All posts by Rachel Owens

The Government Audit Quality Center (GAQC) Updates

This is from the GAQC, Alert No. 404:

The purpose of this GAQC Alert is to provide you with important governmental auditing updates relating to the Novel Coronavirus (COVID-19) as follows:

·   A definitive answer has been provided by the Small Business Administration (SBA) regarding the applicability of single audit requirements to Payment Protection Program (PPP) loans and Economic Injury Disaster loans (EIDL) obtained by not-for-profit entities (NFPs);

·   Statement on Auditing Standard (SAS) 141, Amendment to the Effective Date of SAS Nos. 134 Through 140, has been issued by the Auditing Standards Board (ASB).

·   The U.S. Department of Housing and Urban Development (HUD) has further extended certain submission deadlines for multifamily housing entities and public housing agencies (PHAs), as well as updated other COVID-19 guidance.

·   The Department of Energy (DOE) has extended audit submission deadlines for certain for-profit entities;

·   There are several COVID-19-related developments at the Federal Audit Clearinghouse (FAC); and

·   Registration information for an upcoming AICPA Webcast that will cover general audit-related implications of the COVID-19 pandemic.

SBA Loan Programs

In response to the COVID-19 pandemic, SBA PPP loans, administered under the 7(a) guaranty loan program, are being provided through local financial institutions. While these loans have been made primarily to for-profit entities, some NFPs have also received PPP loans. One of the most common questions we have received is whether SBA PPP loans obtained by NFPs are subject to the Uniform Guidance single audit requirements. The good news is that we have recently received an answer to this question. Based on recent discussions with SBA staff, we have been informed that PPP loans made to NFPs will not be subject to single audit.

On the other hand, SBA informed us that loans made to NFPs under the EIDL program are considered a direct loan program disbursed from SBA to loan recipients. Therefore, these loans are considered federal financial assistance and are subject to the Uniform Guidance single audit requirements.

SAS 141 Delays Auditing Standards

SAS 141 was issued in May 2020 and provides a one year delay for implementing SAS Nos. 134-140 to provide relief to auditors amid the challenges created by the COVID-19 pandemic. This suite of standards will, among other things, result in significant changes to the auditor’s reporting. The standards will now be effective for audits of financial statements for periods ending on or after December 15, 2021 (previously they would have been effective for periods ending on or after December 15, 2020). While early implementation was not permitted for these standards as originally issued, SAS 141 does permit early implementation. Additionally, because they are so interrelated, the ASB recommends that the suite of SASs be implemented concurrently.

HUD COVID-19 Extensions

Multifamily Housing Entities. As reported in GAQC Alert #399, HUD’s Real Estate Assessment Center (REAC) had previously provided a 30-day extension for multifamily audit submissions having due dates of 3/31/20 and 4/30/20 (requiring them to be submitted by April 30th and May 31st respectively). We have just heard from HUD staff that they have further extended these submission deadlines to June 30, 2020. A new user alert has been posted for those logging into the Financial Assessment Subsystem – Multifamily Housing site as follows:

“Global Extension Till June 30th REAC is extending due dates on all submissions that are due April 30th and May 31st. The new due dates for these submissions will be June 30th. This applies to all submissions due within this time frame.”

Further, as noted in GAQC Alert #399, HUD issued a question and answer (Q&A) document, Questions and Answers for Office of Multifamily Housing Stakeholders, which has now been updated through May, 1, 2020, Some of the more recent questions added to the document address forbearance provisions described in Mortgagee Letter 2020-09, Implementation of the Coronavirus Aid, Relief, and Economic Security (CARES) Act Forbearance, which are relevant to multifamily borrowers, servicers, and lenders. Note that Q7 in this Q&A document addresses the audit extension but has not yet been updated to reflect the latest June 30th extension provided by REAC. We assume the next version of the Q&A will reflect this latest change.

PHA Unaudited Submissions. On April 22, 2020, HUD issued an updated version of COVID-19 FAQs for Public Housing Agencies. QC14 of the FAQs extends the submission deadline for unaudited submissions required to be made by PHAs with 12/31/19 and 3/31/20 year-ends to 8/31/20 and 11/30/20 respectively. PHAs are not required to seek HUD approval for these extensions.

