As we continue to navigate through the impact of COVID-19, we want you to know that you and your family are our top priority. We pray that you continue to stay safe and healthy.

As the situation surrounding COVID‑19 rapidly evolves, we want to keep you informed of all the latest news updates and resources available to you.

Yesterday, Gov. Gavin Newsom announced that several major banks have agreed to delay foreclosures and offer mortgage relief to homeowners impacted by the coronavirus.

Wells Fargo, US Bank, Citi and JP Morgan Chase have all agreed to a 90-day waiver of payments for those that have been impacted by COVID-19. Bank of America has agreed to waive payments for 30 days. Many other credit unions and smaller banks have also agreed to the 90-day waiver as well.

The agreement does not eliminate debt for California Homeowners. Instead,  it gives them a 90-day grace period in which to make each month’s payment. Homeowners who want to use the grace period should contact their lender to make arrangements.

1. Last night, the Senate passed a 2 Trillion Dollar Coronavirus relief package, the largest economic rescue bill in US history. The House is expected to vote on the rescue bill tomorrow.

Key terms include:

A. Direct payments of $1,200 per adult and $500 per child for Americans earning up to $75,000 for single tax payers and $150,000 for married tax payers

B. Enhanced unemployment benefits (including gig-economy workers for the first time).

C. $367B of support for small businesses.

D. $500B of loans for larger companies and industries.

E. $150B of grants to state and local governments.

F. $130B for hospitals and healthcare systems.

Read more about these points here: nwppr.co/s185

G. Companies will have through the end of 2022 to pay their 2020 payroll taxes.
Read more here: https://www.cnbc.com/2020/03/26/coronavirus-stimulus-bill-includes-payroll-tax-delay-for-employers.html

2. Leaders from the G20 (a group of 20 major economies including the US) will meet today on the current state of the outbreak. Over 470k people have now been infected globally (up from 330k on Monday)
Read more here: nwppr.co/s286 .

3. Dow posts best 3-day gain since 1931 even as jobless claims surge to record 3.3 million. U.S. stocks rose Thursday even as data revealed a record 3.3 million Americans filed for unemployment benefits.
Read in USA TODAY: https://apple.news/Abh5iBfnzRTm4CPLsB4U0Ng

Philip L. Liberatore, CPA remains committed to providing you with the greatest sense of security and personalized care. Please contact us with any questions or concerns.

As our country continues to fight this pandemic, we want to encourage you with a message from Phil & Dana Liberatore.

We truly appreciate you and our thoughts and prayers are with you and your family.

Thank you for being the best part of Philip L. Liberatore, CPA.

Blessings,

Philip L. Liberatore, CPA
(562) 404-7996 | (714) 522-3337
Facsimile (562) 404-3126
[email protected]

The world finds itself in an unprecedented time filled with anxiety, stress, and concern. We hope that you and your family are healthy and safe.

Thank you for your flexibility and patience as we work together during the COVID-19 pandemic. As the situation surrounding COVID‑19 rapidly evolves, we want to assure you that Philip L. Liberatore, CPA is committed to providing you with seamless and uninterrupted service, as we continue to maintain our operations and protect our employees and communities.

Federal, State and some local governments have been responding to the evolving need for relief in this time, here are some important things that you should know:

IRS filing deadline: The Treasury Department has extended the April 15 deadline to file returns and to pay taxes to July 15.

California deadlines: The Franchise Tax Board has extended both the filing and payment deadline to July 15 for those impacted by COVID-19.

SBA Economic Injury Disaster Loan Program

If you need cash to offset lost revenue and help keep your business afloat, the programs below can help. The U.S. Small Business Administration (SBA) coronavirus resource page provides a list of relief programs, as well as offering guidance to small business owners during this crisis.

The SBA is administering a lending program for small businesses. The SBA is providing low-interest working capital loans of up to $2 million to small businesses and nonprofits affected by the coronavirus in presidential and SBA-declared disaster areas. The disaster assistance is made in the form of low-interest loans to businesses

These loans carry an interest rate of 3.75% for small businesses and 2.75% for nonprofits. Loan repayment terms vary by applicant, up to a maximum of 30 years.

