Episode 7 - CARES Act Tax Programs with Dan Faye

Dan Faye, accounting services manager, navigates the business impact of the CARES Act tax provisions and discusses next steps for farm business owners.

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Transcript

Raechel Sattazahn:   0:00
We recently interviewed Dan Faye, accounting services manager, with AgChoice Farm Credit. As part of the CARES Act there have been several special tax programs announced to assist Americans and businesses during this time. We recently interviewed Dan Faye, accounting services manager, with AgChoice Farm Credit. As part of the CARES Act there have been several special tax programs announced to assist Americans and businesses during this time. 

Raechel Sattazahn:   0:21
The big headline related taxes was pushing back the federal and state tax deadlines from April 15 to July 15. What other information is important for farm businesses to know about these changes?

Dan Faye:   0:48
If you are expecting a tax refund result, don't wait. Go ahead and get your tax return filed. The government is continuing to pay those refunds according to their usual schedules. When the government moved to tax deadline to July 15, it also affected a few other dates and information that we want to keep in mind:

Dan Faye:   0:00
The first one is your first quarter estimated tax payments. Typically those are due on April 15 but that deadline has also been pushed back to July 15.

Dan Faye:   0:00
Another important deadline change relates to tax planning. IRA and HSA contributions can be done after the end of the year and still affect your last year's tax liability. The deadline for those has also been moved to July 15. If you haven't filed your 2019 tax return yet, your accountant may be able to use these strategies to change your tax situation.

Raechel Sattazahn:   0:50
The CARES Act also included several other tax related programs. Please share with our listeners about some of these programs that might be a specific interest to Pennsylvania farms.

Dan Faye:   1:06
First I’d like to share about the Deferral of Employment Tax Deposits program. This program is meant to provide immediate cash flow to small businesses. All employers qualify. It does have implications if your also received a PPP (Payroll Protection Program) loan. If an employer received a PPP loan and it ends up being forgiven, on the day you get your decision from the lender that it is being forgiven, you have to stop deferring deposits. The way it works is that you can defer up to 100% of the employer portion of Social Security tax, which is 6.2%. There is a little word of warning with this program: this is a deferral of deposits, not a forgiveness of deposits, so eventually these payments need to be made. Specifically, they need to be made by two dates. The first one is December 31, 2021 and by then you have to have paid in 50% of what you deferred, and the remaining 50% needs to be paid in by December 31, 2022.

Dan Faye:   0:00
The next program is the Employee Retention Credit. This program has a lot more eligibility requirements than most of the other CARES Act programs. Specifically to be an eligible business, the business has to experience either a full or partial shutdown because of government orders or a significant decline in gross receipts. Both of those are defined by the IRS, and I would encourage all the listeners to go to the IRS FAQ website to get more information on how those are defined. Another requirement is if the employer received a PPP loan, than the employer is not eligible for this credit at all. We haven't seen a lot of movement on this credit yet and that’s because the first time we need to put pen to paper on this is with second quarter payroll tax returns, which we're not going to file until July. That being said, there are some ways you can take advantage of this credit now.  I would encourage you to talk to your payroll provider or accountant if you're interested in using this credit and figuring out how you can use it now, rather than waiting until July.    

Dan Faye:   0:00
The next program I'll share about is the NOL modification. NOL stands for Net Operating Losses. The CARES Act temporarily reset that the rules for net operating losses back to what they were before the tax law change in 2018. What I mean by that is you can claim 100% of your operating loss in the years 2018, 2019 and 2020 and you can actually carry those losses back up to five years. It might be possible for some of the listeners to file an amended tax return for a year and harvest some losses that they weren't able to use originally and get a little bit of a refund. When we deal with NOL there are a lot of intricacies we want to look at to make sure we're using it in the best way. In addition to carrying it back, there's times where you can carry it forward and offset income in next year or the year after that. If you have an operating loss and you think this might apply to you, talk to your tax preparer to make sure it is being used in the best way possible.

Dan Faye:   0:00
Finally, the last program I want to talk about is the economic stimulus checks. These have started to hit taxpayer’s bank accounts now. The amount is $1,200 per adult, so a married couple filing a joint return is going to get $2,400. There's an additional $500 for each dependent child. Let's say you have a family of four, a husband and wife with two kids, and they file a married joint return, the check is going be for $3,400. This check is actually an advance on a future tax credit. So on your 2020 tax return, there's going be a tax credit that your accountant figures out to reconcile that you got the right dollar amount. It's very important that you remember the dollar amount that you're getting because your accountant is going to ask for it next year. I've had a lot of people ask me how the exact amount is determined. What if a person had a kid in 2019? Is the IRS going to catch that and give the extra $500? The IRS will first look at your 2019 tax return, if it has already been filed. If it hasn't been filed yet, they're going to go to your 2018 tax return and check there. If the 2018 return hasn’t been filed yet for whatever reason, then they're going to go on look at Social Security records. Just like with every other credit, there are income limitations that apply to this program. If you're a high income taxpayer, the dollar amount you get may be less than what I’ve shared. 

Raechel Sattazahn:   2:10
If any of our listeners are interested in the programs that you just highlighted, how do they get started using them?

Dan Faye:   2:25
I would encourage everyone to do their research. It's very important that you consult with your accountant and payroll provider to make sure you're getting all of the information that you possibly can about these programs. I would encourage everyone to do their research. It's very important that you consult with your accountant and payroll provider to make sure you're getting all of the information that you possibly can about these programs.   We also want to make sure you're getting reliable information. There's a ton of information out there on the web or on the radio, and you want to make sure you're getting it from a reliable source. AgChoice has a website that we've added - agchoice.com/resources - where we have links to reliable sources such as the IRS FAQ pages for these programs. They’re a good starting point.  You also want to work out a good, detailed plan with your accountant to make sure you're using the programs that are best for you and using them in a way that they can work together without disqualifying you for something else.

Raechel Sattazahn:   7:17
Are there any other final insights you'd like to share today?

Dan Faye:   8:24
These programs are meant to boost the economy by giving a little bit back to taxpayers and a little bit back to small businesses. But just like with any other tax laws and tax subjects, there are a lot of details and intricacies involved in all these programs. These programs are meant to boost the economy by giving a little bit back to taxpayers and a little bit back to small businesses. But just like with any other tax laws and tax subjects, there are a lot of details and intricacies involved in all these programs.   I've said it a few times and I'll say it again: it's incredibly important to consult with your accountant, tax preparer, payroll provider or business consultant to make sure you have all the information that you need to you can make a well informed decision.