wrentham tax | Northeast Financial Strategies, Inc.

Trump Signs Small Business Loan Program Extension

by NFS | Jul 7, 2020 | Archives, Blog Posts

President Trump signed legislation Saturday extending the deadline for small businesses to apply for the Paycheck Protection Program, enacted in the weeks following the economic shutdown caused by the coronavirus pandemic.

The original deadline to apply for the PPP was June 30th, but $130 billion still remained in the fund, out of $660 billion allocated. Both houses of Congress approved the extension unanimously earlier this week. With Trump’s signature Saturday, businesses will now have until Aug. 8 to apply for the assistance.

The PPP lets businesses get direct government subsidies for payroll, rent and other costs. The subsidies come as federal loans, but those loans can be forgiven if businesses use at least 60% of the funds for payroll.

The program has so far doled out about $520 billion in loans to almost 5 million small businesses across the country. The loans were meant to let businesses cover about two and a half months of typical costs.

The program’s sponsors say they want to re-purpose the program to better serve the challenges businesses are facing now, several months into the pandemic.

If you missed the first two opportunities and need any assistance in applying for this program, please do not hesitate to contact the office.

Economic Impact Payments Belong to Recipient, Not Nursing Homes or Care Facilities

by NFS | Jun 16, 2020 | Archives, Blog Posts, COVID

WASHINGTON – The Internal Revenue Service today alerted nursing home and other care facilities that Economic Impact Payments (EIPs) generally belong to the recipients, not the organizations providing the care.

The IRS issued this reminder following concerns that people and businesses may be taking advantage of vulnerable populations who received the Economic Impact Payments.

The payments are intended for the recipients, even if a nursing home or other facility or provider receives the person’s payment, either directly or indirectly by direct deposit or check. These payments do not count as a resource for purposes of determining eligibility for Medicaid and other federal programs for a period of 12 months from receipt. They also do not count as income in determining eligibility for these programs.

The Social Security Administration (SSA) has issued FAQs on this issue, including how representative payees should handle administering the payments for the recipient. SSA has noted that under the Social Security Act, a representative payee is only responsible for managing Social Security or Supplemental Security Income (SSI) benefits. An EIP is not such a benefit; the EIP belongs to the Social Security or SSI beneficiary. A representative payee should discuss the EIP with the beneficiary. If the beneficiary wants to use the EIP independently, the representative payee should provide the EIP to the beneficiary.

The IRS also noted the Economic Impact Payments do not count as resources that have to be turned over by benefit recipients, such as residents of nursing homes whose care is provided for by Medicaid. The Economic Impact Payment is considered an advance refund for 2020 taxes, so it is considered a tax refund for benefits purposes.

The IRS noted the language in the Form 1040 instructions apply to Economic Impact Payments: “Any refund you receive can’t be counted as income when determining if you or anyone else is eligible for benefits or assistance, or how much you or anyone else can receive, under any federal program or under any state or local program financed in whole or in part with federal funds. These programs include Temporary Assistance for Needy Families (TANF), Medicaid, Supplemental Security Income (SSI), and Supplemental Nutrition Assistance Program (formerly food stamps). In addition, when determining eligibility, the refund can’t be counted as a resource for at least 12 months after you receive it.”

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Changes to The PPP Loan Program Under the New PPPFA

by NFS | Jun 12, 2020 | Archives, Blog Posts, COVID

Big changes to the PPP loan program happened quickly, and last week’s changes brought a lot of new forgiveness deadlines. This information is based on the PPPFA (Paycheck Protection Program Flexibility Act) updates as of June 5th when the President signed the final ruling into law.

1) 8 Week Covered Period is Extended to 24 Weeks

Borrowers can choose to extend the eight- week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, and in all cases, the covered period can not extend beyond Dec 31, 2020.

2) The Deadline to Apply For a PPP Loan is June 30th

There are still funds available and the deadline to apply is now set at June 30th. So if anyone was not applying thinking they did not have time to spend the funds they should act quickly and apply before this month ends.

* There are conflicting reports on this loan deadline, the house version had December 31st, and a Senator demanded the program stop lending new funds on June 30th.

3) 75% Rule Reduced to 60%

Now borrowers must spend at least 60% on payroll, not the 75% in the original bill. However, there was a cliff provision meaning borrowers must spend at least 60% on payroll or none of the loan will be forgiven. However, this has already been updated just a few days after it was passed.

