Due to the frequent changes and announcements regarding tax and other programs that impact our client base, The Harding Group wants to reach out to our clients to address some questions or concerns they may have. We will keep monitoring and sharing our curated lists of things our clients should know and consider at this time. Read on for updates on recent tax changes, as well as recommendations for managing your money at this time.
Our Office Update
The Harding Group office is closed, and our employees are working from home until further notice. The best way to reach us is by email. If you are checking the status of your tax return, or aren’t sure who to contact, please email firstname.lastname@example.org.
The Families First Coronavirus Response Act
On March 18th, the Families First Coronavirus Response Act was signed into law. This complicated program applies to businesses with less than 500 employees.
- This act requires employers to pay two weeks of paid sick time in addition to what you already provide, which the government will reimburse.
- It requires employers to pay up to 10 weeks of paid leave for a parent to care for a child whose school is closed because of the virus, which the government will also reimburse in full.
- There is a possible exemption for employers with less than 50 employees if complying with the act risks the viability of the business. It is not known yet on how to apply or what the criteria will be.
- The reimbursement is intended to be credited on quarterly payroll taxes. The IRS will presumably have to add some lines to its 941 form, and the payroll software companies will have to adapt. You can also apparently underpay your payroll taxes based on your anticipated credit, but we do not yet know how that will be implemented.
There will be much more information coming on this, which the Harding Group will be watching closely. If you wish to know more details, the best summary we have found is on the IRS website.
An Update on Loans
SBA Disaster Loans
Low-interest federal loans are available to individuals and businesses due to the economic hardship caused by the coronavirus. The fastest way to get a decision is to apply online here.
Federal student loan interest has automatically dropped to 0% for at least 60 days. If borrowers would like to suspend their loan payments for two months, they need to contact their lender to request it.
An Update on Taxes
- Taxes are due July 15th instead of April 15th.
- 1st quarter estimated tax payments are also due July 15th. At the moment, the 2nd quarter estimated tax payments are still due June 15th.
- IRA contributions are still due April 15th.
- MD sales taxes that are due in March, April, or May can be paid by June 1st and still be considered on time, with no penalties or interest applied. Let us at the Harding Group know if you would like us not to pay your sales tax.
- MD withholding taxes for employers that are due in March, April, or May can be paid by June 1st and be considered on time, with no penalties or interest. However, we are currently unable to take advantage of this because the payroll software companies have not yet been able to adapt to this change. We will let you know when the feature is available.
- MD Unemployment Insurance has implemented a process for employers to file a bulk claim. It is only available to employers with more than 25 employees on the claim, and you can find the details here.
How to Conserve Cash
No one yet knows how much damage COVID-19 will do to the world economy, the US economy, or your finances. Having cash reserves can make a huge difference; here are some steps you can take to protect yourself:
- Avoid unnecessary spending.
- Consider whether or not to pay down debt. If you make additional principal payments to your mortgage or other loans, would that money be better off in a savings account temporarily? You can also pause student loans for 60 days. If you are worried about your job, or unemployed, take advantage of this.
- Consider decreasing retirement contributions. If your household income takes a cut, you might need that money.
- Refinance high-interest loans. With a prime rate of zero, now may be a good time to refinance. As the crisis worsens, it’s possible that even though money is cheap, fewer borrowers will qualify for a loan.
Should You Take on Debt?
Typically the Harding Group advises our clients to keep debt to a minimum, but this situation is unprecedented. Here is what you can do:
- Consider drawing on your line of credit. If you have access to a line of credit and anticipate drawing from it, you may want to take the money now and place it in a savings account. The bank could decide to cancel it any time, so it’s not too early to start thinking about it.
- Consider applying for a loan before things get worse. If your financial situation is strong enough now, consider applying for an SBA disaster loan or another loan to get you through. Remember, however, that you are still taking on debt that needs to be repaid.
- If you need a loan, consider borrowing from your 401-K. Most 401-Ks allow you to borrow 50% of the balance, and there’s no tax impact when you take a loan from your 401-K.
Some Final Advice
Communicating with Lenders
If you are unable to make a loan payment, communicate with your bank. Some banks, such as Bank of America, are allowing borrowers to defer payments during this time without additional interest or penalties, and without negatively impacting your credit scores.
Make Changes to Your Investments
The Harding Group has seen clients going both ways on this: getting out of the market and doubling down. Some clients have placed their money in a money-market account or a bond fund to preserve capital. You could do this within your 401-K or IRA account without any tax implications.
Alternatively, we have some clients who are aggressively investing while the market is down. Every situation is different, and you should be in touch with your financial planner to figure out what is best for you.
trust the professionals at the harding group
Unlike other accounting firms, The Harding Group, located in Annapolis, MD, will never charge you for emails or phone calls and will strive for open communication with our clients. Whether you are interested in business advising, tax preparation, bookkeeping and accounting, payroll services, Training + support for QuickBooks, or retirement planning, we have the expertise and years of experience to help. We serve clients in Annapolis, Anne Arundel County, Baltimore, Severna Park, and Columbia. If you are ready to take the stress out of taxes, contact us online or give us a call at (410) 573-9991 for a free consultation. For more tax tips, follow us on Facebook, Twitter, YouTube, and LinkedIn.