Important HB Financial Planning Updates


By Ross Bramwell


The reaction to the spread of the Coronavirus in the market and the economy has been both swift and significant. In response to this, we have seen several important actions from various levels of government and wanted to make sure you are aware of changes that may impact you. The items listed below are based on legislation such as The Families First Coronavirus Response Act (signed into law on March 18), The Coronavirus Aid Relief and Economic Security (CARES) Act (signed into law March 27), and other emergency actions not included in legislation.


NOTE: All information and recommendations below are based on our understanding as of March 31, 2020.


For Individuals

1) The Federal income tax return due date is automatically extended to July 15. Taxpayers can also defer any tax payments that would normally be due on April 15 until July 15 with no interest or penalties. This includes any payments you need to make with your 2019 return, as well as first quarter 2020 estimated payments. No extension form or other paperwork is needed to obtain an extension. Georgia has announced they will mirror the actions taken at the federal level, and most other states have also decided to the same or something similar. Please contact your client service team if you have questions about your specific state.

HB Recommendation: In general, if you expect to get a refund, consider filing your taxes as soon as possible to get your refund sooner. If you will owe additional taxes for 2019, consider delaying until July.

2) Required Minimum Distributions (RMDs) have been waived for retirement accounts. This waiver applies to Traditional IRAs, Inherited IRAs, SEP IRAs, and SIMPLE IRAs, as well as 401(k), 403(b), and Governmental 457(b) plans.

HB Recommendation: Consider delaying any distributions from retirement plans until next year unless one of the following situations applies to you: 1) you need additional cash to cover expenses, 2) you would like to make a Qualified Charitable Distribution, or 3) you would like to convert some of your IRA to a Roth IRA while values are low due to the market downturn.

3) Coronavirus Relief Payments are being sent to taxpayers in the near future. Payments will be $1,200 for individuals and $2,400 for married couples, plus $500 for each child under 17 years old claimed as a dependent. Payments will be phased out beginning at income limits of $75,000 for individual filers and $150,000 for joint filers. While the rebate is technically a 2020 tax credit, the IRS will initially base eligibility on your 2019 income tax return if you have filed it, otherwise they will use your 2018 return.

Importantly, if the amount you receive is less than you are entitled to based on your 2020 income, you can claim the shortfall when you file your 2020 return. On the other hand, if the amount you receive is more than you would be entitled to, no repayment is required.

HB Recommendation if you made less in 2019 than you did in 2018, and the difference would result in a higher relief payment, consider filing your 2019 return as soon as possible. This would be particularly important if your 2018 income would be above the phase out range and 2019 income was below the phaseout range. Benefits phase out if adjusted gross income (AGI) is over $150,000 for joint filers ($75,000 if single) and totally phase out by $198,000 for joint filers ($99,000 if single). Even if income is over these limits, you may still be eligible to receive $500 per child under 17.

4) Congress waived the 10% penalty on early retirement plan distributions made in 2020. Individuals under the age of 59 ½ who are impacted by the Coronavirus may withdraw up to $100,000 from retirement accounts without the normal penalty that would otherwise apply. Withdrawals can be made from IRAs, employer-sponsored retirement plans, or a combination both. Taxpayers who take these withdrawals will be able to choose whether to recontribute the withdrawn funds within three years of taking the withdrawal, or pay tax on the amount withdrawn (either way, no 10% penalty applies). Taxpayers who choose to pay tax on the amount withdrawn can opt to recognize all the income in 2020, or spread it evenly over three years (2020, 2021, and 2022).

5) Charitable contribution limitations are temporarily relaxed in two ways. Taxpayers who do not itemize deductions will be eligible to donate up to $300 to a qualified charity and have this count as an “above the line” reduction of adjusted gross income. In addition, the 60% of AGI limitation which normally applies to cash donations will be suspended for 2020 for cash contributions (except for donations to private foundations, donor advised funds, and supporting organizations). However, in order for taxpayers to be able to deduct over 50% of AGI in any year (including 2020), gifts will need to be almost entirely made in cash to public charities (excluding Donor Advised Funds). Taxpayers making gifts consisting of a combination of cash, non-cash, and securities are still limited to the old 20%, 30%, and 50% AGI limits.

