download.

You will need this form filled out when applying to participating SBA lenders.

The following offers highlights of the Paycheck Protection Program that small business owners need to be aware of and consider as they move forward:

  • Available to businesses with 500 employees or less.
  • Loan period ranges from March 15, 2020 through June 30, 2020.
  • Loan amount equates to 2.5 times average monthly payroll expenses from 2019—up to $10 million.
  • Loan interest is rate capped at 4%.
  • Loan duration is a maximum of 10 years.
  • Loan forgiveness is available—A borrower is eligible for loan forgiveness equal to the amount spent on the following items, during the eight-week period beginning on the loan origination date:
    • Payroll costs
    • Mortgage interest incurred in the ordinary course of business
    • Rent paid based on a leasing agreement
    • Payments for utilities—including electricity, gas, water, transportation, telephone or internet
    • Additional wages paid to tipped employees
      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.
  • Collateral is not required to secure the loan.
  • No personal guarantee is required to secure the loan.
  • Loan repayments are automatically deferred for six months and up to one year. This includes interest, fees and loan principal.
  • Payment Protection Program loans are applied for through approved banks. The SBA may administer some loans based on viability.
  • For businesses that have been denied SBA loans previously, lending requirements are more lenient.

You can go to the U.S. Department of the Treasury website for more detailed information on the Paycheck Protection Program: Click here for the website.


CARES ACT – ADDITIONAL KEY POINTS

Employee Retention Payroll Tax Credit

  • The Employee Retention Payroll Tax Credit cannot be used in conjunction with the Payroll Protection Program or any other loan where payroll costs are forgiven.
  • Employee retention credit is equal to 50% of the qualified wages paid, but cannot exceed $10,000 per employee.
  • The employer’s gross receipts must be 50% or less than the same calendar quarter in 2019 to qualify.
  • For employers with 100 or less employees, qualified wages are defined as wages paid for all employees during the period—whether they were able to work or not. For employers with 100 or more employees, qualified wages are defined as wages paid to employees not providing services.

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.

Bonus Depreciation

This allows employers to expense qualified improvement property under the section 168 bonus depreciation rules.

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CARES Act for Individuals

March 28, 2020

The following represents a summary of the recently signed into law CARES Act—also referred to as the Stimulus Package.


RECOVERY CHECKS – KEY POINTS

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:

  • Married filing joint: $150,000 (AGI over $198,000 does not qualify)
  • Head of household: $112,500 (AGI over $146,500 does not qualify)
  • Single: $75,000 (AGI over $99,000 does not qualify)

Consider the following example:

  • A married couple with no children has an AGI of $190,000.
  • $190,000 is $40,000 above the $150,000 amount shown above.
  • The couple’s check is reduced by 5% of $40,000, which is $2000.
  • Therefore, they would receive a check for $400. (i.e., $2400 – $2000 = $400)


Check out the calculator posted on the Washington Post website to calculate your stimulus payment amount: Click here for the calculator.*

*Note that the calculator was created based on the figures from the CARES Act.  


Other key details for recovery check eligibility include:

  • Nonresident aliens are not eligible for the rebate.
  • If a taxpayer has an outstanding debt (which the IRS would typically offset a refund by paying that debt), recovery dollars will not be used to offset that debt.
  • Amount will be direct deposited into the account on the last filed return. Every taxpayer will receive a letter indicating their recovery check was dispersed. If the letter is not received, there will be a specific phone number to call to have the check re-issued.
  • AGI will be accessed from 2019 returns if filed at the time of determination. Otherwise, 2018 returns will be used. Taxpayers who have not filed a return will not receive a check unless they did not file because they only have SSA-1099 or RRB-1099 (social security). The Treasury Department will review those forms for 2019 and issue the appropriate amount via check.


UNEMPLOYMENT – KEY POINTS 

Any employee who was furloughed or part of a layoff is eligible for state unemployment. Details are as follows:

  • Unemployment amount via the state typically ranges from 30-50% of the standard wage, depending on the state.
  • The amount a person will receive for unemployment over four months will be the amount the state would already provide, but increased by $600 per week through July 31, 2020. For example, if a person is eligible for $300 weekly, they will receive $900 per week over four months or through July 31, 2020, whichever comes first.
  • If an employee is already unemployed due to COVID-19, the $600 weekly additional payment will be paid retroactively.
  • Self employed individuals, independent contractors, and gig workers are eligible for unemployment under this program.


