SBA Disaster Assistance in Response to Coronavirus
The United States Small Business Association 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 COVID-19. The SBA will issue, under its own authority, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by President Trump, an Economic Injury Disaster Loan declaration.
Delaware has been deemed an eligible area for SBA disaster loans.
Key facts about an Economic Injury Disaster Loan
- The SBA will make loans available statewide to small businesses and private, non-profit organizations to help alleviate economic injury caused by the Coronavirus.
- 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.
- These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact.
- The interest rate is 3.75% for small businesses.
- The interest rate is 2.75% for non-profits.
- The SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case by case basis, based upon each borrower’s ability to repay.
- The SBA’s Economic Injury Disaster Loans are just one piece of the expanded focus of the federal government’s coordinated response.
If you are a small business in the hospitality field, please refer to the prior blog regarding the Hospitality Emergency Loan Program (HELP). HELP is designed to provide financial relief for restaurants, bars and other hospitality industry businesses that employ thousands of Delawareans.
Governor Carney Announces HELP Program to Support Delaware Small Businesses
Small businesses contribute and stimulate our economy by offering employment opportunities and bringing growth and innovation to the community. Unfortunately, a number of small businesses will be impacted by the Coronavirus (COVID-19) outbreak and the lingering after-effects on our economy.
As you are aware, Restaurants have been told to only provide takeout and delivery services to encourage social distancing and limit the amount of time individuals are spending in public spaces. Restaurants, bars, hotels and other hospitality-level businesses, and their employees, are among those most seriously impacted by COVID-19 in Delaware. Governor Carney recently announced the Hospitality Emergency Loan Program (HELP) to provide financial relief for restaurants, bars and other hospitality industry businesses that employ thousands of Delawareans.
The Division of Small Businesses will administer the HELP program, which works to provide businesses with no-interest loans that are capped at $10,000 per business per month to help small businesses cover rent, utilities and other unavoidable bills. The loans can not be used for personnel expenses and will have a 10-year term with payments deferred for nine months.
In order to be eligible for the HELP loans, the business must have been in operation for at least a year, have an annual revenue below $1.5 million and be in certain hospitality-connected industries as described above.
Assistance is also available for Delaware workers impacted by the Coronavirus. Governor Carney approved a number of changes to Delaware’s unemployment benefits program for the hospitality industry. The goal is for benefits to be available within a week of applying, part-time income may still be earned while collecting benefits as long as the worker can demonstrate their decreased hours and earnings, and the Department will not classify tipped workers as minimum wage earners as long as their tips are reported as wages.
Our office is here to assist you during this process. As a small business, we understand the impact of this situation and want to assist our clients throughout the process. Delawareans with questions about COVID-19 or their exposure risk can call the Division of Public Health Coronavirus Call Center at 1-866-408-1899 or 711 for individuals who are hearing impaired.
U.S. Treasury Department and IRS Deferring Tax Deadline and Payments Due to Covid-19 Outbreak
We are sure that many of you have been concerned about how the Coronavirus outbreak is affecting your tax situation. We ensure you that our staff is still working diligently to complete your tax returns and file a timely extension when necessary. The AICPA and the U.S. Treasury Department have issued guidance regarding how the President’s emergency declaration will affect your tax situation. To keep you abreast of the latest changes, we will be updating our blog on our website as well as our Facebook page regarding any updates related to this situation. While our office is remaining fully staffed, we are mindful of limiting the office traffic. If you wish to come in to speak with one of our staff members, please call our office ahead of time to make sure that our conference room is available.
Following President Donald Trump’s emergency declaration, the U.S. Treasury Department and Internal Revenue Service issued guidance allowing all individual and other non-corporate tax filers a 90-day reprieve to file and pay their tax liability typically due on April 15 until July 15, 2020, without penalties or interest. The guidance also allows corporate taxpayers a similar deferment of up to $10 million of federal income tax payments that would typically be due on April 15 until July 15, 2020 without penalties or interest. It is important to note that we will still be able to file an extension on July 15 for those taxpayers who have paid in their tax liability but have not filed their tax return yet. We are continuing to work as we normally would and ask that our clients continue to bring their tax documents in despite the extended deadline.