How to Apply

• Apply online and select “Economic Injury” as the reason you’re seeking assistance.
• You’ll need to supply required supporting documentation that could include the business’s most recent tax returns, a personal financial statement and a schedule of liabilities that lists all your current debts.

• Call the SBA Disaster Assistance Customer Service Center at 1-800-659-2955 for help with your application.

Apply here: https://www.sba.gov/funding-programs/disaster-assistance

City of Los Angeles Small Business Emergency Microloan Program
Businesses and microenterprises in Los Angeles that are responsible for providing low-income jobs can get an emergency microloan of $5,000 to $20,000. Loans with repayment terms of six months to one year carry an interest rate of 0% and five-year loans have interest rates of 3% to 5%.

Who’s eligible: To get a loan, you must meet requirements including having “reasonable and responsible” individual credit history, committing to use the loan for working capital only and ensuring your business is located within the City of Los Angeles. If you own 20% or more of the business, you must guarantee the loan.

How to apply: 

Apply online and provide supporting documentation including business and personal tax returns, three months of bank statements and business and personal financial statements.

Apply here: https://ewddlacity.com/index.php/microloan-program
Los Angeles has also instituted a moratorium on evictions of businesses impacted by the coronavirus through March 31.

The city has also released a coronavirus resilience kit as a guide in dealing with the crisis, see it here: Coronavirus resilience kit

Mandates for Employers under the Families First Coronavirus Response Act
President Trump on Wednesday signed into law the Families First Coronavirus Response Act, the initial coronavirus relief bill. The new law requires small employers — those with fewer than 500 employees — to provide limited paid-leave benefits to employees who are affected by the coronavirus emergency. Small employers are given new tax credits and federal payroll-tax relief to pay for the new mandatory benefits.

To read the Families First Coronavirus Response Act, go to: www.congress.gov/bill/116th-congress/house-bill/6201.

We have a task force and leadership team who are working tirelessly to ensure that we are prepared for any contingency in serving you during these challenging times.

We want to encourage you to stay informed of things that you can do to keep yourself and your family safe using reliable sources. For your convenience, we have provided the links below, as well as the attached CDC informational sheet.

CDC COVID-19 Information page
WHO COVID-19 Information page

Philip L. Liberatore, CPA remains committed to providing you with seamless and uninterrupted service, feel free to reach out to us and we pray that you and your family are healthy and safe.

Philip L. Liberatore, CPA
(562) 404-7996 | (714) 522-3337
Facsimile (562) 404-3126
[email protected]

As our country continue to fight this pandemic, we will continue to update you with pertinent information that may impact you or your business.

As part of a growing effort to stem the financial pain from the coronavirus pandemic the IRS is extending the federal income tax filing deadline to July 15^th without incurring penalties or interest.

The IRS is still processing refunds, as a result, we are designated as an essential business and will remain open to provide you with your tax and accounting needs.

However, for your protection we kindly ask if you are experiencing any of the symptoms that have been associated with the COVID-19 virus, please allow us to render our services via conference call, email, mail or fax, or reschedule your appointment to a later date.

Please contact us with any questions or concerns. We truly appreciate you, our thoughts and prayers are with you and your family.

Thank you for being the best part of Philip L. Liberatore, CPA.

Blessings,

Philip L. Liberatore, CPA
(562) 404-7996 | (714) 522-3337
Facsimile (562) 404-3126
[email protected]

On January 2, 2020, The IRS announced the official date in which they will begin accepting individual income tax returns for the 2019 tax season. Tax season will officially commence on Monday, January 27th through April 15th.

With tax season beginning in less than a week, many Americans can expect to encounter several challenges when dealing with the IRS. Customer services continues to top the list at number one. The IRS has continued to place budget cuts. As a result, a decrease in the number of employees and an increased workload for current employees. In 2019 alone, the IRS received roughly 100 million calls and representatives only answered about 29% of them.

So how can you ensure that your returns are accepted quickly? Decide who will prepare your taxes. The ever-changing filing industry has made it possible for many untrained preparers who have little to no knowledge of tax law to enter the business. Unlike most preparers, Certified Public Accountants are required to pass exams and continue their education to renew their license each year.