FAC Update

Although the FAC is accepting single audit submissions, FAC staff has informed us that the COVID-19 pandemic has impacted normal processing times and that telephone support is limited. It is currently not unusual for a month to pass between the receipt of a submission and for the submission to be processed by the FAC. However, this delay will not impact the recorded acceptance date which will still be based on the actual date of submission.

On another note, the FAC posted information about the 6-month single audit submission extension on the FAC home page under the heading “Important Announcements.” See GAQC Alert #401 for more information on this extension that was established by OMB Memorandum M-20-17, Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19) due to Loss of Operations (OMB Memo M-20-17). In its announcement, the FAC added the following language that does not appear in the OMB memo: “Individual recipients and subrecipients…are requested to include a reference to the [OMB] memorandum in their audit reporting packages so that Federal agencies and pass-through entities are informed.” We understand this addition was made based on a request from OMB and believe the intent is for the auditee to add a statement in the reporting package when it has taken advantage of the 6-month extension due to the COVID-19 pandemic. We have an inquiry into OMB for confirmation on this, as well as a question about where in the reporting package this notification should be placed. We will follow-up in a future GAQC Alert once we get a response.

DOE For-Profit Audit Extension

In the DOE National Nuclear Security Administration’s implementation of OMB Memo M-20-17, DOE extended the audit submission deadline for for-profit entities subject to a compliance audit under DOE rules. The extension is consistent with the extension language provided by OMB for single audits (i.e., a 6-month extension). See the DOE announcement, section 13, titled “Extension of Single Audit Submission,” for more information.

 

If you have additional questions, please feel free to contact our office.

 

U.S. Department of Treasury Expands Income Tax Filing and Payment Relief

In an official pronouncement released Thursday, April 9, the U.S. Department of Treasury expanded on the income tax filing extension and payment relief efforts in response to the current COVID-19 situation.  Effectively, any “income” tax filing or payment that would normally be due during the months of April through June of 2020 has now been automatically extended until July 15, 2020.  As a supplement to the prior income tax filing and payment extensions granted, this new announcement delays the need to remit any quarterly estimated tax payments until July 15th without incurring any penalty or interest charges.  As a result, any business or individual with 2020 quarterly estimated tax payments needs is able to delay both the Quarter 1 and Quarter 2 payments (normally due April 15th and June 15th, respectively) until July 15, 2020.  Also extended are any fiscal year-end income tax return filings (and corresponding tax payments) for businesses (corporate, LLC, partnerships or trusts), gift and estate tax filings, nonprofit organization income tax filings that would have been due in April, May, or June of 2020.  Note that these enhanced extension relief rules do not pertain to Employment Tax Reporting and Payments (including all payroll-related tax returns and deposit requirements).  Finally, as reaffirmation of the recommendations we have previously provided for any business, organization or individual taxpayers that will require additional time to file their respective 2020 income tax returns, the standard extended due dates of September 15 and October 15 may still be requested via filing of the applicable extension form prior to July 15, 2020.

We trust you will find the highlights we have provided on this new pronouncement helpful, but should you have further questions please contact us.

Key Highlights of the CARES Act and the FFCRA Relief Provisions

We have compiled the following useful and concise information for your reference as you consider the various planning opportunities available to address the impact of the COVID-19 situation on nonprofit organizations.  After studying the recently enacted law and interacting with other professionals, by parsing through the voluminous CARES Act, Families First Coronavirus Response Act (“FFCRA”) and relevant peripheral materials, the following includes the highlights of the relevant relief available to you via the government stimulus packages:

FINANCING & GRANTS

  • Loans available under the CARES Act provide the largest measure of assistance available via what is termed the “PPP”.  The borrowing amount is capped at a formula calculating the average monthly “Total payroll” incurred in a trailing 12-month period.  “Total payroll” includes employee compensation (not to exceed $100,000 annually per capita) + health insurance (employer share only) + PTO.  PPP loans will be obtained through traditional lending relationships (local / national banks) and NOT the SBA; best bet is to work with lenders with whom a borrowing relationship already exists as it may help expedite the process.   Our understanding is that local lenders will have finalized the application process and be in a position to initiate the approval process beginning April 3.  We recommend contacting lenders with whom the organization already enjoys a relationship as many banks are refusing to process the PPP applications for new customers without any other current bank connections.
  • Forgiveness of any “PPP” loans received under the CARES Act will be available if proceeds are used for payroll, rent, utilities AND employee labor force or employee compensation after April 1 remains consistent with a pre-April 1 “measurement period”.
  • An alternative loan program will be created in the future [“Midsize Business Loan Program”] will be established for organizations with > 500 employees whom plan to retain workforce.  No details have yet been released on this program.
  • Independently, “Disaster Relief Loans” (referred to as “EIDL”) are available under the more traditional borrowing program offered by the SBA.  The on-line loan application is available at https://covid19relief.sba.gov/#/.
  • What is interesting and somewhat confusing, the EIDL program administered by the SBA also includes a grant opportunity for up to $10,000 for businesses that have been severely effected by COVID-19.  The grant does not require repayment, nor does it obligate the recipient to execute an EIDL loan; furthermore, it does not preclude the business from also applying for the PPP.  Most prospective borrowers will apply for the grant through the SBA (which should be received on an expedited basis according to the Federal government’s stimulus objectives) while simultaneously applying for the PPP through their local lender.
  • NC-based businesses may also apply for loans of < $50,000 under the “NC COVID-19 Rapid Recovery Loan” program administered by a consortium of local lenders and stakeholders, and funded by the “Golden Leaf Foundation”.  The loans will have favorable repayment terms and the application process is available on-line.

 

EMPLOYMENT

  • Payroll tax deferment is available for employer FICA and Medicare due 4/1/20 – 12/31/20.  Any tax amounts deferred must be repaid in no less than 50% < 12/31/21 and the remaining 50% < 12/31/22.
  • Payroll tax credit is available on up 50% of up to $10,000 of wages per employee (or $5,000 of credit per quarter) by meeting certain workforce retention criteria [50% of wages paid to retained labor force during period when business gross revenues decline > 50% or experienced at least a partial shutdown].  Any employer whom receive a PPP loan and loan forgiveness will be precluded from qualifying for an equivalent amount of payroll tax credit.
  • EFMLA [“Family leave”] and EPSL [“Sick leave”] benefits paid out to qualifying employees will generate a payroll tax credit (rather than the normal deduction).  These “leave” and “sick pay” provisions provide a benefit to employees who file claims with compensation (at least in part) for up to 12 weeks in aggregate.  The mandatory leave provisions may not be applicable to anyone in the healthcare industry, however if a business already has family leave policies in place as part of their employee benefits, the policies should be be adhered to with regard to relevant claims made by employees whom are incapable of working due to COVID-19 issues.
  • Employees whom are separated from service via layoff can qualify for Unemployment Insurance.  Filings are now made via on-line platform by the terminated employee directly.  Under NC Law, even employees whom were not fully terminated but experienced severe decrease in work hours may qualify to receive partial benefits.  Anyone properly terminated would be ineligible for EFMLA or EPSL; in addition, employees severed from service whom were participants in the group health plan will need to offered COBRA coverage.  [Note for exit- counseling purposes and temporary layoff planning, a terminated employee is typically not required to self-pay the monthly premium amount until after a 59-day grace period; therefore, if a business anticipates rehiring the terminated employee < 59 days following the expectation of a return to business activity suspended due to COVID-19, there may not be any additional premium cost to the employee nor significant interruption in health care coverage.  [However, each business should consult with its health plan advisor or representative to verify no other “breaks in service” nor “on-board delays” in coverage would apply under the terms of the group plan in place.]