RETIREMENT DISTRIBUTIONS – KEY POINTS

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:

  • Diagnosed with COVID-19
  • Who have family (spouse or dependent) who have been diagnosed with COVID-19
  • Who have adverse financial consequences in relation to COVID-19
  • Who include the distribution in taxable income (unless they elect the 3-year payback)

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.

This waiver does not apply to inherited IRA’s.


CHARITABLE CONTRIBUTIONS – KEY POINTS

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).

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Tax Update Announcement

April 10, 2020

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.


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: Click here for the IRS page.


FREQUENTLY ASKED QUESTIONS


Question 1: Who is eligible for relief under the Notice? 

Answer: 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.


Question 2: Do I have to actually be sick, quarantined or have any other impact from COVID-19 to qualify for payment relief?

Answer: 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.


Question 3: I am a fiscal year filer. My Federal income tax return for fiscal year 2019 is due on April 15, 2020. Am I an “Affected Taxpayer” eligible for relief under the Notice?

Answer 3: 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.


Question 4: Does this relief apply to state tax liabilities? 

Answer: 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 at https://www.taxadmin.org/state-tax-agencies.


Question 5: I haven’t filed my 2019 income tax return yet (that would have been due on April 15), but I expect to file it by July 15. What do I need to do?

Answer: 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.


Question 6: What if I am unable to file my 2019 income tax return (that would have been due on April 15) by July 15, 2020?

Answer: 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.


Question 7: I already filed my 2019 income tax return (that would have been due on April 15) and I owe taxes, but I haven’t paid yet. What do I need to do to avoid interest and penalties?

Answer: 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.


Question 8: I already filed my 2019 income tax return that would have been due on April 15 and scheduled a payment of taxes for April 15, 2020. Will this payment be automatically rescheduled to July 15, 2020?

Answer: 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:

  • If you scheduled a payment through IRS Direct Pay, you can use your confirmation number from the payment to access the “Look Up a Payment” feature. You can modify or cancel a scheduled payment until two business days before the payment date. The email notification you received when you scheduled the payment will contain the confirmation number.
  • If you scheduled a payment through the Electronic Federal Tax Payment System (EFTPS), click on “Payments” from the EFTPS home page, login, click “Cancel a Tax Payment” from the left menu and follow the instructions. You must do so at least two business days before the scheduled payment date.
  • If you scheduled a payment as part of filing your tax return (authorizing an electronic funds withdrawal), you may revoke (cancel) your payment by contacting the U.S. Treasury Financial Agent at 888-353-4537. You must call to make a payment cancellation request no later than 11:59 p.m. ET two business days prior to the scheduled payment date.
  • If you scheduled a payment by credit card or debit card, contact the card processor to cancel the payment.


Question 9: The Notice postpones the deadline for first quarter 2020 estimated income tax payments due on April 15, 2020. What about second quarter estimated tax payments due on June 15? Have they been postponed as well?

Answer: 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.


Question 10: Does this relief provide me more time to contribute money to my IRA for 2019?

Answer: 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).

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U.S. Small Business Administration (SBA) offering disaster assistance in response to COVID-19


ECONOMIC INJURY DISASTER ADVANCE LOAN (EIDL)

March 30, 2020

In response to the Coronavirus (COVID-19) pandemic, small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for an Economic Injury Disaster Loan (EIDL) advance of up to $10,000.

This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application. This loan advance will not have to be repaid.

Click here for the EIDL online application form.

Other Coronavirus Assistance

The SBA provides a debt relief to small businesses as they overcome the challenges created by this health crisis.


LOW-INTEREST FEDERAL DISASTER LOANS

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: Click here for more information 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 disastercustomerservice@sba.gov.

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Family and Medical Leave Act (FMLA) expanded to provide relief to those affected by COVID-19

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:

  • Requires private 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.

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.

  • 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.

Department of Labor Links:

  • FFCRA: Questions and Answers
  • As part of the FFCRA, employers are required to provide notice to employees of the Act’s provisions. An example of the required notice has been made available by the Department of Labor and can be downloaded here: FFCRA NOTICE TO EMPLOYEES.
  • In addition, the Department of Labor has made available a FAQ page discussing the notice requirements: FFCRA NOTICE – FAQ.

