Summit CPA, Inc.

Coronavirus (COVID-19)SBA Disaster Assistance in Response to the Coronavirus

The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19).

SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.

Los Angeles City Small Business Emergency Microloan Program

In light of the sweeping impact the COVID-19 pandemic is having on our small business community, the City of Los Angeles has responded swiftly and decisively to support our local, community businesses. The newly established Small Business Emergency Microloan Program now provides financing needed to strengthen small business enterprises in this time of acute need that have been affected by the COVID-19 outbreak.

Microloan Terms
Loan Limits
$5,000 to $20,000
Interest Rate
- Option 1: 0% for a term of 6 months to 1 year
- Option 2: 3% to 5% for a term of up to 5 years
Term
6 months to 5 years
Loan Fee
No Fee
Admin Fee (credit report)
No Fee
Eligible Uses
Working capital only
Eligible Borrowers
- Option 1: microenterprises in the City of LA that are low-income or will retain low-income jobs
- Option 2: small businesses in the City of LA that will retain low-income jobs
Businesses may apply online for a City of LA Small Business Emergency Microloan. Registration will be required through our secure log-in system.

IRS announces 90-day payment extension (03-17-20)

At a press conference held today, U.S. Treasury Secretary Mnuchin announced the following extensions for federal income tax payments:

Individuals and businesses with an April 15 filing deadline will be given an additional 90 days to pay taxes;
Individuals will be able to defer up to $1 million of tax liability; and
Corporations get an extension for up to $10 million.
Mnuchin was not specific about late-filing penalties for either the March 15 or April 15 deadlines, but it appears interest and penalties will be waived automatically. He stated, "All you have to do is file your taxes. You will automatically not get charged interest and penalties."

We will provide additional information when formal guidance is issued by the IRS.

In light of this information from the IRS, the FTB is looking at their extension to June 15, and we will let you know if the due date for California is extended to 90 days as well.

2020 Tax Season Deadline Extended to July 15 as Nation Fights Coronavirus - IRS News
Taxpayers and businesses will have until July 15, 2020 to file and pay their taxes this year. The change was announced on Tuesday afternoon, by Treasury Secretary Steven Mnuchin ...

Governor provides 60-day filing extension to coronavirus victims (03-13-20)

In his March 12, 2020, executive order, the Governor extended the deadline for state tax filing by 60 days for individuals and businesses unable to file on time based on compliance with public health requirements related to COVID-19. It appears the Governor's order may be much broader and may provide relief for payments as well as other deadlines (e.g. refund and protest claims). We are following up with the FTB and the CDTFA regarding the scope of the order. We are also anticipating that the IRS will be providing similar relief shortly.

The flat 21% federal income tax rate for C corporations under the Tax Cuts and Jobs Act has been great news for these entities and their owners. But some fundamental tax truths for C corporations largely remain the same. For example, although the 21% rate will lower the impact, double taxation is still an important issue to consider, especially if a C corporation owns assets that are likely to appreciate significantly. And C corporation status still generally isn’t advisable for ventures that will incur ongoing tax losses. Have questions? Contact us.

Commercial buildings and improvements generally are depreciated over 39 years, which essentially means you can deduct a portion of the cost every year over the depreciation period. (Land isn’t depreciable.) But special tax breaks that allow deductions to be taken more quickly are available for certain real estate investments. Some were enhanced by the Tax Cuts and Jobs Act (TCJA) and may provide a bigger benefit when you file your 2018 tax return. But there’s one break you might not be able to enjoy due to a drafting error in the TCJA. Contact us to learn more.

A variety of tax-related limits affecting businesses are annually indexed for inflation, and many have increased for 2019. For example, the Section 179 expensing limit has gone up to $1.02 million from $1 million. Also up are the income-based phase-ins for certain limits on the new-last-year Sec. 199A qualified business income deduction for owners of pass-through entities. And most limits related to employer-sponsored retirement plans, such as 401(k)s, are higher this year. Contact us for more information about the limits that will affect your business in 2019.

A higher IRS mileage rate means larger tax deductions for business miles in 2019. The optional standard mileage rate used to calculate the deductible costs of operating an auto for business has increased by 3.5 cents, to 58 cents per mile. The mileage rate comes into play when businesses don’t want to keep track of actual vehicle-related expenses. But you still must record certain information, such as the mileage, date and destination for each trip. The mileage rate can also be used for reimbursing employees. Many rules and limits apply. Contact us for details.

There aren’t too many things businesses can do after a year ends to reduce tax liability for that year. But you might be able to pay employee bonuses for 2018 in 2019 and still deduct them on your 2018 tax return. To be eligible for this favorable tax treatment, you must be an accrual-basis taxpayer and the bonus liability must have been fixed by the end of the tax year, which requires passing the “all-events test” and may necessitate a bonus pool arrangement. If you’re a calendar-year company, you must pay the bonuses by March 15. Contact us to learn more.

The dawning of 2019 means the 2018 income tax filing season will soon be upon us. After year end, it’s generally too late to take action to reduce 2018 taxes. Business owners may, therefore, want to shift their focus to assessing whether they’ll likely owe taxes or get a refund when they file their returns this spring, so they can plan accordingly. With the biggest tax law changes in decades (under the TCJA) generally going into effect beginning in 2018, most businesses and their owners will be significantly impacted. Contact us for a refresher on the changes.

If you own a business, an exit strategy should be part of your tax planning so that taxes don’t trip you up when you retire or leave the business for some other reason. An exit strategy is a plan for passing on responsibility for running the company, transferring ownership and extracting your money from the business. Common exit options include a buy-sell agreement, succession within the family, a management buyout, an ESOP and a sale to an outsider. Each involves a variety of tax and nontax considerations. Contact us to discuss your exit strategy.