In these uncertain times, many of you are concerned like us about what the future will bring for you, your employees and the overall health of your business. Some companies have suffered a complete interruption in business while others are just beginning to see a significant slowdown. While we don’t know exactly what the future will bring, we want you to know that we are here for you. Following is an update on legislation and some suggestions for you to consider:
Federal Tax Payment Deferrals
On March 17, the IRS announced it will defer the long-standing April 15 federal tax payment deadline until July 15, 2020, for most individual and small business taxpayers. Most taxpayers may now defer payment for up to 90 days without accruing interest or penalties. The delay is available for individual taxpayers on the first $1 million of taxes owed and the first $10 million of taxes owed by a corporation. Tax liabilities in excess of these amounts are not eligible for deferral.
On March 18, the IRS released notice 2020-17 which clarifies the following:
- The 90 day postponement of the due date to make federal income tax payments that would normally be due on April 15th applies to both 2019 income taxes and for first quarter 2020 estimated income tax payments.
- The postponement is for income taxes only and not for any other type of Federal tax payment.
- The April 15th deadline to actually file returns has not been extended. However, existing rules that provide for an automatic extension of time to file a return will continue to be available for all taxpayers, so an extension of time to file returns until September or October should generally be available.
It is expected that many states, including Oregon, will follow suit in granting similar tax payment and/or filing relief. We will keep you abreast of these developments as they happen.
Cash Flow Management
If cash flow is a concern for you, you have probably already considered adjusting staffing levels and deferring large purchases. If not, now is the time to do so. You may also consider the following:
- Actively monitor your aged accounts receivable balances. Rising accounts receivable can put tremendous strain on cash flow. You should not wait until accounts receivable balances are 90+ days old to realize you have a collection issue.
- Actively monitor your sales and margins. Declining sales combined with declining margins are a recipe for disaster. A healthy company will maintain its margins even in the most trying of times.
- Review existing debt agreements to determine maturity dates, financial or non-financial covenants or any other provisions that might restrict your ability to access debt during difficult times.
- Meet with your bank to inquire about loan deferral options. It may be possible to forego loan payments for some period of time to help offset cash-flow disruptions.
- Contact your insurance carrier to inquire about business interruption insurance. You may be eligible to file a claim to help cover overhead costs.
Employment Matters
On March 18, the Families First Coronavirus Response Act was signed into law by the president. The bill includes a number of acts including: Emergency Unemployment, Emergency Family and Medical Leave, Emergency Paid Sick-Leave, and Tax Credits for Sick-Leave.
If you need to adjust staffing levels, you should discuss this new legislation and current provisions of your employee manual with your employment attorney. It may be possible for employees to utilize paid-time off or paid family-leave while temporarily out of work. Moreover, staff who are temporarily laid off may be eligible for an unemployment claim through the Oregon Unemployment Division.
Finally, we recommend contacting your health insurance agent regarding specific coverages that may now be available for COVID-19 testing and related visits. Some insurance carriers are bolstering coverage by waiving out of pocket costs for COVID-19 testing, waiving copays, altering prescription drug options, and lowering deductibles for insureds.
Rest assured we are monitoring this developing situation closely. If any major changes occur, such as an office closure, we will update you immediately. In the meantime, we strongly encourage the use of electronic correspondence and virtual meetings for everyone’s health and safety.
Thank you for your patience and trust in Kernutt Stokes during these unusual circumstances. If you have any questions or further concerns, please do not hesitate to contact our office at (541) 687-1170.