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WA State Updates

We have gathered additional resources for WA state and local relief efforts, as well as useful links to help our clients navigate through these challenging times.

1. Working Washington Small Business Grants

Apply for up to $10,000 in emergency funding. Governor Inslee is offering a new Working Washington Small Business Emergency Grant program to assist small businesses impacted by the COVID-19 outbreak. The grant program will provide a limited number of businesses in Washington’s 39 counties with a grant up to $10,000.

2. Department of Revenue regarding COVID-19 Related Relief for taxpayers 

DOR will work with you if you cannot file or pay taxes on time due to the COVID-19 outbreak. 

3. Resources for WA State Businesses & Workers Impacted by COVID-19

A comprehensive resource for businesses. Check out the Employment Security Department COVID-19 webpage.

4. Employment Security Department’s COVID-19 Webpage

Employment Security has programs designed to help individuals and employers. This easy-to-read comparison guide lists some of the most common scenarios that may occur and benefits that may apply.

5. For Businesses in Seattle from Mayor Durkan

Information on the initial recovery package for small business owners to ease the financial impacts of the COVID-19 outbreak.

6. Coronavirus: Common Employer Questions & Answers

In addition to the CDC guidelines, this article by ADP addresses some common employer questions.  

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Tax Reform and What it Means for Your Personal Taxes

The Tax Cuts and Jobs Act was signed into law by the President Trump on December 22, 2017. The new law makes many changes to the tax code. Every taxpayer is impacted. A highlight of the changes follows:

Tax rates. Tax rates are reduced. The top rate is reduced from 39.6% to 37%. Lower rates are also reduced.

Exemptions and the child tax credit. The deduction for personal exemptions is eliminated. An expanded child tax credit will help make up for the loss of personal exemptions for some families. The credit is increased to $2,000 (from $1,000) for qualifying children under 17. For children 17 and older and for other dependents, the credit is $500.

Standard deduction. The new tax reform law doubles the standard deduction. The higher standard deduction ($12,000 for singles, $18,000 for heads of household, and $24,000 for married filing joint) means that fewer taxpayers will benefit from itemizing deductions.

Itemized deductions. Itemized deductions for all state and local taxes, including property taxes, are capped at $10,000. The limit on mortgage debt for purposes of the mortgage interest deduction is reduced from $1,000,000 to $750,000 for loans made after Dec. 15, 2017. Loans made before Dec. 15, 2017 are grandfathered at the $1,000,000 debt limit. The interest on home equity borrowing is no longer deductible. The threshold for medical expense deductions is lowered to 7.5% of adjusted gross income (from 10%) for tax years 2017 and 2018. Miscellaneous itemized deductions subject to the 2% of AGI limitation are not allowed. Miscellaneous itemized deductions lost because of the new law include employee business expenses, investment adviser fees, union dues, and tax preparation fees. Personal casualty losses are not allowed unless the losses were suffered in a federally declared disaster area.

Alimony. The new tax reform law eliminates the alimony deduction for agreements signed after Dec. 31, 2018. Alimony income is not taxable for agreements signed after Dec. 31. 2018. There is no change to the law for agreements signed before Jan. 1, 2019.

Moving expenses. The new tax reform law eliminates the moving expense deduction and makes employer reimbursement of moving expenses taxable to the employee beginning in 2018.

AMT. The new tax reform law temporarily increases the alternative minimum tax (AMT) exemption for tax years 2018 through 2025. The increase in the exemption, as well as the elimination of major tax preferences (exemptions, state taxes above $10,000 and miscellaneous itemized deductions), means that fewer people will be subject to AMT under the new law.

Education. The new tax reform law modifies qualified tuition programs – §529 plans. Funds in the 529 plan can now be used to pay for grades K to 12 private school tuition. The above-the-line deduction for college
tuition expenses was renewed in later legislation, but only for 2017. The American Opportunity and the Lifetime Learning credits continue to be available.

Roth IRA conversions. The new tax reform law repeals the special rule permitting recharacterization of Roth IRA conversions. A conversion of a traditional IRA to a Roth IRA may still be advisable, but once the conversion is completed, it can’t be undone.
These are just a few of the changes included in the Tax Cuts and Jobs Act. Your 2018 taxes will be affected. That’s guaranteed by the scope of the changes. The degree of impact depends on your personal situation.