“If you had major life events in 2019, such as starting a business, growth in business or a sale of a property, your taxes will be more complicated and you need to hire a reputable professional to prepare them”, Phil Liberatore, CPA says. “Don’t wait until the last minute to make that decision because you could end up overpaying your taxes.”

The tax preparation process can be stressful and burdensome, hiring a reputable CPA can relieve that weight off your shoulders. They would have the knowledge and experience to efficiently assist you with your current tax needs. “The IRS has established a more scrutinized approach to certain deductions that you might take, so If you plan on including dependents, claiming head of household, tuition and/or itemizing your deductions, make sure you provide the accurate records for each along with your income statements such as W-2’s or 1099’s that you have received for 2019.”

To ensure that you receive your refund in a timely manner, have your bank account information handy for a direct deposit.

There is an increase in tax scams like phone calls, emails and text messages from scammers pretending to be the IRS. “It is crucial to understand that the IRS will NEVER call you to collect payment over the phone, send you a text message or an email,” Phil Liberatore CPA says. “If you are a recipient of one of these scams, DO NOT respond and immediately report them to the IRS at [email protected].”

Phil Liberatore, The IRS Problem Solver, and his team are dedicated to serving all individuals and businesses by providing a strategic and customized approach to your specific tax needs by delivering an exceptional level of outstanding service.

Article Highlights:

• Appropriations Act of 2020
• History of the Deduction
• Other Education Expense Benefits
• Which Tax Break Provides the Best Benefit

On December 20, 2019, President Trump signed into law the Appropriations Act of 2020, which included a number of tax law changes, among them retroactive extension of certain tax provisions that expired after 2017 or were about to expire, several retirement and IRA plan modifications, and other changes that will, as a whole, impact a large portion of U.S. taxpayers. This article is one of a series of articles dealing with those changes and how they may affect you.

Looking back a few years, a taxpayer who had higher education expenses could generally take advantage of four* possible tax benefits: an itemized deduction if the education was job-related, a higher education tuition and expenses tax credit using either the American Opportunity Tax Credit (AOTC) or the Lifetime Learning Tax Credit (LLC), or an above-the-line deduction for higher education tuition and fees. However, the 2017 tax reforms did away with the itemized deduction through 2025, and Congress allowed the above-the-line deduction for higher education tuition and fees to expire at the end of 2017, leaving only the two education credits as options.

As part of the Appropriations Act of 2020, Congress has retroactively reinstated the above-the-line deduction for 2018 through 2020.

For purposes of the higher education expense deduction, “qualified tuition and related expenses” generally has the same definition, with certain exceptions, as the AOTC and LLC use for higher education expenses, including tuition and fees paid for an eligible student attending school at an eligible higher education institution. The deduction can be claimed for the taxpayer, the taxpayer’s spouse or a dependent of the taxpayer for attending an eligible higher education institution. The deduction, up to $2,000 or $4,000 depending on adjusted gross income (AGI), is not allowed for joint filers with an AGI of $160,000 or more ($80,000 for other filing statuses, although no credit is allowed for taxpayers using the married filing separate status). These phase-out amounts are not inflation-adjusted.

Thus, taxpayers now have three* optional tax benefits for post-secondary education expenses, and the rules related to each are different. Although one of the education tax credits will generally provide the greatest benefit, deciding which option is best can sometimes be complex. Each has a different AGI phase-out limitation, and the AOTC, besides only applying to the first 4 years of post-secondary education, has an additional half-time student requirement. The above-the-line deduction, on the other hand, reduces AGI, and because AGI often limits other benefits on a tax return, the effect of a lowered AGI on other elements of the return needs to be considered.

If you have questions related to the extended above-the-line education deduction, please give us a call.

*There is actually an additional possibility for self-employed individuals who have business-related education expenses. These costs may be claimed as a business expense in lieu of an education credit or the personal above-the-line deduction.

