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Individuals Have a New Opportunity to Receive $500 Economic Impact Payments for Their Children

Article Highlights:

  • $500 Per Child Stimulus Payment
  • Non-Filer Tool
  • Those Who Have Already Used the Non-Filer Tool
  • Those Who Haven’t Used Non-Filer Tool
  • How Payment Will be Made
  • Get My Payment Tool
  • Non-Filers

The Internal Revenue Service has announced it will reopen the registration period for federal beneficiaries with children who didn’t receive a $500 per child Economic Impact (stimulus) Payment earlier this year.

When to Apply – The IRS urges specific federal benefit recipients to use the IRS.gov Non-Filers tool between August 15 and September 30 to enter information on their qualifying children to receive the supplemental $500 payments.

Who Should Register – Those eligible to provide this information include:

  • People with qualifying children who receive Social Security retirement, survivor, or disability benefits;
  • Supplemental Security Income (SSI);
  • Railroad Retirement benefits; and,
  • Veterans Affairs Compensation and Pension (C&P) benefits and did not file a tax return for 2018 or 2019.

The IRS anticipates the catch-up payments, equal to $500 per eligible child, will be issued by mid-October.

Already Used the Non-Filer Tool? – For those Social Security, SSI, Department of Veterans Affairs, and Railroad Retirement Board beneficiaries who have already used the Non-Filers tool to provide information on their children, and who haven’t yet received the $500-per-child payment, no further action is needed. The IRS will automatically make payment in October.

Haven’t Used the Non-Filer Tool? – For those who received Social Security, SSI, RRB or VA benefits and have not used the Non-Filers tool to provide information on their child or children, they should register online by Sept. 30 using the, “Non-Filers: Enter Payment Info Here” tool, available exclusively on IRS.gov. However, anyone who filed or plans to file either a 2018 or 2019 tax return should file the tax return and not use this tool.

Any beneficiary who misses the Sept. 30 deadline will need to wait until next year and claim the Economic Impact Payment as a credit on their 2020 federal income tax return.

How Will Payment be Received? – Those who received their original Economic Impact Payment by direct deposit will also have any supplemental payment direct deposited to the same account. Others will receive a check. The status of the payments can be checked by using the Get My Payment tool on IRS.gov. In addition, a notice verifying the $500-per-child supplemental payment will be sent to each recipient and should be retained with other tax records.

Non-Filers – Those who are not required to file a tax return are still eligible to receive an Economic Impact Payment by using the Non-Filers’ tool – but they need to act by October 15 to receive their payment this year. Otherwise, they will need to wait until next year and claim it as a credit on their 2020 federal income tax return.

The Non-Filers tool is designed for people with incomes typically below $24,400 for married couples, and $12,200 for singles. This includes couples and individuals who are experiencing homelessness. People can qualify, even if they don’t work or have no earned income. But low- and moderate-income workers and working families eligible to receive unique tax benefits, such as the Earned Income Tax Credit or Child Tax Credit, cannot use this tool. They will need to file a regular return.

If you have questions related to the child stimulus payment or stimulus payments in general, please contact us.

Tips to Keep Your Business Afloat During COVID-19

COVID-19 has had an unprecedented impact on all aspects of American businesses, but perhaps none have been as severely affected as small business owners. Surviving this disaster will require more than just time: you will need to take a pragmatic view of what has happened and what steps you are willing and able to take to bounce back. Here are our suggestions:

1. Spending

Review what you’re spending now and what you were spending before to determine what you can eliminate. Efficient spending is going to make a substantial difference in your business’ ability to survive this crisis. If you can break your expenditures down into what is necessary versus what you can eliminate, you’ll be able to give yourself a cash flow advantage.

Perhaps you’ll find that you no longer need the same amount of physical space if you are comfortable with having workers telecommuting. That single example can lead to savings in electricity and other services that can boost your ability to cut expenses. Your goal is to run as lean an operation as possible but to do so without having your cuts impact your ability to provide the service that your clients expect and want.