As for how each state is handling the filing deadline and payments due, this could change over time. The AICPA has released a chart with the different state decisions. The chart can be found here – https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/coronavirus-state-filing-relief.pdf. Delaware has not issued a deferment at this time and their offices remain open during the State of Emergency.
As always, thank you for your continued patronage. Please don’t hesitate to call us if you have any questions or concerns.
Delaware First-Time Homebuyer Credit
Did you know that Delaware offers a credit to first-time homebuyers and that the credit is taken at the federal level?
The Delaware State Housing Authority (create link to website) created the Delaware First-Time Homebuyer Tax Credit under authority granted by Congress in the 1984 Tax Reform Act as a means of providing housing assistance to low and moderate-income homebuyers.
The DE Tax Credit is a non-refundable federal income tax credit designed to assist persons of low to moderate-income to better afford homeownership. The DE Tax Credit holder is eligible to claim a portion of the annual interest paid on the mortgage as a special tax credit, not to exceed $2,000, during each year that they owe amounts on their mortgage loan and occupy the home as their principal residence.
With the DE Tax Credit, you can reduce your federal income tax liability by 35% of interest paid up to $2,000 for that year.
Applicants who receive a DE Tax Credit may be subject to a Recapture Tax if they sell the residence within nine years.
How to Apply
- The homebuyer must apply for the DE Tax Credit through a participating lender. The homebuyer should apply for the DE Tax Credit at the same time he or she makes a formal application for a mortgage loan.
- Homebuyer must purchase a home within Delaware.
- The applicant cannot have had an ownership interest in a Principal Residence at any time during the three-year period prior to the date the mortgage to which the DE Tax Credit relates is executed.
- Homebuyer’s household income and the purchase price must not exceed the maximum limits set by the Program.
- Homebuyer must intend to occupy the home as his or her primary residence.
- Homebuyer must use an approved lender and sign DE Tax Credit affidavit when they purchase their home.
Our office has experience with the Delaware First-Time Homebuyer Credit. Whether you are looking for more information regarding the Credit or need assistance with preparing your tax return utilizing the Credit, we are here to help. Please call our office today to set up an appointment.
We frequently get asked how long our individual and business clients should keep their records and copies of tax returns. Here is our advice:
Most of the time our individual clients ask us which records are important. Here is a list of the most common records you need to keep:
- Records of income received
- Expense items, especially work-related expenses
- Home improvement, sales, and refinances
- Investment purchases and sales information
- The tax basis of gifted and inherited property
- Specific uses of loan proceeds
- Significant, unreimbursed medical expenses
- Charitable contributions
- Interest and taxes paid
- Records of nondeductible IRA contributions
The tax law requires all businesses to keep records to support the gross income, deductions, and credits claimed on their income tax returns.
All businesses should have a permanent set of books which summarize individual deposits, disbursements, and items of adjustment. These records should be retained indefinitely. Permanent records also include those needed to prove the basis (cost) of depreciable assets.
Additionally, supporting documents may be needed to validate the journal entries if your returns are examined by the IRS. The general rule is that supporting documents should be retained at least until the statute of limitations for a tax year have passed.
Our recommended retention periods are:
- 7 years for: bank deposit slips, bank statements, cancelled or substitute checks, credit card receipts, employment tax returns, expense records, inventory records, paid invoices and tax returns
- Contracts, corporate stock records, and financial statements should be permanent records of the business.
- Depreciation schedules should be kept for the life of the asset plus 7 years
- Employee records should be kept for the period of employment plus 7 years
- Investment records should be kept for the ownership period plus 7 years
- Journal and general ledger documents should be kept for the life of the business plus 7 years
- Minutes of meetings should be kept for the life of the company plus 7 years
- Real estate records should be kept for the ownership period plus 7 years
- Home purchase and improvement records should be kept for the ownership period plus 7 years
For more information on record retaining, contact one of our staff members today.
On December 19, 2019, the President signed the SECURE Act. The SECURE Act stands for Setting Every Community Up for Retirement Enhancement and is a bill that includes significant provisions aimed at increasing access to tax-advantaged accounts and preventing older Americans from outliving their assets.