Questions we can answer for you.
o Will the new tax reform law help me or hurt me?
o Is my withholding enough so that I won’t have any surprises next Apr. 15th?
o Is there anything I can do now that will make my taxes less under the new tax reform law?

Please give us a call for answers and planning suggestions.

 

 

 

 

Disclaimer: This post has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.

Voices Short-term rentals may bring long-term tax problems

By Rob Stephens

“Short-term rentals, often called vacation rentals, have exploded onto the travel scene, becoming hugely popular with homeowners and travelers alike. With the help of technology, it is incredibly simple for a property owner to broadcast their rental across the world.

Millions of people in the U.S. are currently renting their homes or apartments on Web sites such as HomeAway, VRBO and Airbnb. With this level of activity, it is vital that accountants and tax professionals have an understanding of property rentals and income tax implications. Though sometimes overlooked, sales and lodging taxes are an entire class of taxes that expose clients to a significant liability.

Home RentalA significant liability

Short-term rental property owners are required to collect and remit sales and lodging taxes on the gross rent collected from guests – the same taxes a hotel is required to collect. Short-term in most states is less than 30 days, but there are a handful of states that have 90-day definitions and a few, such as the popular travel states of Hawaii and Florida, where short-term is defined as up to six months.

The property owner or host is required to collect lodging taxes from the guest on any short-term stays. These taxes are typically 10 percent to 15 percent of the gross rent collected – overnight accommodations are heavily taxed. Sales and lodging taxes are a type of gross receipts tax and there are no deductions.

The average short-term rental will generate $20,000 to $30,000 per year in rent, thus amounting to $2,000 to $5,000 in sales and lodging taxes that must be collected and paid. This is a significant liability if your client is not compliant, especially if they are audited for three to five years of history. These lodging taxes can build into a huge hidden liability for unsuspecting or unknowing clients renting their primary or second homes.”

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Minimum Wage Increases for Seattle and Tacoma 2017

Businesses with employees in Seattle should be preparing to take the new minimum wage into account. Your particular minimum depends upon the size of your operation, and the benefits that you offer.

Effective January 1, 2017, Large Employers, defined as employers with over five hundred employees, will be expected to pay a higher minimum than Small Employers with five hundred or fewer employees. If you pay towards medical benefits, your minimum is $13.50 per hour. If you do not pay towards medical benefits, your minimum is $15.00 per hour.

Small Employers will be expected to pay a minimum of $13.00 per hour. However, if the employer pays $2.00 per hour towards medical benefits, or if a given employee earns at least $2.00 per hour in tips, the minimum is $11.00 per hour.

If you live in the City of Tacoma, your minimum wage is also on the rise as the following:

  • January 1st, 2017: $11.15 per hour.
  • January 1st, 2018: $12.00 per hour.
  • January 1st, 2019: Starting on this date, the minimum will continue to be adjusted annually, according to the rate of inflation.

This minimum applies to most people who work for 80+ hours per year within the city limits of Tacoma.

Additionally, employees who work for 80+ hours in a calendar year are guaranteed a certain amount of paid time off every year. They earn an hour of such time for every 40 hours worked within Tacoma, up to 24 hours. Employees have the option of carrying forward up to 24 hours of unused paid leave, and can use up to 40 hours in a single hear. However, they can only use their paid leave 180 days after the start of their employment.

Should you require any further information on your legal obligations this coming year, or if you are looking for additional help keeping your business’s finances in order, consult Seattle CPA Alisa Na during normal business hours.

*All information presented in this article may subject to change with or without notice. Please check with your city department for the detail.

Year End General Business Deductions 2016

The end of the calendar year is soon about to close, and many are wondering how to be able to pay less in taxes. It just takes a sit-down and figuring out your strategy. We think that a few components of an easy-to-follow game plan make powerful tools to realize your goal.

  1. Prepay expenses using the IRS safe harbor
  2. Stop billing clients/patients in December
  3. Catch holiday and end-of-the-year sales and buy office equipment
  4. Use your credit cards
  5. Don’t assume you are taking too many deductions

Firstly, where your taxes are concerned, business tax deductions are key. Don’t you go thinking you’ve got too many already. The more business tax deductions you claim, the less you pay in regular taxes. One strategy is to prepay your 2017 qualifying expenses now, before 2016 closes; you’ll be enjoying that tax deduction this year. Another time-tested strategy is to stop billing your customers until after the last day of 2016. Doing so is postponing paying taxes on your December income.