2. Agility

Examine how the shifts that the pandemic has forced can be incorporated into your business in a more sustained way. Plenty of companies have shown tremendous flexibility and skill in the way that they deliver their products or services, or even in the products themselves. Every business’ success is based on what the market needs. Business owners who can assess how the pandemic’s unique dynamics can be used to their advantage, or how they can adjust to them, will be the ones that are most successful and most likely to survive.

3. Competitive Inspiration

If you’re stuck for what to do to transform your business, look to your competition for inspiration. Perhaps they’ve moved their in-store shopping experience to one that is entirely available online, or they’re providing a new way to use an old product. Maybe they aren’t able to open but are remaining engaged with customers via webinars, podcasts, or live sessions on Facebook or Instagram. Whatever is working for one company, whether in your industry or not, can serve as inspiration for you.

4. Planning

Take a longer view of your business than what is demanded by the immediate moment. Some companies will be able to return to normal, but that is not true of all of them, and taking a clear-eyed look at how consumers are going to look at spending money with your type of business in the future is time well spent. If your business is primarily dependent upon having lots of people gathered in a small space, then you have to think beyond getting back to work. Instead, spend time thinking about the changes you’re going to have to make to allow yourself to stay in business.

5. Learning

If your business operations have slowed or come to a stop as a result of the pandemic, one of the smartest things you can do is to use the time to expand your knowledge and education. There are many courses that you can take online, both free and fee-based, to make sure that you have sharpened your abilities and expanded your knowledge of your business and industry. Taking cues from successful business owners in similar sectors is a great way to boost your expertise. You can find inspiration from innovators and great thinkers, both current and classical. There is a lot more to be gained from the downtime offered by the pandemic than thinking about your inventory and your clients. Use the time to improve yourself, and it will provide a full advantage within your business.

6. Taking Care

Perhaps most important of all, stay healthy and stay positive. If you have extra time that you would have been spending on your business, take the time to make sure that you are taking care of yourself, your family members, and the people in your community. We are living through history, and when it comes to your business, work toward a resilient response that will advance your business beyond this setback.

If you have additional questions about how to keep your business going during COVID-19, please contact us.

3 Ways to Receive Payments in QuickBooks Online

If you crafted 2020 business goals in 2019, you’ve probably had to revise them due to COVID-19. Despite the disruption of the last six months, we hope that you have managed to stay healthy and keep your small business running.

It’s more important than ever to conscientiously record all of the money coming into your company and ensure that it gets deposited into your account(s). QuickBooks Online offers several ways to accomplish this. Whether you’re receiving payment on an invoice, documenting an instant sale, or selling on the road, the site provides tools to make sure that your receipt of the funds is entered in the correct place.

Delayed Payments

Do you send invoices for products and services? If so, there’s more than one way to record payments when they come in. You can, of course, just open the invoice and click Receive Payment in the upper right corner. We find, though, that going to the All Sales screen gives us a chance to check the status of other pending transactions. Click Sales in the toolbar, then All Sales.

If your list isn’t very long, you can just look for the invoice number. If not, you can use the Filter tool to find the original form. Click the down arrow next to Filter in the upper left to see your search options here (StatusCustomer, etc.).


If you have a lengthy list of sales transactions, you can search for the one(s) you want in this drop-down window.

Once you’ve found the invoice, look down toward the end of that row. In the Action column, you’ll see Receive payment. (While you’re there, click the down arrow to familiarize yourself with the other options.) When the Receive Payment window opens, select the Payment method that applies. Leave the Deposit to field showing Undeposited Funds and look over the rest of the screen to make sure everything is accurate. Print it if you’d like, or add an Attachment using the links at the bottom, then Save it.

Tip: Customers tend to pay invoices faster if you allow them to make payments online. If you’re not yet set up for this, your Tarlow advisor can help you.

Instant Payments

Your business may collect payments at the time you provide a product or service. When this happens, you’ll want to supply your customers with a sales receipt instead of an invoice (this is also important for your records). Click the +New button in the upper left and select Sales Receipt under Customers to open a blank form. You’ll fill this out just like you would an invoice by selecting the Customer first, then entering or selecting any data needed for the other fields.