If you missed any of the earlier tax law change articles you can view those articles at the links below:

• Congress Allowing Higher Medical Deductions for 2019 and 2020
• Employer’s Pension Startup Credit Substantially Increased

Article Highlights:

• New California Legislation
• Employee or Independent Contractor
• Dynamex
• ABC Test
• Impact on Employers
• Impact on Workers
• Safe Harbor

The California legislature recently passed landmark labor legislation that essentially makes it very difficult, if not impossible, for a worker to be classified as an independent contractor (self-employed). Governor Newsom was quick to sign it into law, and it generally became effective on January 1, 2020. Many believe this legislation will suppress entrepreneurship and innovation.

Although this issue currently pertains to California, other smaller states are sure to follow, and this will ultimately become an issue for employers nationwide.

Background: The distinction between employee and independent contractor is governed by both federal law and state law. It has always been a complicated issue at both the federal and state levels, and the state and federal guidelines often differ. However, because of the significant payroll tax revenues involved, the states are generally the most aggressive in classifying workers as employees.

In the California case, the legislation was prompted by a labor case that was ultimately settled by the California Supreme Court. In that case, Dynamex Operations West, a trucking company, was treating its drivers as employees. It started classifying them as independent contractors to reduce costs, which caught the eye of the California Employment Development Department and ultimately reached the California Supreme Court. The court determined the drivers were employees and not independent contractors. However, in making that decision, the California Supreme Court adopted the so-called “ABC test” used by some other states to make their determination.

As a result of this decision, the California Legislature passed legislation (AB-5) codifying, with some exceptions, the ABC test for determining whether a worker is an independent contractor.

The ABC Test: Several states, including Massachusetts and New Jersey, have also adopted this so-called ABC test. The test is a broad means of determining a worker’s status as either an employee or a contractor by considering three factors. If a worker passes all three, then he or she is an independent contractor:

(A) That the worker is free from the hirer’s control and direction, in connection with the performance of the work, both under the contract for the performance of such work and in fact;

(B) That the worker performs work outside the usual course of the hiring entity’s business; and

(C) That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

The objective of the ABC test is to create a simpler, clearer test for determining whether a worker is an employee or an independent contractor. It presumes that a worker hired by an entity is an employee and places the burden on the employer to establish that the worker meets the definition of an independent contractor. But California’s AB-5 legislation did not just adopt the ABC test; it also added numerous and complicated exceptions to using the ABC test, which will surly enrich California labor attorneys.

Impacts on Employers: Employers who have been treating a worker as an independent contractor but must treat him or her as an employee must pay at least minimum wage and provide sick time, meal and rest periods, and health insurance. The employer will also have to pay worker’s compensation benefits and health insurance. On top of that, California has severe monetary penalties for misclassifying workers.

Impacts on Workers: The impacts on workers vary by occupation. Some workers incur significant amounts of expenses, and under the tax reform, they can no longer deduct employee business expenses on their tax returns. Thus, for example, an Uber driver who must provide the vehicle and pay for the gas, insurance and upkeep would be unable to deduct these substantial costs of providing the service and would have to pay taxes on his or her gross income.

Large Employers Are Fighting Back: Some larger employers are fighting back and challenging AB-5. Uber and Doordash have joined forces with some contract drivers to file a suit in the U.S. District Court for Central California alleging that AB-5 violates individuals’ constitutional rights and unfairly discriminates against technology platforms. The California Trucking Association (CTA) successfully obtained a temporary injunction against AB-5 for CTA drivers by contending that AB-5 is in direct conflict with several federal laws related to motor carriers. Regardless of the outcomes of these cases, they will be appealed, and the ultimate outcome is no doubt months, if not years, away.

This leaves few choices for smaller employers other than to carefully assess the provisions of AB-5 when treating a worker as an independent contractor. For those who are unsure, it might be wise to consult a labor attorney. Of course, the safe-harbor option is to treat all workers as employees until all of the legal challenges to AB-5 have run their course.

Article Highlight:

• Appropriations Act of 2020
• Medical AGI Limitations
• Sometimes Overlooked Deductions
• Deductible Health Insurance
• Above-the-Line Health Insurance Deduction for Self-Employed

On December 20, 2019, President Trump signed into law the Appropriations Act of 2020, which included a number of tax law changes, including extending certain tax provisions that expired after 2017 or were about to expire, a number of retirement and IRA plan modifications, and other changes that will impact a large portion of U.S. taxpayers as a whole. This article is one of a series of articles dealing with those changes and how they may affect you.