 

CHARITABLE CONTRIBUTION MODIFICATIONS

  • Individual taxpayers beginning in 2020 tax year may make a $300 tax-deductible contribution to public charities, and without any of the standard itemized deduction limitations.
  • Normal Itemized Deduction AGI limitations [60% for 2019] are lifted in 2020
  • Corporate Contribution Limitation [10% of net income for 2019] is increased to 25% for cash and food donations

 

CARES Act Relief Pertaining to Retirement Accounts

  • The Act allows for “coronavirus-related” distributions from defined contribution retirement plans, such as 401(k), IRAs, and 403(b) plans, of up to $100,000, with the early 10% withdrawal penalty suspended. Income associated with these distributions would be subject to tax over a three-year period rather than in the current year. Taxpayers would be able to choose to repay their retirement plans after receiving these distributions if they wish.
  • Coronavirus-related distributions include those made to individuals who have been diagnosed with COVID-19, a spouse or dependent of such individual, or those who experience adverse financial consequences as a result of the pandemic.
  • The amount that an individual may borrow from a qualified plan is temporarily increased from $50,000 to $100,000.
  • The Act suspends required minimum distributions (RMDs) in the year 2020 for various retirement plans, including IRAs, 403(a) and 403(b) plans, and 457(b) plans. Therefore, the 50% penalty associated with not taking an RMD is suspended in 2020.
  • The RMD suspension covers first RMDs from 2019, which individuals may have deferred until April 1 of this year. Similarly, RMDs are waived for plan participants who turned 70 ½ in 2019 (prior to the enactment of the SECURE Act) and are required to take an RMD prior to April 1 of this year. Though we are waiting on official guidance from the IRS, we expect that if an RMD has already been taken in 2020, the plan participant has up to 60 days to deposit it back into a qualified retirement account. We expect further guidance on a number of questions raised by the Act, including the treatment of 2019 RMDs taken in 2020.

 

Details continue to be released and we will keep you posted as to any new developments, and of course feel free to contact us should you need further information.

 

 

SBA loans may be more difficult than we thought

Small businesses looking to get some relief from the Payroll Protection Program may run into a snag or two.  Because this stimulus package was passed so quickly, the banks are not necessarily prepared to handle the loans like the media initially described.  This article from Fortune provides some additional insight.

If you are a small business looking to apply for one of these loans, here is a link to help you find a lender along with a sample application.

We understand how difficult this time is for you.  If we can be of any assistance, we will be happy to help!  Please contact our office if you have questions or would like to know more about other COVID-19 relief options.

PRESS RELEASE: NC Deferring Interest

FOR IMMEDIATE RELEASE                                        Contact: Joseph Kyzer<mailto:joseph.kyzer@ncleg.net>

Tuesday, March 31, 2020

 

North Carolina Leaders Announce Shared Support for Deferring Interest on Income Tax Until July 15

Raleigh, N.C. – North Carolina leaders announced shared bipartisan support for deferring the accrual of interest on state income taxes filed before July 15, 2020, in a joint statement released by General Assembly lawmakers and Governor Cooper on Tuesday.

View on SpeakerMoore.com<http://speakermoore.com/north-carolina-leaders-announce-shared-support-deferring-interest-income-tax-july-15/>

The deadline for state and federal tax filings were recently delayed to July 15, 2020, and penalties for late payments were also waived.

However, the North Carolina General Assembly and Governor must approve legislation to defer accrual of interest on income taxes, an action that state leaders announced shared support for approving retroactively on Tuesday.

State Senate Democratic Leader Dan Blue (D-Wake), Senate Leader Phil Berger (R-Rockingham), House Speaker Tim Moore (R-Cleveland), and House Democratic Leader Darren Jackson (D-Wake) released a joint statement with Governor Cooper on Tuesday.

“One of the biggest questions we are getting on economic issues is whether families and businesses will be responsible for paying interest on their income taxes now that the filing deadline is delayed,” the five state leaders said in a joint statement Tuesday.

“Today, we can announce our shared support for retroactively waiving the accrual of those interest payments to provide further tax relief for North Carolinians amid the COVID-19 crisis, an important step to offer certainty and recovery assistance for millions of our state’s residents.”

