Michael Gray, CPA's Tax and Business Insight

April 10, 2020

© 2020 by Michael C. Gray

ISSN 1539-395X

A monthly report to help you prepare for your financial future, keep more of what you earn by minimizing your taxes, and build an extraordinary business!

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Easter Decorations
No pictures of grandchildren during social isolation. I hope Janet's Easter decorations brighten your day!

Thoughts about the coronavirus quarantine.

We are witnesses to an historic event. Future generations will ask about our experiences. Might be a good time to keep a journal.

From my perspective, developments are happening at a record pace. Three relief Acts have been passed by Congress so far, and more are expected. Implementing them in a short time is a staggering task, and the banks, federal agencies and state agencies are being overwhelmed by a tidal wave of people that need help.

This truly is a world disaster. The human toll of sickness, death and isolation is terrible. Many businesses won't survive the shutdown. It looks like the social isolation order will be extended beyond May.

Please stay safe and be considerate of others. Young and old people are dying when exposed to the virus. If you're not a designated "essential worker," shelter at home in self-isolation.

This can also be an opportunity to use this time productively to develop ourselves and prepare for when the shutdown ends. Work on your relationships. Call or teleconference with friends and family members.

Yes, I agree. This stinks!

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Happy(?) Easter! Easter will be celebrated on April 12 this year.

Spring is already here, but I think of Easter as the beginning of spring. It's also a special family holiday for many people, as well as a religious holiday to think about making a fresh start, based on the resurrection of Jesus. It looks like we won't be able to have an in-person family gathering this year. Do your best to have a happy and safe holiday.

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Family celebrations.

April is a big birthday month for my family. My daughter and office manager, Dawn Siemer, her husband John and her daughter, Kara, all have April birthdays! Allen Le, Thi Nguyen's husband, is also celebrating his birthday this month. Happy Birthdays!

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Due date for certain tax returns and payments have been automatically extended.

Here is a link to a blog post that I wrote about the extensions, which you should have received. http://www.michaelgraycpa.com/posts/what-does-the-federal-tax-due-date-change-to-july-15-2020-cover/

There have been some updates since I sent it to you. Income tax returns and the related payments with an April 15, 2020 due date have been extended to July 15, 2020, and so have estimated tax payments with an April 15, 2020 due date. If you need more time in July, you should file a form at that time for an additional extension. See your tax advisor.

The Department of the Treasury has also announced that the due dates for operational reports and tax payments for wine, beer, distilled spirits, tobacco products, firearms, and ammunition excise taxes with a due date falling on or after March 1, 2020 through July 1, 2020 are extended for 90 days. Here's a link to the announcement. https://home.treasury.gov/news/press-releases/sm963

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Michael Gray, CPA FREE(!) webinar about coronavirus tax developments.

I will give a two-hour webinar presentation through CalCPA (California Society for Certified Public Accountants) at 11 a.m. Pacific Time on April 22, 2020. This event is FREE!! CPAs and attorneys can receive continuing education credit, but anyone can watch and learn!! I hope you can join me for this event. Here is a link to register. https://www.calcpa.org/events-and-programs/event-details?id=0b2fb1cf-0a5f-4de4-a3df-d336abba7632

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Remember the second California real estate tax payment is due April 10.

There is a nasty penalty for paying real estate taxes late, and the date slips past us because we're thinking about April 15. Why not make this payment now, so you don't forget it?

Only five of 58 California counties have extended the due date for this payment. Santa Clara County (where I live) has NOT. In the San Francisco Bay area, only San Francisco county and San Mateo County have extended the due date for the payment to May 4, 2020.

(San Jose Mercury News, April 8, 2020, p. B1, "Two Bay Area counties defer deadline for property taxes".)

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Due date for first quarter 2020 California sales tax report extended to July 31, 2020.

Here's a URL to the CDTFA's web page about the extension of the due date for filing state tax forms and payments to July 31, 2020, including the California sales and use tax form and payment for the first quarter 2020 for businesses with a tax liability of less than $1 million. Small business taxpayers with less than $5 million in taxable annual sales can set up a 12-month, interest-free payment plan for up to $50,000 of sales and use tax liability. https://www.cdtfa.ca.gov/services/covid19.htm.

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Personal property tax report is still due May 7.

The 2020 annual business personal property tax report, Form 571, became due on April 1, 2020. The form is late and a 10% late filing penalty applies when the form is submitted after May 7, 2020. The due date for this form hasn't been extended (yet), because Governor Newsom can't make an order relating to county taxes.

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IRS assistance curtailed.

The IRS has closed its Taxpayer Assistance Centers until further notice. Telephone assistance is very limited with waiting times even more frustrating than in the past. The IRS is processing tax returns, including issuing refunds, but isn't responding to very much correspondence.

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Has your business applied for a Paycheck Protection Program loan yet?