Medical expenses are deductible as an itemized deduction but only to the extent they exceed a percentage of a taxpayer’s adjusted gross income (AGI). For a long time, the percentage was 7.5%, which was then raised for under-age-65 taxpayers to 10% for 2013 through 2016 and then lowered back to 7.5% for all taxpayers for years 2017 and 2018. It was scheduled to go back up to 10% starting with tax year 2019. However, with the passage of the Appropriations Act of 2020, Congress reduced that percentage back to 7.5% for tax years 2019 and 2020, allowing more taxpayers to qualify for the medical deduction.

However, keep in mind that the total of the itemized deductions must exceed the standard deduction before the itemized deductions will provide a tax break. So even if your medical deductions exceed the 7.5% floor, this doesn’t necessarily mean you will have a tax benefit from them.

To help you maximize your medical deductions, the following are some medical expenses other than those for doctors, dentists, hospitals, and prescriptions that are sometimes overlooked:

• Adult Diapers
• Acupuncture
• Birth Control
• Chiropractor Visits
• Drug-Addiction Treatment
• Fertility Enhancement Therapy
• Gender Identity Disorder Treatments
• Guide Dog Expenses
• Health Insurance Premiums* – Including the premiums you pay for coverage for yourself, your dependents, and your spouse, if applicable, for the following types of plans:
  o Health Care and Hospitalization Insurance
  o Long-Term Care Insurance (but limited based upon age)
  o Medicare B
  o Medicare C (aka Medicare Advantage Plans)
  o Medicare D
  o Dental Insurance
  o Vision Insurance
  o Premiums Paid through a Government Marketplace, Net of the Premium Tax Credit

  *However, premiums paid on your or your family’s behalf by your employer aren’t deductible because their cost is not included in your wage income. If you pay premiums for coverage under your employer’s insurance plan through a “cafeteria” plan, those premiums aren’t deductible either because they are paid with pre-tax dollars.

• Home Modifications for Disabled Individuals
• Lactation Expenses
• Learning Disability Special Education
• Nursing Home Costs
• Nursing Services (which need not be performed by a nurse)
• Pregnancy Tests
• Smoking-Cessation Programs

This is not an all-inclusive list, so please call with questions related to expenses that you think might qualify as a medical expense.

As a tax tip, if you are self-employed, you may be able to deduct 100% (no 7.5%-of-AGI reduction) of the cost of medical insurance without itemizing your deductions. This above-the-line deduction is limited to your net profits from self-employment. If you are a partner who performs services in that capacity and the partnership pays health insurance premiums on your behalf, those premiums are treated as guaranteed payments that are deductible by the partnership and includible in your gross income. In turn, you may deduct the cost of the premiums as an above-the-line deduction under the rules discussed in this article.

No above-the-line deduction is permitted when the self-employed individual is eligible to participate in a “subsidized” health plan maintained by an employer of the taxpayer, the taxpayer’s spouse, any dependent, or any child of the taxpayer who hasn’t attained age 27 as of the end of the tax year. This rule is separately applied to plans that provide coverage for long-term care services. Thus, an individual who is eligible for employer-subsidized health insurance may still deduct long-term care insurance premiums, as long as he or she isn’t eligible for employer-subsidized long-term care insurance. In addition, for the insurance to be treated as subsidized, 50% or more of the premium must be paid by the employer.

This above-the-line deduction is also available to more-than-2% S corporation shareholders. For purposes of the income limitation, the shareholder’s wages from the S corporation are treated as his or her earned income.

The above-the-line deduction includes the premiums you pay for health coverage for yourself, your dependents, and your spouse, if applicable, for the types of plans listed under “Health Insurance Premiums” above.

If you have any questions related to medical itemized deductions or the self-employed above-the-line deduction for health insurance premiums, please give us a call at 562-404-7996.

Article Highlights:

• Standard Mileage Rates for 2020
• Business, Charitable, Medical and Moving Rates
• Important Considerations for 2020
• Switching between the Actual Expense and Standard Mileage Rate Methods
• Employer Reimbursements
• Employee Deductions Suspended
• Special Allowances for SUVs

The Internal Revenue Service (IRS) computes standard mileage rates for business, medical and moving each year, based on a number of factors, to determine the standard mileage rates for the following year.