Under North Carolina law, the liability for failure to pay estimated income tax on time is the accrual of interest. The Secretary of the Department of Revenue is not authorized to waive interest and the agency is required to charge interest on any unpaid tax.

Therefore, the General Assembly and Governor must approve legislation to ensure taxpayers are not liable for such interest between April 15, 2020, and July 15, 2020, the extended deadline.

____________________________________________________________________________________

NORTH CAROLINA GENERAL ASSEMBLY

Legislative Building | 16 West Jones Street | Raleigh, NC 27601 | 919-733-4111

 

Key Highlights of the COVID-19 Relief Programs

by Tony Pandiscia

We have compiled the following useful and concise information for your reference as you consider the various planning opportunities available to address the impact of the COVID-19 situation on your business operations.  After studying the recently enacted law and interacting with other professionals, by parsing through the voluminous CARES Act, Families First Coronavirus Response Act (“FFCRA”) and relevant peripheral materials, the following includes the highlights of the relevant relief available to you via the government stimulus packages:

  • Loans available under the CARES Act provide the largest measure of assistance available via what is termed the “PPP”.  The borrowing amount is capped at a formula calculating the average monthly “Total payroll” incurred in a trailing 12-month period.  “Total payroll” includes employee compensation (not to exceed $100,000 annually per capita) + health insurance (employer share only) + PTO.  PPP loans will be obtained through traditional lending relationships (local / national banks) and NOT the SBA; best bet is to work with lenders with whom a borrowing relationship already exists as it may help expedite the process.   Our understanding is that local lenders will have finalized the application process and be in a position to initiate the approval process by April 3.
  • Forgiveness of any “PPP” loans received under the CARES Act will be available if proceeds are used for payroll, rent, utilities AND employee labor force or employee compensation after April 1 remains consistent with a pre-April 1 “measurement period”.
  • Independently, “Disaster Relief Loans” (referred to as “EIDL”) are available under the more traditional borrowing program offered by the SBA.
  • What is interesting and somewhat confusing, the EIDL program administered by the SBA also includes a grant opportunity for up to $10,000 for businesses that have been severely effected by COVID-19.  The grant does not require repayment, nor does it obligate the recipient to also apply for an EIDL loan; furthermore, it does not preclude the business from also applying for the PPP.  Many businesses will apply for the grant through the SBA (which should be received on an expedited basis according to the Federal government’s stimulus objectives) while simultaneously applying for the PPP through their local lender.
  • NC-based businesses may also apply for loans of < $50,000 under the “NC COVID-19 Rapid Recovery Loan” program administered by a consortium of local lenders and stakeholders, and funded by the “Golden Leaf Foundation”.  The loans will have favorable repayment terms and the application process is available on-line.
  • Payroll tax deferment is available for employer FICA and Medicare due 4/1/20 – 12/31/20.  Any tax amounts deferred must be repaid in no less than 50% < 12/31/21 and the remaining 50% < 12/31/22.
  • Payroll tax credit is available up to $10,000 by meeting certain workforce retention criteria [50% of wages paid to retained labor force during period when business gross revenues decline > 50%]
  • EFMLA [“Family leave”] and EPSL [“Sick leave”] benefits paid out to  qualifying employees will generate a payroll tax credit (rather than the normal deduction).  The mandatory leave provisions may not be applicable to anyone in the healthcare industry, however if a business already has family leave policies in place as part of their employee benefits, the policies will need to be adhered to with regard to relevant claims made by employees whom are incapable of working due to COVID-19 issues.
  • Employees whom are separated from service via layoff can qualify for Unemployment Insurance.  Filings are now made via on-line platform by the terminated employee directly.  Under NC Law, even employees whom were not fully terminated but experienced severe decrease in work hours may qualify to receive partial benefits.  Anyone properly terminated would be ineligible for EFMLA or EPSL; in addition, employees severed from service whom were participants in the group health plan will need to offered COBRA coverage.  [Note for exit- counseling purposes and temporary layoff planning, a terminated employee is typically not required to self-pay the monthly premium amount until after a 59-day grace period; therefore, if a business anticipates rehiring the terminated employee < 59 days following the expectation of a return to business activity suspended due to COVID-19, there may not be any additional premium cost to the employee nor significant interruption in health care coverage.  [However, each business should consult with its health plan advisor or representative to verify no other “breaks in service” nor “on-board delays” in coverage would apply under the terms of the group plan in place.]

