Many of us racing to get the last roll of toilet paper or bottle of hand-sanitizer (two items that have become a form of black-market currency) so we can weather the recent coronavirus pandemic are probably also wondering how we’re going to make the next mortgage payment, or rent payment.
In California, New York, Florida, Massachusetts, New Jersey and several other states, groupings of 10 or more are prohibited, and people who mass-gather are facing potential fines and even imprisonment. All told, 75% of the nation is under “stay at home” orders.
That doesn’t bode well for restaurants, cafes, bars, gyms, hair salons, and other “non-essential” businesses whose survival depends on throngs of people leaving their homes for something beyond groceries and medicine. To get through this, you need to be aware of every government benefit contained in the federal $2 trillion stimulus passed last month.
Whether that mortgage or rent payment can be met depends a lot on whether employers will have the necessary cash flow to meet payroll. The Internal Revenue Service, believe it or not, is cognizant of this worry among the nation’s taxpayers, and they’ve introduced a couple of different initiatives to assist employers during this unprecedented crisis.
IRS COVID-19 INITIATIVES
First, the IRS has extended deadlines for income tax returns and tax payments – and even payments on delinquent tax liabilities – until July 15th to give people time to pay other bills. It also allows time for social distancing to alleviate the pandemic (social distancing isn’t served well by having legions of taxpayers queuing up outside of tax-preparation offices).
Second, the IRS is offering an “Employee Retention Credit” for employers whose businesses are substantially impacted by the pandemic, and by the lockdown restrictions enacted by the various governors of the states most heavily impacted. Paid sick leave credits are also being offered.
The Employee Retention Credit doesn’t just offer relief down the road, but it allows employers to reduce their payroll tax liability immediately, provided they submit the appropriate paperwork with their quarterly form 941. If you can’t cover the credit when your 941 is due, there’s even an opportunity for an advance credit. If you’re behind on employment taxes, immediate relief is crucial. That’s why it’s a good idea to get in touch with a tax professional who can help you take advantage of the stimulus benefits and employer credits that the government is offering.
Third, the Small Business Administration is offering loans to businesses affected by the pandemic. During this crisis I’ve already pivoted from merely solving my client’s back-tax liabilities to shepherding some of them through the process of checking appropriate boxes to ensure their SBA application isn’t rejected. Make sure you hire a tax professional who is not afraid to put on some different hats and help you navigate this process. An Enrolled Agent or CPA might have some insight on specific tax matters, but only a tax attorney offers the broad range of knowledge and expertise in navigating multitudinous bureaucratic channels without pawning you off on another professional.
For those businesses that are not necessarily seeing the kinds of dramatic slowdowns in business that they’re witnessing in bars and restaurants, there is still a lot of pain to be had. If you’re a subcontractor on a construction site, for example, you’re probably waiting anxiously for payments that may now be delayed more than usual. That will definitely put a pinch on your ability to meet payroll and keep your employees on-site. While the Employee Retention Credit may help, it may still not be enough.
In that case, it doesn’t hurt to hire a tax professional early to help you deal with the fallout you may face when the tax man comes calling in late July. After July 15th – unless we’re told otherwise – the IRS levy floodgates will open, and you could find your bank account cleaned out right when you’re finally receiving those progress payments you desperately need to pay employees, cover fuel costs, and keep a roof over your own head. Don’t wait until the COVID-19 nightmare is over to find out that the tax honeymoon is over, too.
In the meantime, if you were already facing down the IRS Collections apparatus before the pandemic, you may be in the dark about how the bureaucracy is functioning.
The most significant hurdle you might be facing is an inability to contact anyone about your tax debt. That’s because the Automated Collections System (ACS) is not offering live telephone assistance at this time. In other words, if your tax debt is not assigned to a local Revenue Officer, you literally do not have the ability to speak to a human being on the phone (or by any other means) about your tax debt.
As a tax professional, I have worked around this problem by contacting Revenue Officers located close to the locale of a given taxpayer to see if I can track down updates on Offers in Compromise we’ve submitted, Appeals we’ve filed, or to determine if payments or tax returns have been received and processed. I have done this even if the given Revenue Officer I called is not assigned to that individual’s case. In most cases, they’ve been sympathetic to my client’s plight, and they’ve given me some information to help set my client at ease.
Meanwhile, Revenue Officers, Settlement Officers (IRS Appeals) and Offer in Compromise Specialists are continuing to work cases, and move the process along. There is no better time to resolve your tax debt than when the IRS is in a compassionate mood, because it puts most of the cards in our hands. I am finding that I can buy some significant time for my clients and me to prepare paperwork to put our best foot forward in getting a settlement.
In times like this, uncertainty can be the biggest source of anxiety. When I can get access to crucial information for my clients and give them some predictability to their lives, I can hear that anxiety leave their voice.