March 2021 Tax Newsletter

Spring is Almost Here!

With April 15th right around the corner, get answers to common tax questions in this month’s newsletter. Also included is a look at the Employee Retention Tax Credit recently expanded by law.

Please call if you would like to discuss how this information could impact your situation. If you know someone who can benefit from this newsletter, feel free to send it to them.

Upcoming Dates in the Tax Calendar

  • March 31 – Webinar: Employee Retention Tax Credits
  • April 7th – Webinar: Restaurant Relief
  • April 15th – Trust, Estate and Gift Tax Returns Due
  • May 17th – Individual Income Tax Returns and Tax Payments Due
  • May 17th – Annual Exempt Organization Return: Due Date

In This Issue

Tax Day for individuals extended to May 17: Treasury, IRS extend filing and payment deadline

The Treasury Department and Internal Revenue Service announced that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021.

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868. Filing Form 4868 gives taxpayers until October 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

Estimated Tax Payments Due April 15, 2021

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income.

State tax returns

The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. State filing and payment deadlines vary and are not always the same as the federal filing deadline.

Employee Retention Tax Credits

The Internal Revenue Service urges employers to take advantage of the newly-extended employee retention tax credit, designed to make it easier for businesses that, despite challenges posed by COVID-19, choose to keep their employees on the payroll.

The employee retention credit (ERC) for eligible employers can be claimed for up to $5,000 per employee in 2020 and up to $28,000 per employee in 2021.

One of these two qualifying events determine eligibility:

  • A trade or business is fully or partially suspended due to governmental orders limiting commerce, travel or group meetings due to COVID-19-, or
  • A trade or business experiences a significant decline in gross receipts for any calendar quarter when compared to 2019 (50% for 2020 and 20% for 2021).

With the passage of the American Rescue Plan Act of 2021, the ERC was expanded to include relief for large employers who are severely financially distressed and for startup businesses who began carrying on a trade or business after February 15, 2020.

Additionally, recent guidance has provided greater detail into what constitutes “partially suspended” operations, opening the door for more businesses to qualify. We strongly encourage you to take a second look at your business’ eligibility.

There are limitations on eligible wages and healthcare expenses depending on whether the business received PPP forgiveness, claimed other credits on wages, or had a certain fulltime employee count.

The requirements continue to change and we expect additional guidance, but we encourage businesses to consider this credit now.

Our team at Moskowitz LLP provides a customized advisory approach. We can help you:

  • Determine your eligibility for the ERC
  • Identify, document and calculate qualified wages and qualified health plan expenses
  • Calculate the quarterly ERC amount
  • Claim and report the credit
  • We do not charge for an initial consultation.

For a full engagement, we charge a flat fee retainer typically between $5,000 and $10,000 per quarter, depending on the number and complexity of the calculations.

Our team at Moskowitz LLP is committed to keeping you well informed on any tax and accounting issues that affect your business.

We have been helping businesses like yours remain in the forefront of any new tax changes or new relief that is critical to managing your business in this challenging and changing environment.

For calendar quarters beginning after June 30, 2021, American Recue Plan Act includes the following new ERTC provisions:

  • Certain startup businesses established after February 15, 2020, are now eligible for up to $50,000 per quarter, even if other eligibility tests are not met.
  • Employers of all sizes who experience a reduction in gross receipts of more than 90 percent compared to the same 2019 quarter are now eligible for a credit on all employee wages.
  • The IRS statute of limitations to make an ERTC assessment has been extended from three years to five years.

Contact us today to see how much you are entitled to receive. We are also hosting a webinar on the Employee Retention Credit on March 31, 2021. You can register here.

Restaurant Revitalization Fund FAQs (Register for our April 7th webinar now.)

Who Is an Eligible Entity?

A restaurant, food stand, food truck, food cart, caterer, saloon, inn, tavern, bar, lounge, brewpub, tasting room, taproom, licensed facility or premise of a beverage alcohol producer where the public may taste, sample, or purchase products, or other similar place of business in which the public or patrons assemble for the primary purpose of being served food or drink.

How Much Can an Eligible Entity Receive in Funding?