Details continue to be released and we will keep you posted as to any new developments, and of course feel free to contact us should you need further information.

COVID-19 Links

In an effort to streamline the ever-changing world we live in with the COVID-19 virus, here are some links that are all related to updated tax changes, small businesses, individual sick leave, and other filing requirements.  As more information is released, it will be added at the top of this list.

 

 

 

Have you been using zoom?  https://www.forbes.com/sites/leemathews/2020/04/13/500000-hacked-zoom-accounts-given-away-for-free-on-the-dark-web/#58a7fbc858c5

US Dept of Treasury Grants Additional Income Tax Filing and Payment Relief https://www.irs.gov/pub/irs-drop/n-20-23.pdf

New NonProfit Extensions https://home.treasury.gov/news/press-releases/sm970

CDC Recommendations https://www.cdc.gov/coronavirus/2019-ncov/index.html

COVID-19 Relief Tracker https://www.forbes.com/sites/briannegarrett/2020/03/20/small-business-relief-tracker-funding-grants-and-resources-for-business-owners-grappling-with-coronavirus/#1e1e001bdd4c

There’s hope for Small Businesses! https://www.wraltechwire.com/2020/04/03/bank-of-america-accepting-virus-crisis-loan-applications-receives-10000-in-first-hour/

Key Highlights of the CARES Act and the FFCRA Relief Provisions https://www.langdoncpa.com/?p=4717&preview=true

SBA loans more difficult than we thought https://www.langdoncpa.com/2020/04/03/sba-loans-may-be-more-difficult-than-we-thought/

Employer tax credits, and more https://www.journalofaccountancy.com/news/2020/apr/irs-new-employer-tax-credits-form-employee-retention-credit-guidance-coronavirus.html

More Assistance for Nonprofits https://www.councilofnonprofits.org/trends-policy-issues/loans-available-nonprofits-the-cares-act-public-law-116-132

NC Press Release: Deferred Interest https://www.langdoncpa.com/2020/04/01/press-release-nc-deferring-interest/

Applications for Small Business Paycheck Protection Program https://www.journalofaccountancy.com/news/2020/mar/paycheck-protection-loan-for-small-businesses-coronavirus-pandemic.html

Employer questions answered! https://www.dol.gov/agencies/whd/employers

SBA debt relief related to COVID-19 https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources#section-header-4

Gift tax returns extended too! https://www.journalofaccountancy.com/news/2020/mar/gift-gst-tax-returns-postponed-filing-deadlines-coronavirus-pandemic.html

Assisted Living Resources for COVID-19 https://www.ncala.org/covid-19.html

How much COVID-19 stimulus will I receive? https://www.cnbc.com/2020/03/27/the-stimulus-payment-calculator-tells-you-how-much-money-you-could-get.html

Possible Increase for VA Nursing Facilities https://www.vhca.org/publications/careconnection/march-26-2020/vhca-vcal-seeking-additional-funding-for-nf-care-under-covid-19-emergency/

COVID-19 Resources for Non-Profits https://www.ncnonprofits.org/resources/pandemicresources

The CARES Act questions answered https://www.journalofaccountancy.com/news/2020/mar/cares-act-economic-relief-coronavirus-tax-provisions.html?utm_source=mnl:alerts&utm_medium=email&utm_campaign=25Mar2020&utm_content=headline

NC DHHS provides additional COVID-19 support https://www.ncdhhs.gov/news/press-releases/nc-medicaid-increases-support-protect-those-most-risk-serious-illness-covid-19

Clarification on NC Tax Deadlines https://www.ncacpa.org/wp-content/uploads/2020/03/Frequently-Asked-Questions-COVID-final.pdf?utm_source=Google&utm_medium=Referral&utm_campaign=NCACPA&_zs=fG9HX&_zl=MMK22