The CARES Act includes a mandate for the Small Business Administration (SBA) to administer a Paycheck Protection Program (PPP). Here is a link to a brief explanation of the program from the American Institute of Certified Public Accountants. https://www.aicpa.org/content/dam/aicpa/interestareas/privatecompaniespracticesection/qualityservicesdelivery/ussba/downloadabledocuments/paycheck-protection-plan-resource.pdf

You apply for the loan at a bank that makes SBA loans. The documentation requirements are VERY ABBREVIATED using payroll tax reports. When the loan is used to pay payroll costs, a portion of the principal amount is forgiven, TAX FREE!

The current interest rate is 1% with a two-year term.

This relief measure is a no-brainer, and every small business (generally has less than 500 employees) should apply.

Banks are being swamped with applications for these loans. If your bank can't currently process yours, please call me at 408-918-3161 for a referral to one that can.

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General comment about tax developments.

I have sent blog posts relating to some tax developments. You'll find them at www.michaelgraycpa.com. Right now, the flow of developments is like a fire hose. I can't cover everything in this newsletter. Please join the webinar that I'll give on April 22 for CalCPA that I mentioned above.

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Certain partnerships may file amended income tax returns.

Under the centralized audit regime for partnerships (including LLCs taxed as partnerships), partnerships usually can't file amended income tax returns, but must file administrative adjustment forms for corrections to their income tax returns. Effective for tax years beginning in 2018 and 2019, the IRS is permitting partnerships subject to the centralized audit regime to file amended income tax returns no later than September 30, 2020 when the partnership filed Form 1065 and furnished Schedules K-1 to its partners for partnership taxable years beginning in 2018 or 2019 before the revenue procedure was issued. See your tax advisor for details.

(Revenue Procedure 2020-23.)

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Electric vehicle rebates are taxable.

When rebates for electric vehicles come from a source other than the manufacturer (in that case, they are a purchase price adjustment), the rebate is taxable income. The IRS has privately ruled that rebates, nontax credits, and other incentives provided by state agencies are not purchase price reductions and are taxable income.

(Spidell's California Taxletter, April, 2020, p. 6, "Electric vehicle rebates are taxable." Private letter ruling for price adjustments, 9623035, 201027015, 199939021, 200142019, 200816027. Private letter ruling for state agency rebate, 201004005.)

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OTA allows "drop and swap" exchange.

The California Office of Tax Appeals (OTA) allowed a taxpayer to exchange a 10% tenant in common interest in real estate that was previously owned by a partnership in which the taxpayer had a 10% ownership interest.

(Appeal of Mitchell, 2018-OTA-210, petition for rehearing denied, 2020-OTA-001.)

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Please share your good experiences with Michael Gray, CPA.

As you know, more and more people are going to the internet to find information about service providers. We hope you will share some good words about experiences that you have had with our firm<. Some of the sites where you can share your experiences include yelp.com and siliconvalley.citysearch.com.

We use Angie's List to assess whether we're doing a good job keeping valued customers like you happy. Please visit AngiesList.com/Review/4258970 in order to grade our quality of work and customer service.

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Financial Insider Weekly past episodes

After eight years of production, I have discontinued producing new interviews for Financial Insider Weekly. Doing the show has been a rewarding experience and I consider back episodes to be my legacy of financial literacy education to our community. Back episodes available at https://www.youtube.com/user/financialinsiderweek.

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Michael Gray regrets he can no longer personally answer email questions. He will answer selected questions in this newsletter.

For your questions about dependent exemptions, see IRS Publication 501 at www.irs.gov.

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Visit our new article!

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Follow me on Social Media!

Want to see new episodes of Financial Insider Weekly as soon as they're posted on Youtube? Want to see Michael Gray's blog posts as soon as they're live? We post them (and more) on social media!

If you enjoy Twitter, please follow me at www.twitter.com/michaelgraycpa. I would especially appreciate retweets of our messages announcing episodes of Financial Insider Weekly.

I'm also on Facebook, LinkedIn, and Google+.

you can also follow me on other social media sites, Facebook, LinkedIn, and Google+.

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If you have employee stock options, have you subscribed to Michael Gray, CPA's Option Alert at no charge or obligation?

To learn more, visit stockoptionadvisors.com/subscribe.shtml

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Real estate investors, have you subscribed to Michael Gray, CPA's Real Estate Tax Letter at no charge or obligation?

For details, visit www.realestatetaxletter.com

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Check out my blog.

I have also started a blog at www.michaelgraycpa.com. Check it out!

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My daughter and her husband, Holly and Dan Baker, have a Southern French Restaurant at 23 Ross Common, Ross, California, about 15 minutes north of the Golden Gate Bridge. The name of the restaurant is Marché Aux Fleurs and their website address is marcheauxfleursrestaurant.com. For the best meal of your life, call 415-925-9200 for a reservation and give them a try! For directions, visit our website at www.taxtrimmers.com/directions.shtml.

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Michael Gray, CPA
2482 Wooding Ct.
San Jose, CA 95128
(408) 918-3162
FAX: (408) 938-0610
Hours: 8am - 5pm PDT Monday - Friday

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