What We Know of the Financial Impacts of COVID-19

The past few weeks have been trying for the world. As you're surely aware of by now most of us have been put into isolation. For the most part, we’re allowed outside only if absolutely necessary and even then, we’re expected to keep our distance from each other. Even the seniors surviving from the Greatest Generation haven’t seen anything like this before.

Among all this change the US government is trying to curtail the economic impact. Below are some of the action items they have taken that you should be aware of. Note that as this event is impacting everyone in a unique way, this will not be a detailed account of all of the changes, rather a summary of key points. This has all developed so quickly that administration of any of the benefits could take several weeks from now to start flowing but it would be expected that any benefits will be retroactive to the start date of when the impact from the shutdown occurred.

Paid Sick Leave & Unemployment Benefits

Those impacted by COVID-19, employed, self-employed, and independent contractors alike, are eligible for unemployment benefits and possibly emergency paid leave benefits under recently passed legislation by the US government. The Families First Coronavirus Response Act details the exact eligibility requirements for each type of benefit but in short, if you aren’t earning right now because of this shutdown, you can likely collect under one of the emergency provisions. Read more here: https://appropriations.house.gov/sites/democrats.appropriations.house.gov/files/Families%20First%20summary.pdf

A note on unemployment benefits: if you are an employer and find yourself having to layoff workers due to the COVID-19 shutdown, you should review your state’s unemployment agency rules and process on how to collect benefits. Each state will administer benefits to recipients in their own way and based on guidance issued by the federal government.

Small Business Loans and Economic Stimulus Checks

If you’re a US resident, then you have definitely heard about the stimulus checks that will be coming your way at some point. The following outlines how much you can expect to receive based on your 2019 taxes (or 2018 if that is the most recent return filed):

  • Single Taxpayers earning $75k or less = $1,200 stimulus check

  • Married Taxpayers earning $150k or less = $2,400 stimulus check

  • Qualifying Children (not dependents) = $500 credit check

Head of Household taxpayers are not specifically identified in the legislation but it’s probably safe to assume your income threshold is $112,500.

As you earn above those limits the amount of your stimulus check will be reduced, possibly to zero.

The how and when of the arrival of this money is currently unclear but I always like to play it safe and assume you’re not getting it until you’ve got it. These payments are not expected to be taxable in 2020.

If you’re a small business owner then you may have heard that the SBA is giving out disaster relief loans at ridiculously low rates for long-terms. Additionally, if you use those funds to cover payroll during the shutdown then you may not need to repay all or a portion of the loaned amount. Expect a lengthy process and endless hoops to jump through but if you think you qualify then head over to SBA.gov and check out the application.

For more on the CARES Act which covers all of the above you can check out this link: https://www.congress.gov/bill/116th-congress/senate-bill/3548/text

Taxes

I don’t think I have been alive long enough to say “this has never happened” but I’m pretty sure it hasn’t. The IRS has extended the filing and payment deadline for 2019 income tax returns until July 15, 2020. This covers all individuals and corporations. The payment extension applies to individuals who owe less than $1M and corporations that owe less than $10M. The extension is automatic meaning there is nothing you need to do to get it but I’d caution that logic and file an extension form by April 15, 2020 to be safe. The worst case is you didn’t need to do it but for as easy as it is to do, I wouldn’t chance it.

I strongly encourage anyone looking to take advantage of this deferral opportunity to read this FAQ from the IRS very carefully as there are several exclusions that apply:

https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers

A very important note: Every state is handling this crisis separately. What’s happening in New York isn’t the same thing that’s happening in Utah or Colorado or Kansas. Some states have adopted the same measure as the federal government but not all. That means that even if you don’t file your federal return and/or payment by April 15, you may still be on the hook for the state side. You should consult with your tax advisor to understand how the state(s) you file in is handling this crisis.

As a bonus, the IRS is also automatically suspending all existing installment agreements for payments due between April 1 and July 15, 2020. If you are on a payment plan you should expect payments to restart beginning on July 16. The debit date will remain the same.

As a double bonus, all Q1 2020 estimated tax payments are also extended until July 15. However, the Q2 2020 payment is still due on June 15, 2020.

The IRS bonus items may or may not apply at the state level. Again, you should consult with your tax advisor to understand how the state(s) you file in is handling those items.

No other taxes are eligible for deferral as of the writing of this post.

There are other items that were covered as part of the CARES Act not covered here but you can read more about them in the link provided in the previous section.

My overall opinion about these items is that if you can pay any tax due on-time, do it. The governments are doing their best to help taxpayers but there are so many exclusions and special conditions that if you try to take advantage you may find yourself getting into trouble when you were just trying to take a lifeline.

Scams

My least favorite, but most interesting part of any crisis, are scams. Right now, there are people, companies, and organizations taking advantage of this unprecedented time. Some are doing so legally and ethically, some just legally, some without regard for the law or ethics. Be very cautious right now as to who you give any personal information to. Do your research about anyone who contacts you before providing any information or documents to them to ensure you are working with a trusted party. Validate contacts first before you proceed with anything. Scams will arise via phone, text, e-mail, mail, and social media so be cautious on all fronts.

I hope this has been a somewhat helpful resource for readers. As I mentioned at the beginning, it’s hard to tackle all the possible scenarios because everyone will have a unique situation, so this was meant more as a general reference than specific guidance. If you have any questions though Eliseo CPA would be more than happy to try to help so please feel free to reach out!