Category: Blog

How Will U.S. Employment Figures, Coronavirus Impact Job Markets?

5 min read

How Will U.S. Employment Figures, Coronavirus Impact Job Markets?With the CARES Act (Coronavirus Aid, Relief and Economic Security) signed into law by President Trump on March 27, this set into motion major initiatives by the U.S. government in response to the coronavirus’ economic impact. This Act provides $2 trillion in financial aid to the nation, in big part to soften the impact of the coronavirus’ hit to the country’s unemployment numbers.

For the week ending April 11, seasonally adjusted jobless claims came in at 5,245,000, a drop of 1,370,000 from the April 9 revised level of 6,615,000, according to an April 16 news release from the U.S. Department of Labor.

For the week ending April 18, seasonally adjusted initial claims were reported at 4,427,000, or 810,000 fewer than the prior week’s revised level, according to an April 23 news release from the U.S. Department of Labor. April 11’s adjusted level was lowered by 8,000 to 5,237,000, down from the original 5,245,000 figure.

Taking into account the cumulative unemployment claims over the past five weeks, there have been approximately 26 million workers in the United States put out of work due to the coronavirus and the resulting economic downturn. With the employment picture facing a grim reality, the CARES Act provides many relief programs.

One part of the law provides financial relief for individuals, families, and businesses. Highlights include direct payments of $1,200 for individuals making up to $75,000, $112,000 for heads of households, and $150,000 for joint filers. Enhanced unemployment benefits also are included in the law to help those who are laid off, including contract workers.

Another way the CARES Act helps stimulate the economy is through the Paycheck Protection Program. Funded at $349 billion, this SBA-backed loan is designed to offer financial help to struggling businesses impacted by the coronavirus. A key aspect of this program is to give businesses enough money to pay at least eight weeks of payroll and related expenses to increase their chances of staying in business.

Factors for eligibility to apply for PPP loans include companies that are able to demonstrate their business has been reduced by Covid-19 and have less than 500 workers on their PPP application. Examples of eligible businesses/individuals include independently-owned franchises, contractors/self-employed individuals, tribal businesses, hotels, and restaurants. Eligible companies are able to have their loans forgiven, up to $10 million if they are borrowed from an SBA-approved 7(a) lender.  

According to the U.S. Department of the Treasury, loans may be forgivable if the following criteria are met. No less than 75 percent of the loan is to be used for payroll costs, at which payroll costs on a 12-month basis are maxed out at $100k. Other allowable loan funds, up to 25 percent of the loan proceeds, can be used to pay for rent, utilities or mortgage interest. However, if full-time staffing is reduced or if the salary is reduced by more than 25 percent for full-time employees making less than $100k per 2019’s salary, PPP borrowers may owe money back. However, if any disqualifying changes that occurred between Feb. 15 and April 16 are made whole by June 30, the loans can become re-eligible to be forgiven.

Economic Injury Disaster Loan

Another significant relief program the CARES Act provides in the way of economic relief is through the Economic Injury Disaster Loans program (EIDL). The EIDL program is generally for businesses with 500 or fewer employees, whereby the company can apply to borrow as much as $200k. Loans up to $25,000 require no collateral, and requests above $25,000 require only business assets to serve as collateral.

One significant provision of the EIDL is what’s referred to as the Economic Injury Disaster Loan Emergency Advance. This enables applicants of the EIDL to receive as much as $10,000 in relief that’s not required to be paid back, creating a de facto grant, per the U.S. Small Business Administration. Businesses can receive as much as $1,000 per employee, up to $10,000, based on the number of workers a business employs. Depending on how extensive a business has suffered economically, a maximum of $2 million can be borrowed by a business through EIDLs and/or physical disaster loans, according to the U.S. Small Business Administration.

With these and other domestic government stimulus programs, coupled with other countries implementing their own stimulus programs, it’s worth noting different potential outcomes depending on the pandemic’s severity and health mitigation factors. According to the Organization for Economic Cooperation and Development, the following are some forecasts on how Covid-19 is likely to impact the global economy:

  • While the coronavirus data from China has been questioned, the OECD says that assuming the infections from the coronavirus peak during Q1 in China, the world’s economy is expected to grow less than projected for 2020, dropping to 2.4 percent from 2.9 percent. And while China’s economy is expected to drop below 5 percent in 2020, the country is expected to exceed 6 percent growth in 2021.
  • The OECD also noted that with a pandemic lingering longer and with greater intensity throughout the Asia-Pacific region, North America and Europe, it projects worldwide growth to drop to 1.5 percent in 2020.