Employers using Payroll Tax Credits for Paid Leave due to Coronavirus https://www.accountingtoday.com/news/employers-can-begin-using-payroll-tax-credits-for-paid-leave-for-coronavirus

CMS extends Cost Report Deadlines https://www.palmettogba.com/palmetto/providers.nsf/ls/JM%20Part%20A~BMYLSN5443?opendocument&utm_source=J11AL&utm_campaign=JMALs&utm_medium=email

Small Business Q&A https://sbshrs.adpinfo.com/covid19-faqs

IRS push back tax FILING deadline https://abc11.com/business/tax-day-pushed-back-amid-viral-outbreak-mnuchin/6031749/

Bill to address paid sick leave related to COVID-19 (FFCRA) https://www.forbes.com/sites/tomspiggle/2020/03/17/the-families-first-coronavirus-response-act-what-it-does-for-employees-who-need-paid-sick-leave/#615dd2f06f1a

HUD and Single Audit Extension https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-17.pdf?utm_medium=email&SubscriberID=111017000&utm_source=GAQC20&Site=AICPA&LinkID=8741972&utm_campaign=GAQC_AlertMAR20&cid=email:GAQC20:GAQC_AlertMAR20:https%3a%2f%2fwww.whitehouse.gov%2fwp-content%2fuploads%2f2020%2f03%2fM-20-17.pdf:AICPA&SendID=266068&utm_content=A20MAR400_GAQC_Alert401

IRS Press Release “Payment Relief” https://www.langdoncpa.com/2020/03/19/official-guidance-for-tax-deadlines/

Single Audit Submission Info https://www.whitehouse.gov/wp-content/uploads/2020/03/M-20-11.pdf

US Department of Labor defines FMLA related to COVID-19 https://www.dol.gov/agencies/whd/fmla/pandemic

IRS extends PAYMENT deadline https://www.cnbc.com/2020/03/17/treasury-and-irs-to-delay-tax-deadline-by-90-days.html

https://www.cpapracticeadvisor.com/tax-compliance/news/21129660/2020-tax-season-payment-deadline-extended-to-july-15-as-nation-fights-coronavirus-irs-news?utm_source=CPA+Other+Communications&utm_medium=email&utm_campaign=CCSN200317002&o_eid=9442A3978623C7T&rdx.ident=[object+Object]

 

Official Guidance for Tax Deadlines

From IRS Press Release:

March 18, 2020

The Treasury Department and the Internal Revenue Service are providing special payment relief to individuals and businesses in response to the COVID-19 Outbreak. The filing deadline for tax returns remains April 15, 2020. The IRS urges taxpayers who are owed a refund to file as quickly as possible. For those who can’t file by the April 15, 2020 deadline, the IRS reminds individual taxpayers that everyone is eligible to request a six-month extension to file their return.

This payment relief includes:

Individuals: Income tax payment deadlines for individual returns, with a due date of April 15, 2020, are being automatically extended until July 15, 2020, for up to $1 million of their 2019 tax due. This payment relief applies to all individual returns, including self-employed individuals, and all entities other than C-Corporations, such as trusts or estates. IRS will automatically provide this relief to taxpayers. Taxpayers do not need to file any additional forms or call the IRS to qualify for this relief.

Corporations: For C Corporations, income tax payment deadlines are being automatically extended until July 15, 2020, for up to $10 million of their 2019 tax due.

This relief also includes estimated tax payments for tax year 2020 that are due on April 15, 2020.

Penalties and interest will begin to accrue on any remaining unpaid balances as of July 16, 2020. If you file your tax return or request an extension of time to file by April 15, 2020, you will automatically avoid interest and penalties on the taxes paid by July 15.

The IRS reminds individual taxpayers the easiest and fastest way to request a filing extension is to electronically file Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses must file Form 7004.

This relief only applies to federal income tax (including tax on self-employment income) payments otherwise due April 15, 2020, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details. More information is available at https://www.taxadmin.org/state-tax-agencies.

