Welcome to our GJC Advisor Spring/Summer Tax Update!
As we all continue to deal with the impact of the novel coronavirus COVID-19 and this rapidly-changing situation, there continues to to be new developments. Rest assured that GJC will continue to keep you updated with how these developments may impact you and your business, whether accounting and reporting related, or otherwise.
Recent content we have shared related to this pandemic include the following:
- GJC’s Response to COVID-19 – Office Update
- CARES Act and Employee Benefit Plans
- Coronavirus Strikes Nonprofits
- COVID-19 Federal Aid Package
We hope you enjoy this edition of the GJC Advisor. As always, if you have any questions, feel free to contact us.
Stay healthy, stay positive!
Coronavirus: Tax & Relocation Implications for the Mobile Workforce
The novel coronavirus that causes the disease COVID-19 has become a global issue. Since the virus was declared a pandemic by the World Health Organization (WHO), we have seen more border entry restrictions, quarantines and travel bans implemented to stop the virus’ spread. The evolving situation has made managing a mobile workforce more challenging.
IRS Expands COVID-19 Postponement Relief Under Notice 2020-23
On April 9, 2020, the IRS issued Notice 2020-23, which contains expanded relief for those tax forms and other filings that are postponed as was originally announced last month. See the IRS Coronavirus website for more details.
First, the payments and returns eligible for relief are expanded. Any tax return or payment due on or after April 1, 2020, and before July 15, 2020, is now automatically postponed to July 15, 2020-no extension forms, letters, or other forms of documentation or communication are required to make use of this relief. This will now cover, for example, calendar-year 2020 second quarter estimated tax payments, among other things. If an Affected Taxpayer as defined by the notice needs additional time to file, such taxpayer may choose to file the appropriate extension form by July 15, 2020, to obtain a filing extension.
IRS Provides Welcome Relief for Partnership Filings to Obtain CARES Act Benefits
General Rules for Amending Partnership Returns
Prior to 2018, partnerships were generally subject to unified partnership audit and litigation rules enacted by the Tax Equity and Fiscal Responsibility Act of 1982, commonly referred to as the TEFRA partnership procedures.
For taxable years beginning after December 31, 2017, the Bipartisan Budget Act of 2015 (BBA) replaced the TEFRA audit procedures with a centralized partnership audit regime. These new audit procedures apply to all partnerships, unless the partnership makes a valid election not to have those procedures apply. Partnerships subject to the centralized partnership audit regime are referred to as BBA partnerships.
President Trump Signs Into Law CARES Act
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief and Economic Security (CARES) Act, which provides relief to taxpayers affected by the novel coronavirus (COVID-19). The CARES Act is the third round of federal government aid related to COVID-19. BDO summarized the top provisions in the new legislation below, with more detailed alerts on individual provisions to follow.
2020 Recovery Refund Checks for Individuals
The CARES Act provides eligible individuals with a refund check equal to $1,200 ($2,400 for joint filers) plus $500 per qualifying child. The refund begins to phase out if the individual’s adjusted gross income (AGI) exceeds $75,000 ($150,000 for joint filers and $112,500 for head of household filers). The credit is completely phased out for individuals with no qualifying children if their AGI exceeds $99,000 ($198,000 for joint filers and $136,500 for head of household filers).
Read more…IRS Releases Updated COVID-19 Relief – Now Extending Filing Date and Payment
On March 20, 2020, the Internal Revenue Service released Notice 2020-18, its second round of formal guidance – this time expanding its earlier guidance (Notice 2020-17) by including relief to taxpayers for both federal income tax returns and federal income tax payments which would be due April 15, 2020. Notice 2020-18 is available here. Notice 2020-17 is superseded by Notice 2020-18.
Under the expanded guidance, the President’s March 13, 2020, Emergency Declaration instructs the Treasury Secretary to provide relief to taxpayers affected by the novel coronavirus (COVID-19). The notice provides that any person with a federal income tax return or federal income tax payment due April 15, 2020, is an “Affected Taxpayer.” Any such person includes an individual, trust, estate, partnership, association, company, or corporation. For Affected Taxpayers, the relief provides that federal income tax returns or federal income tax payments that would ordinarily be due April 15, 2020, are postponed until July 15, 2020.
Updated 2020 Inflation-Adjusted Items for Individuals’ Tax PlanningThe IRS released the inflation-adjusted items for 2020 for various provisions of the Internal Revenue Code. Read on for highlights on the updated 2020 amounts as well as the respective 2019 figures for comparison (skip to the end for 2019 and 2020 federal income tax rates). Rates that stayed the same from 2019 to 2020 are not included in the scope of this alert.
Individuals’ Tax Planning Highlights for 2020
Social Security Tax
- The old age, survivors, and disability insurance (OASDI) portion of the social security tax is imposed on employee compensation and self-employment income, except that this tax is imposed only to the extent of the maximum wage base set by the Social Security Administration ($132,900 for 2019 and $137,700 for 2020).
- The OASDI program is funded by contributions from employees and employers through FICA tax, which is based on 6.2% of the employee’s gross pay. Both employees and employers contribute equal amounts. Self-employed business owners also pay a similar tax, called SECA (or self-employment tax), based on 12.4% of the net income of their businesses.