If you don’t anticipate needing all of the fields on your sales forms, you can remove some of them and even add your own. Ask us how this works.

If you’d like to add custom fields to your sales forms, you can do so in QuickBooks Online.

When you’ve completed all of the fields in your sales receipt, you can preview and print it. You can also save and email it to the customer.

Going Mobile

If you generate sales on the road, you can still create sales receipts for customers using the QuickBooks mobile app. Just click the plus (+) sign at the bottom of the screen and select Sales Receipt. The form is similar to the one you’d use on your desktop computer, though the layout is different, of course.

Having a QuickBooks Payments account is especially helpful when you’re making mobile sales. You can even swipe your customers’ credit and debit cards if you order a card reader from Intuit. We can walk you through this process.

You don’t ever want to record a payment incorrectly, of course, but it’s especially important right now to ensure that you’re accounting for every dollar that comes in. Please stay healthy and safe, and contact us if we can help in any way with your accounting and your use of QuickBooks Online.

A Novel Way to Make COVID-19 Relief Donations

Article Highlights:

  • Donating unused vacation time, sick leave and personal time
  • Employer’s Function
  • Great Donation Opportunity

On March 13, 2020, the President issued an emergency disaster declaration under the Stafford Act as a result of the coronavirus pandemic. The disaster area covers all 50 states, the District of Columbia, and five U.S. Territories. As a result, and as was done in the past in the wake of major disasters, including Hurricanes Katrina, Sandy, Harvey and Maria, the IRS is providing special relief that allows employees to donate their unused paid vacation, sick leave, and personal leave time to COVID-19 relief efforts.

Here is how it works: if your employer is participating, you can relinquish any available and paid vacation time, sick leave, and personal leave for cash payments, which your employer will donate to COVID-19 relief charitable organizations. The cash payment will not be treated as wages to you, and your employer can deduct the amount given as a business expense. However, since the income isn’t taxable to you, you will not be allowed to claim the donation as a charitable deduction on your tax return. Even so, excluding income is often worth more as tax savings than a potential tax deduction, especially if you generally claim the standard deduction* or you are subject to AGI-based limitations.

This particular relief applies to all donations made before January 1, 2021, giving individuals plenty of time to forgo their unused paid vacation, sick and leave time and have the cash value donated to a worthy cause.

This is an excellent opportunity to provide sorely needed help in the ongoing COVID-19 emergency without costing you anything but time. Contact your employer to donate. If your employer is unaware of this program, refer them to IRS Notice 2020-46 for further details.

If you have questions related to donating leave time for COVID-19 relief efforts or other charitable contributions, please contact us.

 

*Normally, charitable contributions are deductible only if you itemize your deductions on Schedule A as part of your 1040 return. This means you wouldn’t get a tax benefit from your donations if you claim the standard deduction instead of itemizing. However, the CARES Act, passed in late March 2020, allows up to $300 of cash charitable contributions made in 2020 to be deducted from your income even if you use the standard deduction. Of course, as noted above, you can’t deduct the value of COVID-19 relief donations made through leave-based donation programs in any case. Instead, the leave time is non-taxable.

U.S. House of Representatives Passes the PPP Extension and The Paycheck Protection Small Business Forgiveness Act is Introduced

On Wednesday, July 1, 2020, the U.S. House of Representatives passed a bill to extend the Paycheck Protection Program (PPP) application period by five additional weeks until August 8, 2020.  The U.S. Senate passed the bill by unanimous consent on Tuesday, June 30, 2020, less than four hours before the PPP application window was scheduled to close with more than $130 billion in unspent loan money. It is expected that President Donald Trump will sign the bill into law this week. Members of the House and the Senate are expected to adjourn for the Fourth of July holiday and are scheduled to return in two weeks.