6) Federal pandemic unemployment compensation of $600 per week is available to unemployed persons in addition to the amount of unemployment benefits they would normally receive from the state (typically about 62% of prior compensation, but not to exceed $380 per week).


For Businesses

7) The Paycheck Protection Program (PPP) enables business with fewer than 500 employees to obtain potentially forgivable loans administered by the Small Business Administration (SBA).

  • Loans can be up to 2½ times the qualifying payroll costs, capped at $10 million.
  • The intent of the PPP is to provide a short-term lending vehicle for employers to help keep their employees in place. Loan forgiveness eligibility will be based on two criteria:
    • Funds must be spent on covered expenses during an 8-week period beginning on the loan closing date.
    • Forgiveness will be reduced if borrowers lay off employees. The loan forgiveness is tied to number of employees at the end of the 8-week period divided by the number you had before.
  • Covered expenses include payroll (includes amounts paid to independent contractors, but excludes any compensation in excess of $100,000) and some benefits (group HC, retirement plan contributions, paid leave) as well as state/local tax on employees and rent.
  • Any amount forgiven is not included in taxable income.
  • Loans will be administered by 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions and will carry interest rates of less than 4% (if not forgiven).

HB Recommendation: Any business that might benefit from this program should begin the application process immediately. Going through your existing banking relationships will be most efficient in most cases, especially if you already have an SBA loan. Your bank may have their own website with details on how to apply. You can also get some additional information here:

8) The Employee Retention Credit is available for businesses (regardless of size) whose business is partially or fully suspended by orders from a governmental authority due to the Coronavirus, or who has substantial decline in revenue due to the virus.

  • This is a refundable payroll tax credit of up to 50% of qualified wages (including health insurance premiums) paid after March 12.
  • For eligible employers with 100 or fewer full-time employees, all employee wages paid qualify for the credit, whether the employer is open for business, the employees are working from home, or the business is subject to a shutdown order.
  • The qualified wages to be taken into account may not exceed $10,000 of compensation, including health benefits, paid to an eligible employee in a calendar quarter.
  • There are rules preventing “double dipping” with this credit and other available benefits.

9) Employers can defer payment of payroll taxes. This deferral enables employers (including the self-employed) to delay paying the employer portion of certain payroll taxes through the end of 2020. Half of the employer 6.2% social security tax for 2020 can be deferred to December 31, 2021, and the other half can be deferred to December 31, 2022.

10) Net Operating Loss (NOL) Rules have been relaxed. Previously, the ability of a taxpayer to use the taxpayer’s NOL carryforwards were subject to an annual limitation based on the taxpayer’s taxable-income and could not be carried back to reduce income in a prior tax year and obtain a refund for taxes paid in the earlier period. Legislation signed on March 27, 2020 amends the Code so that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years and used to offset taxable income during that five-year period, producing a refund that would be paid to the taxpayer. The legislation temporarily removes the percentage of taxable income limitation enacted as part of the 2017 Tax Cuts and Jobs Act (TCJA) and allows an NOL to fully offset the taxpayer’s taxable income. Although these changes will allow a more tax-efficient use of NOLs by taxpayers, they will also require that companies amend prior tax returns in order to capture the benefit of the NOL carryback.

11) Recent legislation also provides a technical correction to the 2017 Tax Cuts and Jobs Act (TCJA) for qualified improvement property. Because of an unintended technical glitch in the TCJA, “qualified improvement property” (certain leasehold improvements, restaurant property, and retail property improvements) did not qualify for 100% bonus depreciation. The CARES Act fixes that.

Disclosures: The information reflects Homrich Berg’s views, opinions and analyses as of March 31, 2020. The information is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any investment product. The information does not represent legal, tax, accounting or investment advice; recipients should consult their respective advisors regarding such matters. Certain of the information herein is based on third party sources believed to be reliable but which have not been independently verified. Past performance is not a guarantee or indicator of future results; inherent in any investment is the risk of loss.

Homrich Berg is a national independent wealth management firm that provides fiduciary, fee-only investment management and financial planning services, serving as the leader of the financial team for our clients.