COVID-19 Weekly Digest (September 02, 2020)
Shutting down economies around the world to fight the coronavirus has been a blunt and costly instrument, as this piece in the Wall Street Journal describes. Taiwan, South Korea and Hong Kong demonstrated that it was possible to reduce infection rates by widespread testing, contact tracing, cutting off travel with China and adopting masks. Such stringent controls were not possible in most states in the U.S., so instead, we resorted to widespread lockdowns. As new research seems to indicate, a better approach might be targeted lockdowns and mandating the use of masks. For example, in the German city of Jena, after mask-wearing was required in public places, on transit and at work, new infections nearly disappeared.
We’re still not out of the danger zone, so let’s work together to keep each other safe!
CARES ACT UPDATES
Executive Actions for Pandemic Relief
With President Trump’s executive memorandum deferring withholding and payment of individual payroll taxes set to begin on September 1, employers have been anxiously awaiting guidance from the IRS on implementation. The payroll taxes deferred under the executive action are the employees’ share of social security taxes (6.2%) for employees who are paid less than $4,000 per bi-weekly pay period. Finally, late on Friday, August 28, the IRS released a brief notice. Here are the highlights from that notice:
Eligibility of employees for deferral of withholding of taxes will be determined on a pay-period by pay-period basis.
Employers who defer the withholding of payroll taxes will be required to withhold and pay the deferred taxes between January 1, 2021, and April 30, 2021, or they will be assessed late payment penalties and interest.
Employers may make other arrangements to collect those deferred taxes from affected employees.
The memorandum delays only the withholding of payroll taxes, not the timing of the employers’ payment of those taxes.
Employers must still follow the usual requirements for timely payment of any taxes withheld from employees’ paychecks.
However, the guidance omits many of the clarifications sought by the AICPA, as discussed in this podcast (with transcript). For example, what should be the process for employees and employers to elect to participate in this program?
Economic Impact Payments (aka Stimulus Checks)
About 50,000 people did not receive the full amount of the economic impact payment they were entitled to because their spouse was behind on child support. The IRS is in the process of making these people whole. Any person who included Form 8379, Injured Spouse Allocation, with their 2019 or 2018 tax return will automatically receive a payment from the IRS that covers the portion of their EIP which was diverted to pay their spouse’s past-due child support. No action needs to be taken by those affected.
Paycheck Protection Program (PPP)
On August 25, the SBA released another interim final rule regarding PPP loan forgiveness covering two issues. First, the SBA clarified that the compensation of S-corporation owner-employees who own less than 5% of the corporation is not included under the constraints limit. The forgivable compensation for S-corporation owners can be either eight weeks of their 2019 settlement, up to $15,385, for an 8-week covered period, or 2.5 months of their 2019 compensation, up to $20,833, for a 24-week covered period.
The second issue deals with self-rental expenses. Entities that rent property from a related party can only include the amount of self-rental cost that would cover mortgage interest paid during the covered period. This is to level the playing field between entities that hold real estate in that same entity and those that have real estate in a separate entity.
TAX ISSUES
Recently, some taxpayers received notices from the IRS regarding unpaid taxes, even though they had sent payment to the IRS. Due to the IRS shut down, an estimated 12 million pieces of mail piled up in IRS facilities, but the IRS tax collection machine continued to crank out notices of taxes due, with interest and penalties. Fortunately, on August 21, the IRS has stopped sending out some of those payment due notices. If you receive one of those notices, and have already mailed a check, don’t cancel or void that check. Eventually, all those payments should get matched up with tax returns. Calling the IRS is discouraged due to long wait times. If you still need to send payment to the IRS, consider making your payment electronically.
LIVING WITH AND AFTER THE PANDEMIC
Work in the post-pandemic world
This “experiment” with remote work during the pandemic is changing the minds of CEOs about the need for expensive office space. According to a recent survey, 68% of large-company CEOs are planning on downsizing their office footprint. Besides the obvious savings on rent, companies have access to a talent pool as broad as the country, or even as broad as the globe. Some companies may give their office space a facelift to make it more suitable to a hybrid approach, where the office is one of several places people get their work done.
Back to school
Many schools are distributing Chromebooks to students as part of their remote learning strategy. Google’s new Family Link app lets parents set up parental controls for their kids, but there are some tricks, as this piece in the Wall Street Journal explains.
Last spring, parents thought that remote learning would just be a short-time experience. But with virus outbreaks continuing, many parents are once again trying to figure out how to make it work. National Geographic spoke to veteran homeschoolers to get their advice for parents. Setting rules, such as staying logged in for the whole class and not opening another browser window to surf the net or play games during an online course, can help.