On Tuesday, June 30, 2020, the U.S. Small Business Administration (SBA), which oversees the program with the Treasury Department, had approved nearly 4.9 million loans for a total of more than $520 billion. At midnight on June 30, 2020, the SBA stopped accepting loan applications. The unexpected extension is intended to provide small businesses additional time to apply for the approximately $129 billion in PPP funding remaining.

In addition to the five-week extension for the PPP application period, U.S. Senators Kevin Cramer (R-ND), Bob Menendez (D-NJ), Thom Tillis (R-NC) and Kyrsten Sinema (D-AZ), members of the Senate Banking Committee, introduced the Paycheck Protection Small Business Forgiveness Act to streamline forgiveness of PPP loans for small businesses. This bipartisan legislation includes forgiveness for PPP loans of $150,000 or less if the borrower submits a simple, one-page attestation form to the lender. It also ensures the lender will be held harmless from any enforcement action if the borrower’s attestation contained falsehoods.

Approximately 85% of PPP loans would be eligible for this simplified loan forgiveness process. The approximately 3.7 million PPP loans of $150,000 or less account for 85% of all PPP approved loans, but only 26% of the PPP funds delivered. The cost of applying for forgiveness for a PPP loan of this size is $2,000 for the small business and $500 for the lender. The bipartisan legislation introduced could save small businesses $7.4 billion and banks nearly $2 billion.

As background, in early April, Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The PPP was launched to aid the U.S. economy and assist small businesses facing economic hardships created by the COVID-19 pandemic. The program provides forgivable loans of up to $10 million per borrower that small businesses and other qualifying entities can use to cover payroll and other select costs, including mortgage interest, rent, and utilities.

PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met. The amount of the loan forgiveness may be reduced based on the percentage of eligible costs attributed to nonpayroll costs, any decrease in employee headcount, and decreases in salaries or wages per employee.

Tarlow is Here to Help – Please Contact Us with Questions

Tarlow Partners and staff members are closely monitoring tax-related legislation and regulations, and new guidance from the SBA and the Department of Treasury. We will continue to send updates and communications about relevant news and changing guidelines.

We are readily available to assist business owners in submitting Loan Forgiveness applications. If you have any questions about interpreting these new requirements and maximizing PPP loan forgiveness, please contact your Tarlow advisor for assistance.

The U.S. Senate Approved a Vote to Extend the Paycheck Protection Program Application Period

On Tuesday, June 30, 2020, the U.S. Senate approved a vote to extend the Paycheck Protection Program (PPP) application period by five additional weeks until August 8, 2020.  The vote was passed by unanimous consent less than four hours before the PPP application window was scheduled to close with more than $130 billion in unspent loan money.

The legislation will require President Donald Trump’s signature for the program to continue. It now heads to the House of Representatives, which had finished voting before the bill was approved by the Senate.  Members of both chambers are expected to adjourn by the end of the week for the Fourth of July holiday and are scheduled to return in two weeks. The House would have to pass the measure and President Trump would have to sign it before the extension would take effect.

As of 5:00 p.m. ET on Tuesday, June 30, 2020, the U.S. Small Business Administration (SBA), which oversees the program with the Treasury Department, had approved nearly 4.9 million loans for a total of more than $520 billion. At midnight on Tuesday, June 30, 2020, the SBA stopped accepting loan applications. The unexpected extension is intended to provide small businesses additional time to apply for the approximately $129 billion in PPP funding remaining.

In early April, Congress created the PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act.  The PPP was launched to aid the U.S. economy and assist small businesses facing economic hardships created by the COVID-19 pandemic. The program provides forgivable loans of up to $10 million per borrower that small businesses and other qualifying entities can use to cover payroll and other select costs, including mortgage interest, rent, and utilities.

PPP loan recipients can have their loans forgiven in full if the funds were used for eligible expenses and other criteria are met. The amount of the loan forgiveness may be reduced based on the percentage of eligible costs attributed to nonpayroll costs, any decrease in employee headcount, and decreases in salaries or wages per employee.