Another is buying your company’s new assets, like computers, photocopiers, or office tables and chairs, or use your company’s credit card to purchase some office supplies and other necessities before the close of December. It’s also a great time to get your hands on holiday deals. Like what we say, if you have legitimate deductions, by all means use them. Spend now to be able to enjoy those tax deductions for the current year and pay less taxes for them.

It’ll be good to know also for Washingtonians, that as a result of the recent November elections, the Washington state minimum wage will go up to $11 dollars starting January 1st, 2017. This should enable a reasonable boost in spending, and with the above strategy, pay less in regular taxes for the coming year.

Remember the Child and Dependent Care Credit This Summer

It is common nowadays for parents to be too busy to properly look after their children during the summer months, prompting them to seek out the help of daycare or day camps. If you make use of such services this summer, you may be eligible for a federal tax credit. Here is what you need to know about the Child and Dependent Care Credit:

1. Expenses Must Be for Qualifying Persons: The expenses you claim the credit for generally must be for the care of dependents under the age of thirteen.

2. Expenses Must Be Work-Related: Expenses only qualify if you require care for your dependents so that you can either work or look for work. If you file a joint return, this rule applies to your spouse as well. Your spouse meets this requirement if he or she is a full-time student, or if he or she is physically or mentally incapable of self-care.

3. Earned Income is Required: You must have earned income in the form of wages, salaries, or tips. This includes net earnings from self-employment. If you file jointly, your spouse must also have earned income unless he or she is either a full-time student or incapable of self-care.

4. Married Couples Must File Joint Returns: You must file jointly with your spouse, unless you are either legally separated or living apart.

5. Expenses Must Be for Qualifying Types of Care: You may qualify if you are paying for care in your home, at a daycare facility, or at a day camp. You may not claim the expenses for certain types of care, including the following:
    • Summer school tutoring costs.
    • Overnight camps.
    • Care provided by either your spouse or your child who is under the age of nineteen at the end of the year.
    • Care provided by a person you can claim as a dependent.
    • If you get dependent care benefits from your employer, special rules may apply.

6. Credit Amount: The credit equals between twenty and thirty-five percent of your allowable expenses, depending on your income. The total expense that you can claim in a single year is limited to $3,000 for one qualifying person, or $6,000 for two or more.

7. Keep Records: You should be prepared to keep all receipts and records pertaining to your expenses, including the name, address, and taxpayer identification number of your care provider. You will submit this information on Form 2441.

Should you require any assistance in preparing your taxes, please consult Seattle CPA Alisa Na for further information.

Minimum Wage Increases for Seattle and Tacoma

Businesses with employees in Seattle should be preparing to take the new minimum wage into account. Your particular minimum depends upon the size of your operation, and the benefits that you offer.

Large employers, defined as employers with over five hundred employees, will be expected to pay a higher minimum than employers with five hundred or fewer employees. If you pay towards medical benefits, your minimum is $12.50 per hour. If you do not pay towards medical benefits, your minimum is $13.00 per hour.

Many small employers will be expected to pay a minimum of $12.00 per hour. However, if the employer pays $1.50 per hour towards medical benefits, or if a given employee earns at least $1.50 per hour in tips, the minimum is $10.50 per hour.

If you live in the City of Tacoma, your minimum wage is also on the rise as the following:

  • February 1st, 2016: $10.35 per hour.
  • January 1st, 2017: $11.15 per hour.
  • January 1st, 2018: $12.00 per hour.
  • January 1st, 2019: Starting on this date, the minimum will continue to be adjusted annually, according to the rate of inflation.

Please visit City of Tacoma website for the full detail.

This minimum applies to most people who work for 80+ hours per year within the city limits of Tacoma.

Additionally, employees who work for 80+ hours in a calendar year are guaranteed a certain amount of paid time off every year. They earn an hour of such time for every 40 hours worked within Tacoma, up to 24 hours. Employees have the option of carrying forward up to 24 hours of unused paid leave, and can use up to 40 hours in a single hear. However, they can only use their paid leave 180 days after the start of their employment.

Should you require any further information on your legal obligations this coming year, or if you are looking for additional help keeping your business’s finances in order, consult Seattle CPA Alisa Na during normal business hours.