As it does annually around the end of the year, the IRS has announced the 2020 optional standard mileage rates. Thus, beginning on Jan. 1, 2020, the standard mileage rates for the use of a car (or a van, pickup or panel truck) are:

• 57.5 cents per mile for business miles driven (including a 27-cent-per-mile allocation for depreciation). This is down from 58 cents in 2019;
• 17 cents per mile driven for medical or moving* purposes. This is down from 20 cents in 2019; and
• 14 cents per mile driven in service of charitable organizations.

The business standard mileage rate is based on an annual study of the fixed and variable costs of operating an automobile. The rate for medical and moving purposes is based on the variable costs determined by the same study. The rate for using an automobile while performing services for a charitable organization is statutorily set (it can only be changed by Congressional action) and has been 14 cents per mile for 22 years).

Important Consideration: The 2020 rates take into account 2019 fuel costs. Based on the potential for substantially higher gas prices in 2020, it may be appropriate to consider switching to the actual expense method for 2020 or at least to keep track of the actual expenses, including fuel costs, repairs and maintenance, so that the option is available for 2020.

Taxpayers always have the choice of calculating the actual costs of using their vehicle for business rather than using the standard mileage rates. In addition to the potential for higher fuel prices, the extension and expansion of the bonus depreciation as well as increased depreciation limitations for passenger autos in the Tax Cuts and Jobs Act may make using the actual expense method worthwhile during the first year when a vehicle is placed into business service.

However, the standard mileage rates cannot be used if you used the actual method (using Section 179, bonus depreciation and/or MACRS depreciation) in previous years. This rule is applied on a vehicle-by-vehicle basis. In addition, the business standard mileage rate cannot be used for any vehicle used for hire or for more than four vehicles simultaneously.

Employer Reimbursement – When employers reimburse employees for business-related car expenses using the standard mileage allowance method for each substantiated employment-connected business mile, the reimbursement is tax-free if the employee substantiates to the employer the time, place, mileage and purpose of the employment-connected business travel, and returns any excess payment to the employer. This reimbursement arrangement is referred to as an accountable plan.

The Tax Cuts and Jobs Act eliminated employee business expenses as an itemized deduction, effective for 2018 through 2025. Therefore, during this period employees may not take a deduction on their federal returns for unreimbursed employment-related use of their autos, light trucks or vans. Since they no longer get any tax benefit, employees with significant job-related auto usage should ask their employers to set up an accountable plan to reimburse them.

Members of a reserve component of the U.S. Armed Forces, state and local government officials paid on a fee basis and certain performing artists continue to be allowed to deduct unreimbursed employee travel expenses, including the business standard mileage rate, because they are deductible from gross income rather than as an itemized deduction. Self-employed individuals continue to be able to deduct use of their personal vehicle for business purposes as an expense of the business if properly substantiated.

Faster Write-Offs for Heavy Sport Utility Vehicles (SUVs) – Many of today’s SUVs weigh more than 6,000 pounds and are therefore not subject to the limit rules on luxury auto depreciation. Taxpayers who purchase a heavy SUV and put it into business use in 2020 can utilize both the Section 179 expense deduction, up to a maximum for 2020 of $25,900, and the bonus depreciation (if the Section 179 deduction is claimed, it must be applied before the bonus depreciation) to produce a sizable first-year tax deduction. However, the vehicle cannot exceed a gross unloaded vehicle weight of 14,000 pounds. Caution: Business autos are 5-year class property. If the taxpayer subsequently disposes of the vehicle before the end of the 5-year period, as many do, a portion of the Section 179 expense deduction will be recaptured and must be added back to the taxpayer’s income (self-employment income for self-employed individuals). The future ramifications of deducting all or a significant portion of the vehicle’s cost using Section 179 should be considered. Generally, for vehicles weighing more than 6,000 pounds, using 100% bonus depreciation is the better option.

If you have questions related to the best methods of deducting the business use of your vehicle or the documentation required, please give us a call at 562-404-7996.