Tarlow is Here to Help – Please Contact Us with Questions

Tarlow Partners and staff members are closely monitoring tax-related legislation and regulations, and new guidance from the SBA and the Department of Treasury. We will continue to send updates and communications about relevant news and changing guidelines.

We are readily available to assist business owners in submitting Loan Forgiveness applications. If you have any questions about interpreting these new requirements and maximizing PPP loan forgiveness, please contact your Tarlow advisor for assistance.

Unique IRA Opportunities for 2020

Article Highlights:

  • 2020 Tax Saving Opportunities
  • Traditional IRA to Roth IRA Conversions
  • Paying the Conversions Tax
  • Required Minimum Distribution (RMD)
  • 2020 RMD Waiver
  • Coordinating Distributions with 2020 Income

As bad as it has been financially for many individuals, 2020 does provide some unique tax opportunities for those who have traditional IRA accounts. These range from converting traditional IRAs to Roth IRAs, retirees making larger-than-normal IRA withdrawals, and the decision whether to take advantage of the required minimum distribution suspension for 2020. Let’s look at these prospective tax strategies to see if they might apply to you.

CONVERSION OF A TRADITIONAL IRA TO A ROTH IRA

The first opportunity to explore is converting your traditional IRA account to a Roth IRA account. The reason you might want to do that is a Roth IRA provides tax-free accumulation and, once you reach retirement age, tax-free distributions. A traditional IRA provides tax deferral of earnings, and the distributions are taxable.

Since distributions from a Roth IRA are not taxable, but those from a traditional IRA would be, you generally pay tax on the amount converted. The government isn’t going to allow both the tax deduction when contributing to a traditional IRA and tax-free withdrawal from the Roth on the converted amount. Thus, a conversion provides the most benefit in a year when your income is low, and as a result, you receive a lower tax rate. Timing is critical, and 2020 may be a low-income year when you might find it appropriate to convert some portion of your traditional IRA to a Roth IRA.

Example: Suppose you are generally in the 32% tax bracket but find yourself in the 12% tax bracket for 2020 because of the COVID-19 pandemic. That means you can convert some portion of your traditional IRA to a Roth IRA at a tax cost of only 12% (or $120 per $1,000 converted) as opposed to $320 per $1,000 under normal circumstances.

When considering a conversion, one concern is where the money to pay the conversion tax comes from. Generally, it must come from separate funds. If it is taken from the IRA being converted, for individuals under age 59½, the funds withdrawn to pay the tax will also be subject to the 10% early distribution penalty in addition to being taxed.

Conversions can be tricky, and once made, they cannot be undone. If you reside in a state with state income tax, the conversion may also be taxable by the state. If you are considering a conversion, it might be appropriate to call for an appointment so that this office can help you analyze your conversion options properly or develop a conversion plan that fits your particular circumstances.

REQUIRED MINIMUM DISTRIBUTION SUSPENSION

For 2020, the government has suspended the requirement for certain older* taxpayers to take required minimum distributions (RMDs) from their retirement plans and traditional IRAs. Just because the obligation to take RMDs has been suspended doesn’t mean you shouldn’t take a distribution in 2020.

That decision should be based on two issues:

(1) Primarily, on your need to pay for living expenses, and
(2) Secondly, sound tax planning.

Issue number one speaks for itself. However, there are times when your income is low compared to normal, and it may be beneficial tax-wise to take distribution even if you are not required to. This may be true even if you aren’t of age for the RMD to apply. In these situations, the amount of a distribution can be coordinated with your tax liability to provide a beneficial tax outcome. In some cases, the distribution could even be free from tax or at least subject to a tax substantially lower than in a normal year.

Generally, this strategy is for individuals older than 59.5 and not subject to the 10% early withdrawal penalty. However, there are times when paying the 10% penalty may even be worth it for younger individuals when the tax saving is large enough.

It is important to understand that we are talking about retirement funds. Just because you can receive them out of a traditional IRA or qualified plan for a low tax doesn’t mean they shouldn’t be set aside in a savings account for future retirement needs.