An eligible entity can receive a grant equal to the Pandemic-Related Revenue Loss of the entity (please see the definition below). However, this amount is subject to certain limits. Specifically, grants made to eligible entities cannot exceed $10 million, and are limited to $5 million per physical location.

How Much Money Is Available?

Available in grants from the American Rescue Plan’s Restaurant Revitalization Fund will total $28.6 billion. Given the number of possible eligible entities, this money is likely to go quickly. Eligible entities should apply as soon as applications become available in order to improve their chances of getting a grant.

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Answers to Common Tax Questions

Three giant legislative packages extended different types of coronavirus-related relief, including two rounds of stimulus checks, expanded unemployment benefits and a series of tax breaks. The latest, a $1.9 trillion stimulus package signed into law this March, will provide many people with yet another check.

Not surprisingly, taxpayers are confused. We highlight some of the most common questions below.

When will I get my refund?

The pandemic and additional stimulus payments will, in all probability, delay refund payments. But as of now here are the old wait times to receive your refund. The pandemic and additional stimulus payments will, in all probability, delay refund payments. But as of now here are the old wait times to receive your refund.

  • E-file return with a direct deposit – 1 to 3 weeks
  • E-file return with a mailed check- 1 month
  • Paper file return with a direct deposit – 3 weeks
  • Paper file return with a mailed check – 2 months

NOTE: If you want exact information on the status of YOUR refund go to www.irs.gov/refund and follow their instructions.

Can I still get a stimulus payment?

If you’re still waiting on either the 2020 or 2021 stimulus payment, file your 2020 tax return and claim the Recovery Rebate Credit. This is why it is important to keep track of any payments you receive from the government during the year. You will need them to account for any missing payments or underpayments.

Can I correct a tax form that has an incorrect dollar amount?

If you receive a tax document with incorrect information, contact the company that issued the document and try to get it fixed immediately. If you can’t get a corrected form right away, include both the incorrect form and the correct dollar amount when turning in your tax documents to have your return prepared.

Can I deduct charitable contributions if I don’t itemize?

In 2020 you can claim a $300 charitable contribution deduction regardless of whether or not you itemize your deductions. If you missed this window of this above-the-line donation in 2020, never fear as it is also available in 2021 with an increased limit to $600 for married couples. So save those donation receipts!

Are my unemployment benefits taxable?

Mostly. Unemployment insurance is generally subject to federal as well as state income tax, though there are exceptions (Nine states don’t impose their own income taxes, and another six exempt unemployment payments from taxation, according to the Tax Foundation).

The new relief bill will make the first $10,200 of benefits tax-free if your income is less than $150,000. This applies to 2020 only. (If you’ve already filed your taxes, watch for Internal Revenue Service guidance.)

It is important to note that not all States follow Federal Law. This means that the tax treatment may be different under State Law v. Federal Law. As such you may end up owing the State tax on the total unemployment income received.

How to protect yourself from identity theft‌

“Identity theft” sounds like a movie title, but it is a real-life horror story for hundreds of thousands of people every year.

Identity theft occurs when someone fraudulently uses your personal information – your social security number, driver’s license number, birth date, etc. – to apply for credit, services, or benefits using your name. Lawsuits, garnished wages, and tax liens can result. To make matters worse, because the theft is “invisible,” you may not discover it quickly.

How can you protect yourself? Here are some practical steps you can take:

Watch the numbers.

Store your social security card in a safe place. Don’t print your social security number on your checks, and refrain from using it as a password on your financial or Internet accounts. If you are required to provide your social security number, find out how it will be used and how it will be protected.

Keep your data confidential.

Give out your birth date only when absolutely necessary. Leave off either the day or the year, if possible.

Prevent your account numbers from falling into the wrong hands by shredding documents rather than simply discarding them. Shred all discarded mail that contains personal information, such as pre-approved credit offers.

Monitor your credit.

Check your monthly bills to make sure all charges are legitimate. Investigate unusual items immediately.

Consider lowering the limit on your credit cards to reduce the extent of fraudulent activity if a card is stolen or lost. Cancel cards you no longer use.

Order a credit report at least annually. Check it for errors and notify the credit bureau if you find any.