Upcoming Single Audit Submission Highlights

The U.S. Office of Management and Budget (OMB) issued the following memorandum, dated March 9, 2020, Administrative Relief for Recipients and Applicants of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID-19).

In response to that alert, the Governmental Audit Quality Center (GAQC) of the AICPA followed up with OMB to clarify certain points made in the memo and issued their own alert No. 398 as follows:

  • The OMB memo discusses a potential extension of the single audit submission deadline by 12 months. OMB clarified that this extension cannot be applied to ALL recipients as of right now. The memo is intended to provide guidance to federal agencies relating to areas where relief may be provided to certain
  • The guidance in the OMB memo primarily relates to recipients receiving funds for coronavirus preparation and response (H.R. 6074). There could be cases where agencies may decide to apply the guidance to existing awards that are deemed by the agency to be for continued research and services necessary to carry out the emergency response relating to COVID-19.
  • Federal agencies are expected to issue their own guidance.
  • OMB is working on additional guidance to address situations where recipients may have operations that have been adversely impacted by COVID-19 but are not recipients of H.R.6074 funds.
  • The GAQC recommends that entities and auditors contact the National Single Audit Coordinator at the cognizant or oversight agency if there are concerns about meeting the upcoming March 31, 2020 deadline (for June 30, 2019 single audit submissions).

If you have any questions, or would like more clarification on this issue, please contact our office.

Employer Shared Responsibility Penalties

by Tony Pandiscia

The Internal Revenue Service “IRS” has recently been issuing “226J Letters” to businesses to conduct inquiry into whether compliance was properly maintained under the Affordable Care Act [“ACA”] for the 2016 Tax Year.  While the IRS has been authorized to issue this correspondence in the past, the 2016 Tax Year is significant because it marks the first year following the sunset of favorable “transitional relief” rules that had been available in prior years for businesses that were not in compliance with the ACA.  When a business is not in compliance with the ACA healthcare mandate, the result is exposure to the “employer shared responsibility penalty” [or “ESRP”].

A business may incur the “ESRP” under the ACA when it is an applicable large employer [“ALEs”] whom fails to offer:

  • “minimum essential” health insurance coverage to its full-time employees and their children, or
  •  insurance coverage that is “considered affordable”.

Technical rules help determine exactly whom is an ALE [i.e. how to properly count the “full-time equivalent” employees], what would be considered “minimum essential” [health insurance coverage], as well as whether the premiums charged employees were “considered affordable”.  Most businesses confronted the myriad of health insurance options designed to meet ACA compliance beginning back in 2013 when the law was initially announced, although various provisions of the law effectively delayed the assessment of penalties until after January 1, 2015 to give businesses ample time to implement suitable health insurance programs and permit the IRS opportunity to develop adequate record keeping and tracking mechanisms.

It is important to understand that receipt of a the 226J Letter is not the actual assessment of the liability.  Instead it is a notification from the IRS that based on certain records in its database, the business may be subject to the ESRP and the business now has the responsibility to formally contest or confirm the assertion.  [Typically the records the IRS has analyzed include Forms 1094, 1095, W-2 along with the Premium Tax Credit database that is populated through the “Exchange” where individuals obtained coverage through “Healthcare.gov”.]  The formal response to the 226J Letter must be submitted to the IRS using Form 14764, plus attachments.  Included in the 226J Letter will be a “response deadline” [generally 30 days from the date of the letter] for which a business owner must submit the response or by default the IRS will assume no additional evidence is available to refute the ESRP assertion.

Due to the complexity and time-constraints involved, upon receipt of a 226J Letter a business owner should immediately contact a Tax Professional to assist with the response process.  The format of the Form 14764 allows for submission of explanations and substantive documentation that may help update or correct the IRS’ records, as well as counter (if applicable) the government’s ESRP assertion.  As with other IRS dispute resolution matters, reliance on a qualified Tax Professional will permit the business owner to avail him/herself of all applicable ESRP response strategies (including extensions of time, available exemptions, review of formula computations and ratios, and even installment payment plan negotiation attempts, as necessary).  Langdon & Company LLP is well-versed in ESRP issues, so feel free to connect with us if you have any questions.