Due to the 24 week covered period, this rule should not be a problem. This along with the other changes should make it easier to achieve 100% forgiveness.

4) Rehire Date Moved From 6/30/20 to 12/31/20

Businesses now have until 12/31/20 to rehire employees back to the 2/15/20 level.

Due to the 12/31/20 rehire date, most typically won’t be filing forgiveness applications until January 2021 at the earliest.

5) Required FTE Goal For The Rehire Exemption is Reduced If You Are Unable To Rehire People or Business Has Declined Due to HHS, CDC, or OSHA Requirements Regarding COVID-19

The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. Previous guidance already allowed borrowers to exclude from those calculations employees who turned down good faith offers to be rehired at the same hours and wages as before the pandemic. The new bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.

We will need guidance to clarify the inability to restore business operations, but overall this is helpful to increase Safe Harbor and obtain full forgiveness.

6) New PPP Loans Will Have a Minimum Maturity of 5 Years

New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%.

7) Allow Payroll Tax Deferral

Allow small businesses to take a PPP loan and also qualify for a separate, recently enacted payroll tax deferral, currently prohibited to prevent “double dipping.”

8) Extend Loan Forgiveness Period

Extend the period for when a business can apply for loan forgiveness, from within six months to within 10 months of the last day of the covered period, before it must start making interest and principal payments. Under the new bill, PPP loan interest and payment of principal and fees will be deferred until the loan is forgiven by the lender.

Here Are Some Indirect Changes to The PPP Loan Program:

We assume the $15,385 per person payroll limit will be increased to $46,154 but need confirmation from the SBA.
The forgiveness application will be completely changed.
Although utilities, health insurance, SUTA, and other small costs are still eligible, they become less important. Rather than worry about tracking small receipts, we are recommending focusing on the big items that are easy to show to the lender that’ll review the forgiveness application – payroll and rent.

We will continue to keep you updated as we get additional guidance.

Help Your Children Get The Most Out Of Their First Post-College Job

by NFS | Jun 10, 2020 | Archives, Blog Posts

Your child finally graduated from college and is starting her first job. College probably did a great job preparing her for the technical aspects of her new career. But she may not be thinking about the softer skills of the work world like accepting feedback from her boss, networking with peers or taking best advantage of employee benefits.

Not all adult children welcome advice from their parents, but if your kids are open to your guidance, here are a few tips to share:

Learn your boss’s style. A good relationship with your leader is key to getting the most out of your first job. Find out your boss’s preferences and expectations, provide him or her with frequent updates on your projects, ask for occasional feedback if your boss doesn’t provide it and respond positively to constructive criticism.

Be professional. In college you may have been used to sliding into class a few minutes late or wearing yoga pants every day. But once you enter the work world, a professional approach can go a long way. Pay attention to your office’s culture and follow your boss’s and coworkers’s leads regarding start and end times, lunch breaks and your wardrobe and overall appearance. Be mindful not to overuse your personal cell phone — and if you feel compelled to check social media or text a friend, try to do so in a private space away from your desk.

Network. Set up brief meetings with each member of your department to find out what their role is, what they’re working on, how you might be able to help them and what they’re interested in outside of work. Also seek out mentors — people with more experience who can help guide you toward success.

Create a professional development plan with concrete goals and action steps. Many companies will provide you with a development plan framework, but if yours doesn’t, create your own plan. Talk to Human Resources, your leader and others in your field to find out what certifications, courses, degrees or professional groups might help you advance your career.

Make the most of your company’s benefits and compensation package. (Parents, here’s an area where your guidance can be invaluable, especially if you’ve footed the bill in the past and your kids haven’t had to think much about finances.) Here are a few key things to keep in mind:

Know what to expect from your paycheck. If you haven’t started your new job yet, be aware of the deductions that will be taken from your paycheck. Deductions will include federal income tax, federal and state insurance taxes, Medicare taxes, state income taxes, contributions to your 401(k) and benefits such as health insurance or disability insurance. If you want to know approximately how much your first paycheck will be, here’s a helpful Paycheck Calculator.
Save for your future goals and your future self (retirement) — contribute to your 401(k) or other employer-sponsored savings plan. A specific percentage of your salary will be automatically withheld from your paycheck using pre-tax dollars. About 75 percent of employers offer a matching program, with a typical employer match of 50 percent of your contribution, up to 6 percent of your salary. Be sure to take advantage of this free money! Your 401(k) will grow tax deferred until you withdraw it in retirement.
When you’re still paying off student loans and have other expenses to think about, it can be hard to prioritize saving for retirement. But start saving now while time is on your side! For example, if you save 6 percent of a $45,000 salary at age 22 with a 50 percent employer match (3%), you’ll retire with more than a million dollars at age 65. But if you don’t start saving until age 35, your retirement savings will likely be less than half that amount! To figure how much you should save, try a 401(k) calculator.
Enroll in employer health insurance. If your employer doesn’t offer health insurance, federal law allows you to be insured as a dependent on your parents’ health insurance plan until age 26. If your employer does offer health insurance, they’ll usually pay a percentage of the monthly premium. Employers pay an average of 82 percent of the monthly premium for single coverage, and deduct the rest from your paycheck.
If your employer offers multiple health insurance options, consider the following about the various plans: What services are covered (especially important if you have a health condition)? What providers are covered? How much will it cost, considering both your monthly contribution toward your premium, as well as any deductible and copayment amounts you pay out-of-pocket toward your care?
Take advantage of education assistance. More than 90 percent of employers offer some level of tuition assistance for advanced studies that will help you in your job. Some employers will even help employees pay back their existing student loans.
Use employee discounts. Many employers offer discounts toward things like cell phone plans, gym memberships, tickets to local sporting events or company products.

Need a little extra help? Here’s a useful checklist to help them stay on track. And do not hesitate to call the office for any assistance with any of your financial needs.

This information is brought to you by Athene — where unconventional thinking brings innovative annuity solutions that can help make your retirement dreams a reality.

Reminder: Deadline Postponed to July 15 For Those Who Pay Estimated Taxes

by NFS | Jun 9, 2020 | Archives, Blog Posts

WASHINGTON – The Internal Revenue Service reminds taxpayers that estimated tax payments for tax year 2020, originally due April 15 and June 15, are now due July 15. This means that any individual or corporation that has a quarterly estimated tax payment due has until July 15 to make that payment without penalty.

In response to the COVID-19 outbreak, the Treasury Department and the Internal Revenue Service are providing special tax filing and payment relief to individuals and businesses. This relief applies to federal income tax returns and tax payments (including tax on self-employment income) otherwise due April 15, 2020. This relief does not apply to state tax payments or deposits or payments of any other type of federal tax.

Who needs to pay quarterly?

Most often, self-employed people, including many involved in the sharing economy, need to pay quarterly installments of estimated tax. Similarly, investors, retirees and others often need to make these payments. That’s because a substantial portion of their income is not subject to withholding. Other income generally not subject to withholding includes interest, dividends, capital gains, alimony and rental income.

Special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year.

Taxpayers can avoid an underpayment penalty by owing less than $1,000 at tax time or by paying most of their taxes during the year. Generally, for 2020 that means making payments of at least 90% of the tax expected on their 2020 return.

Taxes are pay-as-you-go

This means taxpayers need to pay most of their taxes owed during the year as income is received. There are two ways to do that:

Withholding from pay, pension or certain government payments such as Social Security; and/or
Making quarterly estimated tax payments during the year.

Tax Withholding Estimator

If a taxpayer receives salaries and wages, they can avoid having to pay estimated tax by asking their employer to withhold more tax from their earnings. To do this, they would file a new Form W-4.

If a taxpayer receives a paycheck, the new and improved Tax Withholding Estimator can help them make sure they have the right amount of tax withheld from their pay. The tool is now more mobile friendly and replaces the Withholding Calculator on IRS.gov. The Tax Withholding Estimator offers workers, as well as retirees, self-employed individuals and other taxpayers a clear, step-by-step method for effectively checking their withholding to protect against having too little tax withheld and facing an unexpected tax bill or penalty at tax time next year.

How to pay estimated taxes

Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. They can also visit IRS.gov/payments to pay electronically. IRS offers two free electronic payment options where taxpayers can schedule their estimated federal tax payments up to 30 days in advance with Direct Pay or up to 365 days in advance with the Electronic Federal Tax Payment System (EFTPS).

Need assistance?

Feel free to contact the office for help in calculating and paying your estimated taxes.