The most important points of the SECURE Act are:
- The Act will make it easier for small business owners to set up “safe harbor” retirement plans that are less expensive and easier to administer.
- Many part-time workers will be eligible to participate in an employer retirement plan.
- The Act pushes back the age at which retirement plan participants need to take RMDs from 70 1/2 to 72 and allows traditional IRA owners to keep making contributions indefinitely.
- The Act does mandate that most non-spouses inheriting IRAs take distributions that end up emptying the account in 10 years.
- The Act allows 401(k) plans to offer annuities.
- The Act will provide a maximum credit of $500 per year to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment.
- The Act will enable businesses to sign up part-time employees who work either 1,000 hours throughout the year or have three consecutive years with 500 hours of service.
- The Act will allow the use of tax-advantaged 529 plan accounts for qualified student loan repayments (up to $10,000 annually).
- The Act will permit penalty-free withdrawals of $5,000 from 401(k) accounts to defray the costs of having or adopting a child.
For more information regarding the SECURE Act, contact one of our knowledgeable staff members today.
TIN vs SSN vs ITIN vs EIN
For business owners all of these identification numbers can be confusing, so we are going to break them down for you.
TIN – Taxpayer Identification Number
A Taxpayer Identification Number is an identification number used by the Internal Revenue Service (IRS) in the administration of tax laws. A Social Security number is issued by the Social Security Administration (SSA) whereas all other TINs are issued by the IRS.
SSN – Social Security Number
A Social Security Number is for U.S. citizens and “authorized non-citizen residents.” An example of an authorized non-citizen resident would be a green card holder or a student in the U.S. on a Visa.
ITIN – Individual Taxpayer Identification Number
An Individual Taxpayer Identification Number is for a resident with a foreign status. This includes undocumented aliens and non-resident aliens that conduct business in the U.S. An ITIN is only available to resident and non-resident aliens who are NOT eligible for U.S. employment and need the identification number for other tax purposes. You can identify an ITIN because it is a 9-digit number, beginning with the number “9” and is formatted like a SSN.
EIN – Employer Identification Number
An Employer Identification Number is also known as a Federal Tax Identification Number, and is used to identify a business entity. Generally, businesses need an EIN.
Employers are required to have their employees complete an I-9, Employment Eligibility Verification Form, which attests to the individual’s eligibility to work. You will find a PDF or paper version I-9 Form here – https://www.uscis.gov/i-9
Employers can verify the information given on the I-9 form by using E-Verify, https://www.e-verify.gov/. While it is not mandatory for employers in Delaware to use E-Verify, it is a useful tool to assist employers with verifying the identity and authorization of individuals seeking employment.
Businesses using subcontractors are required to have the subcontractor complete a Form W-9 and obtain a copy of their business license and liability insurance upon hiring. You can obtain a pdf copy of the Form W-9 here – https://www.irs.gov/pub/irs-pdf/fw9.pdf
January 4, 2020
Dear Clients and Friends:
We hope 2019 was a happy and prosperous year for you. Now that it is January, it’s time to start thinking about gathering the information needed for the preparation of your taxes.
Last year, the provisions of the Tax Cuts and Jobs Act (TCJ) went into effect. Many taxpayers were caught unaware of the many deductions that changed as a result of the TCJ. The most significant change for individuals was the increase in the standard deduction and loss of the exemption deduction. Most taxpayers received smaller refunds then they were expecting and, in some cases, they even had to pay. Another new provision called the QBI deduction benefited some taxpayers who owned businesses, Partnerships and S-Corporations, but created confusion for owners of rental properties. Some rental properties qualified for the new OBI deduction and some didn’t. Guidance from the IRS has been sparse or nonexistent. It is still an area of the new law creating more questions than definitive answers. On December 20, 2019 the President signed a new budget that included some significant tax changes. Many of the tax provisions are effective retroactively back to January 1, 2018. As a result, we will be reviewing your 2018 return and may recommend you amend your 2018 return to take advantage of these provisions when appropriate.
The IRS is giving the Form W-4, Employees Withholding Allowance Certificate, a major overhaul beginning January 1. The previous form estimated your appropriate tax withholding using an allowance system.The new form will no longer use allowances but instead ask you to account for all income, deductions, credits and potential changes to provide a more accurate forecast for your tax withholdings. Please reach out to us if you need any assistance completing the form.
