CPA News and Updates for our Valued MHA Clients and Friends:
As the 3rd Quarter closes we`ve gathered and explained all the most important CPA news and updates.
Deadline to return RMDs
Have you received a Required Minimum Distribution (RMD) this year? If yes, you can still avoid paying taxes by rolling over or repaying the distribution by Monday, August 31st. As a reminder, the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, waived the requirement to take distributions from retirement accounts during 2020. This waiver included RMDs for individuals who turned age 70 ½ in 2019 and took their first RMD in 2020. So if you have received an RMD and you would be interested in returning it to your investment account, your time is running short. Be sure you talk to your investment advisor about options available to meet this August 31st deadline.
Colorado Healthy Families and Workplaces Act
In our July newsletter, we wrote about the new Colorado Tax Bill which requires employers to pay sick leave. This requirement starts on January 1st for any employer with more than 15 employees whether seasonal, part-time, or full time. That’s why we want to make sure that everyone is prepared. To recap, Colorado Senate Bill 20-205 was passed in July creating the “Healthy Families and Workplaces Act”. This Act requires employers with 16 or more employees to pay sick leave to employees starting January 1, 2021. On the other hand, employers with 15 or fewer employees are required to begin paying sick leave on January 1, 2022. The paid sick leave is accrued at a minimum rate of one hour of paid sick leave for every 30 hours worked, up to a maximum of 48 hours of paid sick leave per calendar year. Employers need to incorporate this act into their existing employee manuals, annual budgets, and compensation package calculations.
Read more about this tax bill here: https://leg.colorado.gov/bills/sb20-205
IRS Underpayment Notices
Some of you may have noticed that the IRS has been erroneously issuing underpayment notices this month. This is one of the most disturbing CPA news of this period. But, fortunately, they recognized the problem and announced a plan. IRS will temporarily suspend mailing certain types of notices that go to taxpayers who have a balance due on their taxes. The agency seeks to avoid confusion for taxpayers who previously responded to a balance due notice but whose payment may still be among the backlog of unopened or unprocessed mail.
Tax Plan and Strategic Review
The third quarter is a great time for individuals and small business owners to review their tax plans for the year. Therefore, we recommend that all small business owners meet with their tax professional sometime in July, August, or September. It`s the perfect time to discuss trend lines and metrics to evaluate 2020. Individual taxpayers should reach out if they are facing unusual circumstances this year such as a property sale, receipt of unemployment income, and deferral of RMDs. Since this year has brought a roller coaster of ups and downs, the tax consequences could be substantial. Besides, many States are not following with all the Federal changes. As a result, you may experience State impacts from payroll tax credits, net operating losses, and loan forgiveness. Talking about taxes today is more important than ever. You should also discuss employee benefits and the upcoming requirements to provide pay for sick leave at the same time. Give our MHA team a call or email and get your meeting scheduled to work together on a tax plan for the balance of this year and into the future.
September 15th filing deadline
The deadline is looming for small businesses that have not filed their 2019 income tax returns. September 15th is the final due date for 2019 extended S-Corporation and Partnership tax returns, 3rd quarter 2020 estimated taxes for individuals, and the original filing date for June year-end C-Corporations. If you miss this filing deadline, the penalties can be substantial. We strongly recommend getting your papers together for filing as soon as possible.
Do you need a fractional CFO?
Small business owners are often overwhelmed by marketers of business services that may or may not be useful to their small businesses. These services may be called “fractional CFO” services, “business coaching”, and “executive management” services. While carrying nuances, they all provide services that you can most likely get from your Associates and CPAs at McNurlin & Hitchcock. The experts at MHA can work with you on business management, human resources, and executive leadership. We look forward to sharing our experience and knowledge with our clients. We want to help you generate tools and metrics to better understand your business. These tools could include:
- cash flow forecasts
- trend analysis
- overhead and cost rate calculations
- 2021 budget plan
- human resource assistance
- employee benefit decisions
- all other issues that a small business owner must handle
Form 1040 for 2020
The IRS has released a draft version of the Form 1040 for 2020 and it looks a bit different from last year. To begin with, this draft version has some new questions to address provisions from the CARES and the Families First Acts. Also, it has new questions that reflect the IRS’ crackdown on cryptocurrency investors and a new line to claim the charitable contribution deduction for taxpayers who claim the standard deduction. Moreover, a new line has been added to reconcile the “recovery rebate credit”. It will be used to offset the stimulus checks that went out from the IRS earlier this year. If you qualify for the credit but did not receive the stimulus check then you should apply this line here.
HEROES vs HEALS Act
I would be remiss if I didn’t mention in this CPA news article the two Acts that are still sitting out there. The Heroes Act is in the House and the HEALS Act is in the Senate. I mention them only to remind everyone that these are still pending resolution and their passage, if/when it happens, will change the tax law again.
That’s the big news today. Thank you for reading to the end! Please take care and stay strong. Keep us posted as you navigate these waters and do not hesitate to reach out with questions.
Kim Hitchcock, CPA
McNurlin, Hitchcock & Associates, P. C.