*All information presented in this article may subject to change with or without notice. Please check with your city department for the detail.

Understanding the Changing Obamacare Penalties

The Patient Protection and Affordable Care Act, more commonly known as Obamacare, imposes penalties on taxpayers who choose not to purchase qualifying health care coverage. These penalties were modest at first, but have been jumping up by large degrees. To make sure that you don’t get caught by surprise, consider the following summary of current penalties and how they are scheduled to progress in the near future:

In 2014, the first year that Obamacare penalties were in effect, they were relatively minor. The minimums were set at $95 per adult and $45.50 per child, capped at a total of $285. Higher income households could have a penalty as high as 1% of any income earned over the tax filing threshold.

The penalties increased for 2015. Currently, you can expect to pay $325 per adult and $162.50 per child, up to a limit of $975 or 2% of your household income above your tax filing threshold, whichever is higher.

Penalties are only going to get worse next year. Once 2016 rolls around, the rates will jump to $695 per adult and $347.50 per child, up to a limit of $2,085 or 2.5% of your household income above your filing threshold, whichever is higher. Following this, penalties shall go up by modest amounts according to the Consumer Price Index.

For more information on taxes, and how to avoid penalties, please consult Seattle CPA Alisa Na during normal business hours.

Important Tax Deadlines

Being aware of all of your important tax-related deadlines throughout the year is a good way to save time and avoid penalties in the long run. What follows is a list of important deadlines for businesses and individuals as they typically occur; remember that these days may be moved to accommodate federal holidays:

Filing Deadlines

Your deadline for filing taxes may vary, depending on the nature of the entity you represent:

  • April 15th: This deadline applies to individuals, sole proprietorships, single-member LLC’s, partnerships, real estate mortgage investment conduits, estates, and trusts.
  • March 15th: This deadline applies to corporations, S-corporations, homeowners associations, cooperative associations, and real estate investment trusts.

Estimated Tax Payments

If you are self-employed or otherwise receive income that requires you to pay estimated taxes every quarter, there are four deadlines to be mindful of:

  • April 15th: 1st Quarter Payment Due
  • June 15th: 2nd Quarter Payment Due
  • September 15th: 3rd Quarter Payment Due
  • January 15th: 4th Quarter Payment Due

Tax Extension Deadlines

People who require more time to prepare their tax returns should take note of the following two deadlines:

  • April 15th: This is the last day to request a tax extension.
  • October 15th: Should you be approved for a tax extension, you will be required to file by this date.

IRA Deadlines

If you have an IRA, there are two deadlines to be aware of:

  • April 15th: This is the last day to contribute to a traditional or Roth IRA for the previous tax year. If you have a Keogh or SEP, and you are approved for a filing extension, you have until October 15th to put money into such accounts.
  • October 15th: If you converted your traditional IRA to a Roth and paid taxes on this conversion with your most recent return, this is the deadline for recharacterizing the conversion.

For further information on your taxes, or for help managing your finances, please contact Seattle CPA Alisa Na during normal business hours.

Deducting Your Moving Expenses

When you move for the sake of a job, some of the expenses relating to your move may be deductible on your tax return. Such expenses can include the costs of transportation and lodging incurred during your move, the costs of packing, shipping, storing, or insuring your property, and the cost of disconnecting or connecting utilities. You cannot deduct the cost of meals, the cost of your new home, costs associated with selling your home, or the cost of breaking or entering into a lease.

To find out if you are eligible to deduct your moving expenses, consider the following requirements:

  • The move must relate to the start of work. You can generally consider the moving expenses for your return if the move is made within one year of starting a job at a new location.
  • The move must meet the distance requirements. The new location of your job must be a minimum of fifty miles farther away from your old home than your previous job location.
  • Your job must meet the time requirements. The job requiring you to move must be a full-time position, and you must work in this job for at least thirty-nine weeks the first year following your move. Additionally, you must work full-time for a minimum of seventy-eight weeks throughout the first two years at the new job location. These rules also apply if you are self-employed. If your tax return is due prior to you meeting these requirements, but you expect to meet them later on, you can still claim the deduction for this tax year.

Any reimbursement that you receive from your employer regarding your moving expenses may need to be reported as income.

For further details, see Publication 521. Should you require any additional help with your taxes or finances, please contact Seattle CPA Alisa Na during normal business hours.