These opportunities are easily overlooked, and it can be complicated to figure out the conversion or distribution amount to optimize the tax benefits. If you have questions or would like this firm to assist you in determining the strategy that best fits your needs, please contact us.

*If not for the COVID-19 suspension, 2020 RMDs would be required by taxpayers who turned age 70½ before 2020 or reach age 72 in 2020.

The IRS Is Issuing Some Stimulus Payments by Debit Card; Some Are Being Mistaken as Junk Mail and Thrown Out

Article Highlights:

  • Junk Mail
  • Stimulus Payment
  • Debit Card

If you are like most Americans, you probably receive tons of junk mail, which you tend to discard without reading. However, if you haven’t already received your stimulus payment from the federal government, it’s important to look through those envelopes carefully. The government has begun sending out its stimulus payments on debit cards mailed in plain white envelopes, which some people have discarded, thinking it was junk mail.

The Treasury has decided to send the 4 million or so individuals still waiting for their stimulus payments a Visa debit card, issued by a financial institution that the general public is generally not familiar with, in a plain envelope from Money Network Cardholder Services, also a name few will recognize. After years of counseling by the IRS and others, people have become very diligent in watching out for scams and false advertising, and mail from an unknown source in a plain envelope appears to be just another advertisement for a credit card or, even worse, a scam. As a result, many people discarded the envelope, not realizing that it contained their stimulus payment.

The taxpayers who would receive a debit card were determined by the Bureau of the Fiscal Service, a part of the Treasury Department that works with the IRS to handle the distribution of the payments.

The IRS website does caution that some payments will be issued on a prepaid debit card mailed in a plain envelope from Money Network Cardholder Services. The Visa name will appear on the front of the card; the back of the card has the name of the issuing bank, MetaBank®, N.A. The information included with the card will explain that the card is the recipient’s Economic Impact Payment Card.

For those that did discard or lose the card, they can request a replacement card through MetaBank’s customer service department by calling 800-240-8100 and selecting option #2. There is no charge for the replacement card, and you don’t need to know the card number to obtain a replacement.

Bottom line: if you are still waiting for your stimulus payment, be careful not to throw it in the trash. If you have any questions, please contact us.

The July 15th Deadline Is Fast Approaching, and It Isn’t Just for the 2019 Individual Tax Return

Article Highlights:

  • Extensions 
  • Contributions to IRAs 
  • Estimated Tax Payments for the First Two Quarters of 2020 
  • Individual Refund Claims for the 2016 Tax Year 
  • Foreign Account Reporting Requirements 

Due to the COVID-19 emergency, the IRS provided taxpayers with an automatic three-month extension to July 15 to file their 2019 tax returns and pay the 2019 tax, among other tax actions normally due on April 15. With July 15 fast approaching, it is crucial to understand that the day is more than just the deadline for filing your 2019 tax return. It is also the deadline for other tax items. Here is the rundown:

  • 1040 Extension – Those who are unable to file their 2019 individual 1040 tax return by the July 15 deadline need to file a Form 4868 extension, which will give them until October 15 to file the return. The tax liability shown on the extension should be paid with the extension form to avoid late payment penalties and interest. Penalties, interest, or additions to tax for failure to pay federal income taxes were disregarded during the April 15–to–July 15 extension-period window, but these will begin to accrue on July 16, 2020.

CAUTION: While the Form 4868 extension is an extension for filing, it is not an extension for paying your tax liability. The Form 4868 instructions say (and tax courts have ruled) that for an extension to be valid, a taxpayer must properly estimate their tax liability, enter that tax liability on the form, and file the extension by the due date of the return, which is July 15 this year.

The monthly penalty for not filing the 1040 tax return by the July 15 due date is 4½ percent of the tax due for late filing and ½ percent of the tax due for late payment. The maximum cumulative penalty rate is 25%; however, the ½ percent per month for late payment continues until the tax is paid.

There is also a minimum penalty for 2019 returns not filed within 60 days of the return due date, including extensions. That penalty is the lesser of $435 or the amount due on the 2019 tax return.

