Neilley & Co. CPA Blog

Bottom Line:  If you were holding any Columbus City income tax or payroll tax forms because of their office closure, you should mail them now.

The Details:  The Columbus City Income Tax Division temporarily closed its offices on March 18^th, in accordance with Mayor Ginther’s declaration of a city emergency.  At that time, they asked that no returns or payments be mailed until they reopened.  They resumed operations with limited staffing on May 5^th, so income tax forms and payments may be mailed any time now.

The deadline to file and pay any 2019 balance due is July 15^th.  First and second quarter estimated tax payments for 2020 are also deferred to July 15^th.  This is true not only for Columbus city tax, but all Ohio cities, as well as federal, Ohio and Ohio School District income tax returns.  Most other states deferred their filing deadlines as well, but if you are filing anything outside of Ohio, check the state revenue department website to confirm.

Unlike income tax returns, deadlines for employer payroll tax filings did not change.  If you have not yet filed your first quarter 2020 payroll returns, you should do so as soon as possible.

In March, Congress created an entirely new SBA product, the Paycheck Protection Program (PPP) loan.  It has been a whirlwind ever since, trying to sort out the details and keep up with frequent changes as to how this was going to work.

The dust has settled somewhat on the loan application process, but the biggest draw of the PPP loan was the potential for it to be completely forgiven if certain conditions were met.  SBA had to give immediate attention to getting the program up and running for the initial application and approval process.  They simply didn’t have the bandwidth to publish forgiveness guidelines at the same time.  As a result, much of what was publicized in the media and online as to exactly how loan forgiveness will work was, quite frankly, speculation, until official guidance came out this past weekend.  Whatever you thought you understood about it, you’ll have to re-evaluate it now.

There are really two parts to loan forgiveness.  First is the timing and type of expenses that will qualify for forgiveness.  There are definitely some ins and outs to understand and plan for the best outcome, but relatively speaking, that’s the easy part.

Where it really gets complicated is figuring changes not only in “head count” as measured by full time equivalent employees (FTEs), but also changes in the amount specific employees are paid for eight weeks following the loan.  There are numerous options as to (a) how to measure FTEs and what time period to compare them to, and (b) how to measure individual employee compensation and what time period to compare that to.

You could use 100% of your PPP loan proceeds to cover payroll and nothing else, but still get tripped up with FTEs or compensation and be on the hook to repay some part of it.  The loss of even one very part time employee could result in thousands of dollars of loan not being forgiven, out of proportion to your other employees and overall payroll.  These calculations are littered with landmines, many of which you may not see until it’s too late if you’re not paying attention in advance.  Proceed with caution, and do not assume all will be well unless you fully understand the various implications.

Even as business starts to resume, the economic fallout will be with us for quite some time.  Could you use some help to navigate loan forgiveness, cash flow, or other challenges so your business will not only survive, but thrive?  We would be happy to have a conversation to explore how we might be able to help.  Feel free to contact us to schedule a brief phone call or zoom meeting.

 

Now that people are receiving these payments, we’re getting lots of calls from others who haven’t gotten theirs yet.  We knew IRS would be sending the payments out in waves, so that’s not surprising.  We don’t know for sure exactly how IRS is deciding who will be included in each batch, but we would like to offer our educated guess.

First Up: 2019 Filers  It appears IRS is starting with folks who already filed their 2019 tax return, met the income limitations (see Maximize Your Check, below), AND used direct deposit for a refund.  Contrary to their earliest announcements, IRS now says they will NOT use bank information you may have provided to have any payment due direct debited.  They definitely won’t take it off any check you might have mailed in to make a payment.

Paper checks are supposed to start going out this week to eligible taxpayers who didn’t use direct deposit for a refund.  Those will probably go out in batches as well.

Then 2018  Whether you’re getting your payment by paper check or direct deposit, it will likely take some time for them to get through all the 2019 filers.  We think that once they do, they will only then go back to those who haven’t filed 2019 yet, but did file for 2018, and repeat the process above.  Also note that once you file your return, it takes some number of weeks for IRS to completely process it (even if they already sent you a refund) before you’ll be in their 2019 queue.  Depending on the timing, it’s possible you could file your 2019 return during this process, but still get a check based on 2018.

Tracking Your Payment  IRS has a “Get My Payment” tool on their website (irs.gov), but it appears it won’t work until IRS has scheduled your payment to be issued, whether for direct deposit or in a paper check.  Until that happens, you’ll get a message that they couldn’t verify your eligibility.  There is also a link for Non-Filers to enter bank information, but you can’t use that if you filed either a 2019 or 2018 return.

With the Get My Payment tool, once your payment has been scheduled and before it is sent out, you can:

• track the status of your payment,
• update your address if you’ve moved,
• input bank information for direct deposit if you didn’t use direct deposit of your 2019 or 2018 tax refund, or
• update bank information for direct deposit if it has changed.

You won’t receive any kind of notice that your payment is queued up, so if you want to do any of the above, you’ll just have to keep checking online.  Your status on the Get My Payment tool is only updated once a day, usually at night, so there’s no need to check any more often than that.  After your payment is direct deposited, IRS will mail you a notice with the details.

When to File Your 2019 Return  Anyone who owes a balance due with their 2019 return has until July 15^th to pay it, with no penalty or interest.  However, if you want to get your stimulus check more quickly, we suggest filing your return earlier, even if you wait to send payment in later.  That should put you into one of the earlier 2019 filer groups, rather than waiting for IRS to get to the 2018 filers.  However, you’ll still need to input your bank info using the Get My Payment tool as discussed above if you want to get it sooner with direct deposit.

Maximize Your Check  If you haven’t filed your 2019 return yet, take a look at your expected AGI compared to 2018.  Remember there is a phase out of the stimulus payment, depending on your filing status for whichever year (2019 or 2018) your payment is based on:

• Married Filing Jointly: $150,000-$198,000 AGI
• Head of Household: $112,500-$136,500 AGI
• Single or Married Filing Separate: $75,000-$99,000 AGI

If your AGI is less than the lowest figure in these ranges, you’ll get the full payment ($1,200 per person, plus $500 per dependent child under age 17), then a reduced amount, until you receive none above the highest figure.

If your 2019 AGI would qualify you for a larger check than 2018, you should file as soon as you can.  If 2019 would qualify you for a lower amount however, we suggest waiting to file until after you get your payment.  Even though the due date is now July 15^th, you can still file for an extension to October 15^th if necessary (although you still need to pay any tax due by July 15^th).  Of course, if you’re expecting a refund on your 2019 return, you’ll have to weigh the benefit of a larger stimulus check against waiting longer for your refund.

Not Getting the Full Payment?  If you do not receive the full stimulus payment this year and would qualify for more based on your 2020 income, it appears you’ll be able to claim the difference as a credit on next year’s tax return.  Be sure to keep a record of the amount you receive now so you can claim any additional credit.

More Questions?  Check out the FAQ section on irs.gov where they address the most common questions about eligibility, direct deposit and more.