Key dates for taxes plus PPP/EIDL Q&A
IRS and Treasury Provide Extensions on Taxes and More
In response to the sweeping shelter-in-place mandates due to the COVID-19 pandemic, the Treasury Department and Internal Revenue Service have issued automatic extensions to the federal income tax filing due date from April 15, 2020, to July 15, 2020. Note: if you live in a state with an income tax, please refer to your state’s guidelines for filing.
This extension also applies to payments for 2019 taxes owed and estimated quarterly taxes due for the first and second quarters of 2020. No action is needed for taxpayers to receive this automatic extension. If you need to extend your 2019 tax return to October 15th, you can still do so by filing the appropriate form by July 15th.
Below is a table of important dates to keep in mind for personal federal taxes:
These extensions notwithstanding, if you anticipate receiving a tax refund from your 2019 return, we recommend filing as soon as possible. You can expect July 15th to be a very busy day for CPAs and other tax professionals. Thus, the sooner you can submit your information, the more smoothly the process will go.
Q&A on PPP and EIDL Relief Programs for Self Employed
With the fallout from COVID-19 wreaking havoc on America's small businesses, our government is dedicating unprecedented funds to dampen its impact. We've had many of our clients ask about the eligibility of self-employed and sole proprietorships for these relief programs, so we’re providing these answers to some of the frequently asked questions.
(Disclaimer: As of April 16th, federal funds for the programs listed below have been exhausted. We expect that more funds will be allocated to these programs and encourage you to check sba.gov for updates. The application period ends June 30th.)
I am self-employed and have no employees. What relief options are available to me?
- Payroll Protection Program (PPP).
- SBA loan which converts to a grant if used for payroll, rent, utilities, and mortgage interest.
- Covers 2.5x average monthly net profit (based upon 2019 Schedule C).
- Eligibility Requirements:
- Your business has been in operation since February 15, 2020.
- You are not an active partner in a partnership (partnership must file its own application).
- Economic Injury Disaster Loan (EIDL)
- Provides loans of up to $2 million.
- A loan advance of up to $10,000 does not need to be repaid.
What is the maximum amount a sole proprietor can receive?
- PPP - ($100,000 max. annual salary ÷ 12) x 2.5 = $20,833.
- EIDL - $10,000 loan advance, $2 million loan.
Are real estate investors eligible?
- The PPP loan is designed for income that is subject to self-employment taxes (W-2, 1099, Schedule C). Most rental income is considered passive income (Schedule E) and is not eligible for PPP.
- The EIDL is a better fit for passive incomes such as real estate investors.
Can I receive both the PPP and EIDL?
- If you apply and are approved for both, the $10,000 EIDL grant will be subtracted from the forgivable amount of the PPP loan.
What if I have a different business structure, such as S-Corp, C-Corp, etc.?
- Here is a great resource.
There are nuances to these programs that emerge daily, and we expect more direction from the IRS and SBA soon. With so many more questions than answers, your bank is likely the best resource for specific answers as it relates to your situation. We also recommend the overviews provided at www.sba.gov.
As always, we endeavor to walk through this difficult time with you. Please reach out if we can offer guidance in your specific circumstance.
Additionally, we covered many aspects of these relief programs in our webinar on Tuesday, April 14. If you weren’t able to join us live or just want a refresher, you can watch the recorded presentation here.
Update from the Slaughter Associates Investment Committee
As we continue to see the markets vacillate, the Slaughter Associates Investment Committee remains hard at work evaluating investment opportunities. A trend that we are continuing to observe and move in anticipation of is a high demand for stock in companies with quality balance sheets and mostly domestic large-cap. This is a continuation of our adjustments to add allocation to quality. We believe this sector should excel in both the short-term, as the market recovers, and long-term once the economy returns to normal rates of growth. We anticipate these financially healthy companies will also be in line to acquire companies that were perhaps less secure entering the crisis.
As mentioned before, our strategy is to continually monitor all data so we can make moves that we feel will be accretive to your individual portfolio’s success.