Ep. 68: Paul Miller - Tax Implications and Planning due to COVID-19

Miller & Company, LLP:
https://www.cpafirmnyc.com/


FULL EPISODE TRANSCRIPTAdam: (00:06)
Welcome back to episode 68 of Count Me In. IMA's podcast about
all things affecting the accounting and finance world. I'm your
host, Adam Larson, and today we'll be listening to an important
conversation about the tax implications and guidelines for
individuals and small to midsize businesses following the various
government loans in response to the COVID-19  crisis. Paul
Miller is a CPA with over 30 years of experience in the
accounting industry. Keep listening to hear how he's been
advising his clients during these uncertain times. 


Mitch: (00:41)
All right, Paul, so to start off in general, you're an accountant
from the clients that you work with. What are some of the trends
that you've seen, whether it's individuals or businesses
following this COVID-19 crisis? 


Paul: (00:54)
Everyone wants to know how to or have obtained the Paychecks
Protection Program and what it means to them, how they have to
spend it. That's been the general focus of the last two weeks,
and it's very demanding. I've been engaging a lot with an
employment attorney because a lot of people are, they have to be
very careful that this is going to be scrutinized at some time,
and they have to be sure that they follow the first set of rules.
If they got the first trench of money and the second set of
rules, they got the second trench of money. So you have to
navigate them, and I'm trying to navigate it the latter 
because I think that's more conservative than the first set of
economic rules. So I've been referring clients to a SBA attorney
and I've been referring clients to a labor attorney, and
simultaneously we've constructed, and we're going to launch it
today, which is an spreadsheet that gives people, not an official
guideline but like a checker so you could keep track of where
you're at, where you're spending is at, where your head counts
at. That's, that's one of the most important things today that
most of my businesses are focused on. The people who actually
went out and got the money. I did have two or three clients
obtain the loans and return them for their business is not in
economic uncertainty anymore. 


Mitch: (02:23)
So, you know, particularly in the US we here are very familiar
with the stimulus package, you know, these government loans you
mentioned and as a result of that or you know, on top of that,
we've also recently seen the extension of the standard April 15th
tax deadline. So that's been pushed back and you know, with your
clients and everything you're working with these attorneys, what
does the tax deadline mean now for everybody? And really, I guess
you could start with the individual, or wherever direction you
want to go. But what can people expect from this extension? 


Paul: (02:57)
Well, it's definitely great. There's two schools of thought,
right? The people who all money and the people who are getting a
refund. The people who are getting a refund want to file. The
problem is if your return contains any paper documents, your
return is not getting processed. The IRS has made an announcement
that they're not processing manual returns. So, you know, if you
have any manual attachment or you have to file by paper, you're
not getting a refund. For people who owe, and you would have
voted on April 15th that extends everything till July 15th. So
there's no penalties, no interest. You go to July 15th. There are
States that have a broken from the federal government that a lot
of your audience needs to be aware of. For example, New Hampshire
is expecting their tax return on June 15th. DC expected their
first estimate on April 15th. So you have to pay attention to
where you file. You have to pay attention is the extension for
not only the federal, and has the state connected with the
federal and decided to align themselves and not break from, and
have you have a separate filing, puts you under 
distress. 


Mitch: (04:12)
And what about from the business side effects this small to
medium sized firms. Let's say you receive some of these
government loans. What does that mean for your taxes and your
filing and everything else you need to be aware of? 


Paul: (04:27)
Well, again, this is fluid, so it's changing every day, right? So
as of today, the money that you received, is  not taxable.
The expenses that you pay, are not deductible. And the difference
that you're not forgiven is a loan over 24 months at 
1%. 


Mitch: (04:52)
So many of our listeners are management accounts, right? They're
really focused on the operations, the strategy within the
business. With this kind of money, and there's different
stipulations as you've just outlined for us, what does that mean
to their day to day roles? You know, within the smaller business,
even if you're a sole proprietor, as far as the planning, overall
performance of the business, what are you recommending to your
clients? 


Paul: (05:19)
There's two schools of thought. You know, if you took the money,
the money was to bring your staff back. Okay. Again, it's fluid
so I'll blend it in. I've been telling people to preserve capital
because you don't know how long this is going to last. Access to
capital is very important. I'm explaining to people that it's
not.... what is your objective? I asked that question to the
employee. Is it too forgive the money and you're not worried
about your business, or your business is going to sustain and be
fine anyway. Or is your concern, I need the cash flow, because
another disconnect with this PPP program, the Paychecks
Protection Program is the government has not aligned themselves
with the States. So technically from the day you received the
money, you have eight weeks to spend it. That really doesn't line
up in a lot of States, because a lot of businesses may be a
different phase and not open. So you may ask people to come back
to work, and they may not want to come back to work. Technically,
and I'm not a lawyer, so I don't want to speak legally, but it's
my understanding you're supposed to write a letter to the
employee saying your job is available, we're willing to pay you,
and then you're supposed to notify unemployment and then put them
on family leave. This has been a big challenge for a lot of
people. 


Mitch: (06:44)
When should a business and individual really seek some additional
guidance like yourself here? I know, you've obviously dealt with
clients, we were talking about it just before we got on here, all
over the place, right? Is there a threshold or a point in time
where you say, or you've seen people are, you know, right in time
or maybe it's too late before they contact an accountant and
start to plan how to work through all these loans and the
different tax extensions and such, you know, when is that point
in time that you really need to get in touch with an
accountant? 


Paul: (07:22)
The minute you have the money. I think if you're not working with
your accountant or your accountant is not up on top of this,
you're in trouble. You're in trouble. You know, people, there's
so much information out there, we send out very limited emails in
bulk to have effectiveness so that when people get them, I'm
getting calls from other clients who have accountants and so I
just want to thank you for your email. I'm trying to give people
the guidance that I get, not only from what I read, I talk to
clients, I have clients who are lobbyists who are working on the
bill. They are working on the revision of the bill. I talked to
my friends, the SBA, just trying to get as much information as I
can to get my clients as informed as they possibly can. And I
think a client who does not seek counsel is, unless they took a
little bit of mo...