When you have gathered all your tax information, please call our office to set up an appointment to meet with us to go over your tax information. You may also drop off or mail your information to our office if you do not wish to have appointment. This year, we are utilizing a new portal which gives us the capability to securely share QuickBooks backups and other documents along with electronic copies of your tax returns. If you are interested in utilizing our portal, please let us know and we will initiate this by sending you an invitation to utilize the service.
We look forward to hearing from you soon and assisting you with your tax and financial obligations. As always, contact us if you have any questions.
Starkey & Company, PA
November 19, 2019
Dear Clients and Friends:
We hope you are enjoying the cooler weather of fall and are looking forward to the holidays ahead. With one year behind us of working with the new tax law, we have a better understanding of how the changes will impact your tax situation. Of course, tax law is always evolving so the tax year 2019 will bring its own set of changes.
Some of these changes are highlighted in the enclosed year-end edition of our newsletter. In the newsletter, you will find important information to consider before the end of 2019. For the tax year 2019, the alimony rules have changed. For the recently divorced, alimony is no longer a tax deduction for those paying it, nor is it income for those receiving it. Additionally, the threshold to deduct medical expenses as an itemized deduction has increased from 7.5 percent to 10 percent. The threshold increase means that less of your medical expenses will be deductible. A more positive tax change is that the portion of the Affordable Care Act that requires you to have health insurance or pay a penalty is suspended for now.
Tax planning is always important. The newsletter highlights some important items you should consider to ensure you are not missing something that could affect your tax situation. If you are 70 ½ or older, you will need to take your Required Minimum Distribution before December 31 if you haven’t already. You could face a 50% tax if you neglect to take the RMD before the end of the year. If you are a charitable contributor, you may want to consider making Qualified Charitable Distributions from your IRA to meet all or part of your Required Minimum Distribution. The charity must receive your donation by December 31 in order for you to apply it to your 2019 tax return. There are other last minute tips included in our newsletter that you could utilize to help your tax situation in these last few weeks of the year.
The IRS is giving the Form W-4, Employees Withholding Allowance Certificate, a major overhaul beginning January 1. The previous form estimated your appropriate tax withholding using an allowance system. The new form will no longer use allowances but instead ask you to account for all income, deductions, credits and potential changes to provide a more accurate forecast for your tax withholdings. Please reach out to us if you need any assistance completing the form.
For the first time in six years, contribution limits for retirement savings are increasing. Contribution maximums for 401(k) accounts and IRAs have increased by $500 for 2019. As you are aware, contributing the maximum amount allowable will maximize your tax savings and increase your future earnings potential. If you are 50 or older, remember to take advantage of the additional catch-up contribution amounts available.
In December, we will be attending more seminars to gain a better understanding of the tax law changes that went into effect in 2018. The IRS continues to issue regulations that clarify the new law and it is important for us to keep abreast of these changes so we can assist our clients with the best tax advice.
Please stop by our office to be introduced to our new CPA, Angel Hodges. Angel came on board in August and is excited to help us serve our clients and friends.
The months of November and December are a great time to evaluate your tax situation and review the options you have. If you have any concerns or questions, please don’t hesitate to call our office regarding the information contained in this letter or any questions you would like to address before the end of the year. We will be sending out our tax organizers in January. If you haven’t received one in the past but would like to, please call our office. As always, we appreciate your continued patronage and welcome the referrals of your friends and associates.
Starkey & Company, P.A.
FOR IMMEDIATE RELEASE SEPTEMBER 4, 2019
Starkey & Company, PA, a Certified Public Accounting Firm in Milford, Delaware is excited to announce the addition of Angela M. Hodges, CPA to the firm. Raised in Greenwood Delaware, Angel feels a connection to the local area and the businesses that serve our communities. During her 16 year career, Angel has enjoyed helping clients with tax preparation, business consulting, payroll education, and record organization systems. Angel will be assisting clients with their individual and business tax needs. If you call or stop in, please say hello and help us welcome Angel to the firm. We are accepting new clients and look forward to continuing our mission of assisting each client in reaching their financial goals.