Importantly, if you do not owe or if you are getting a refund, there is no penalty because the penalties are based on a percentage of the tax due—if no tax is due, then no penalty is assessed.

The IRS also charges interest on late payments and penalties. The rate is subject to quarterly adjustment and is currently at an annual rate of 5% of the amount owed, with interest accumulating daily.

  • Contributions to a Roth or Traditional IRA for the 2019 Tax Year – July 15 is the last day for making 2019 contributions to Roth or traditional IRAs. Form 4868 does not provide an extension for making IRA contributions. 
  • Individual Estimated Tax Payments for the First Two Quarters of 2020 – Normally, the first installment of estimated taxes for a tax year is due on April 15, and the second installment comes due on June 15. For 2020, the IRS extended these due dates to July 15, to coincide with the other COVID-19-related extensions. Taxpayers who fail to prepay the minimum (“safe harbor”) amount may be subject to a penalty for underpayment of the estimated tax. This penalty is based on the interest on the underpayment, which is calculated using the short-term federal rate plus three percentage points. The penalty is computed on a quarter-by-quarter basis, so even people who have prepaid the correct overall amount for the year may be subject to the penalty if the amounts are not paid proportionally or in a timely way. However, for 2020, penalties for failure to pay federal income taxes during the April 15–to–July 15 period will be disregarded.

Federal tax law does provide ways to avoid the underpayment penalty. For instance, if the underpayment is less than $1,000 (referred to as the de minimis amount), no penalty is assessed. In addition, two options exist for safe-harbor prepayments:

    1. The first is based on the total tax on the current year’s return. There is no penalty when prepayments (including both withholding and estimated payments) equal or exceed 90% of the current year’s tax.
    2. The second is based on the total tax amount (not including credits for prepayments) on the return for the preceding tax year. This is generally set at 100% of the prior year’s tax liability. However, taxpayers with adjusted gross income exceeding $150,000 (or $75,000 for married taxpayers filing separately) must pay 110% of the prior year’s tax liability to meet the safe-harbor test. 
  • Individual Refund Claims for the 2016 Tax Year – The regular three-year statute of limitations for 2016 tax returns typically would have expired on April 15 of this year. However, due to the COVID-19 emergency, the statute of limitations was extended to July 15. Thus, no refund will be granted for 2016 returns (original or amended) filed after July 15. An exception is if a net operating loss is being carried to 2016; in this case, the usual three-year limitation for claiming a refund won’t apply as long as the statute is still open for the year when the net operating loss (NOL) occurred. However, taxpayers could risk missing out on the refundable Earned Income Tax Credit, the refundable American Opportunity Tax Credit for college tuition, and the refundable child credit for the 2016 tax year if they do not file before the statute of limitations ends. Caution: The statute does not apply to balances due for unfiled 2016 returns. 
  • Foreign Account Reporting Requirements (FBAR) – For each United States person who has a financial interest in, signature, or other authority over any foreign financial accounts, including bank, securities, or different types of financial accounts in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, that person must report that relationship to the U.S. government during each calendar year. This reporting requirement is commonly referred to as FBAR, and the due date is the same as that for individual 1040 returns.

This report is submitted online to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), and the FBAR’s annual due date is April 15. However, FinCEN grants an automatic extension to October 15 each year, so if you missed the April due date this year, you still have until October 15 to file the FBAR. Penalties for failing to file an FBAR are severe, and individuals should not overlook overseas family accounts on which they are named as account holders or online foreign gambling accounts. If in doubt, call this office for further details.

If your income tax return is still pending because of missing information, please forward that information to us as quickly as possible so that we can ensure your return meets the July 15 deadline. Keep in mind that the last week before the due date can be very hectic, and your returns may not be completed in time if you wait until the last minute. If you know that the missing information will not be available before the July 15 deadline, please contact your Tarlow advisor so that we can prepare an extension request (and 2020 estimated tax vouchers, if needed).

If you have not yet completed your returns, please contact us immediately so that we can schedule an appointment, estimate your taxes, or file an extension.