Only time will determine how much of an impact the coronavirus will have on global markets. Governments around the world will continue to do their part to mitigate negative impacts.

Be Right About Free Money: Potential Legal Risks of the Paycheck Protection Loan Program

3 min read

Paycheck Protection Loan ProgramOne of the most important provisions of the CARES Act for small businesses is called the Paycheck Protection Program (PPP). The PPP is a $349 billion program designed to assist small businesses (fewer than 500 employees) facing financial difficulties as a result of the COVID-19 pandemic through specifically structured loans.

The loan program offers funding to cover payroll for up to eight weeks, with the intent of stemming from unemployment. These loans can be forgiven and essentially become a grant if your business meets certain criteria with no need to repay the money.

As the old saying goes, there’s no such thing as a free lunch – or in this case, free government money. There are potential legal risks that could jeopardize the forgivability of the loan.

Conditional Grants

Another way to look at the PPP loans is as conditional grants. The U.S. Small Business Administration (SBA) notes that loans will be forgiven in full if the funds are used for appropriate costs. Covered costs include payroll, mortgage interest, rent, and utilities. Further, the payroll costs must account for at least 75 percent of the loan proceeds used. The employer needs to maintain or quickly rehire employees and maintain wage and salary levels in order to receive 100 percent forgiveness.

The Devil’s in the Certification Details

The loan application process requires certain certifications. Businesses that are still operating need to certify that the current economic uncertainty makes the loan necessary to keep operations going.

If this seems vague, it’s because it is. There probably isn’t a small business out there that is not facing significant uncertainty in the current climate. The problem is that the certification standard the PPP lays out is extremely subjective. As a result, with the encouragement for businesses to apply, many may do so under the impression that they will have their loan fully forgiven to only run into trouble later if they don’t meet the certification standards.

Legal Risks

By not providing any definition about the nature or extent of the required impact to operations that would make the loan request “necessary to support ongoing operations,” the SBA is making both applicants and lenders apprehensive.

Some law firms are even warning clients via their newsletters about potential legal exposure under the False Claims Act (FCA). Legal counsels are cautioning that a misrepresentation included in an application could result in FCA liability. Businesses must navigate between being as aggressive as possible to bolster their application while staying within the rules of the program.

More Certification Guidance is Needed

The government agencies involved need to provide more clear and objective guidance on the conditions needed to meet the certification requirements of the loan application process. Without clear and definable guidance as to what constitutes facing economic uncertainty, small businesses could face problems in the future.

Objective criteria such as a percentage of revenue decline or order capacity would provide a rather bright-line test and give both guidance to businesses and confidence in the process. 

Prospects for Investing in the 2020s

4 min read

Investing in the 2020The third decade of the 21st century started out with a vigorous economy, record low unemployment levels, and benign inflation. But late in the first quarter over the span of two weeks, investors faced the fastest stock market correction in history.

With an unpredictable assailant like a global virus, short-term actions by Congress and the Federal Reserve will need time to see if they are effective. Ultimately, the fate of the U.S. and global economies, which in turn will impact the investment markets, is dependent on how long the COVID-19 outbreak continues and if there is a second wave. Clearly, both supply and demand have been dramatically reduced, with a ripple effect on companies, workers, consumers, and investors. Once the crisis has passed, we will learn which sectors, industries, and individual companies remain financially viable with a business model built to sustain this unprecedented economic fallout.

Amid this backdrop, wealth managers must read the tea leaves to anticipate what the investment markets will look like post-coronavirus. The challenge is how to best position assets to take advantage of future gains without giving up ground now and turning paper losses into permanent shortfalls.

For individual investors, it comes down to what you want to accomplish in the next decade – or what your money can accomplish for you. Are you nearing retirement? Will you remain in the accumulation phase, wherein you can afford to take on market risk? Are you just starting out, and are you risk-averse due to the two major economic declines experienced in your relatively short life, or are you prepared to invest in future prospects – wherever they may lie?

Anyone already in or nearing retirement would do well to invest for a steady stream of income. While the DJIA initially took a beating, many blue-chip stalwarts continue to grow and payout dividends as they have long term, through thick and thin. However, pay attention here, as there are some long-standing dividend-paying companies that are starting to suspend or substantially cut dividend payments.

Growth-oriented investors would do well to look at companies that were well-positioned to survive the pandemic, because they may well represent commerce of the future. This includes the well-established FAANG stocks (Facebook, Apple, Amazon, Netflix, and Google), which have become masters of fast and reliable delivery of online content and physical delivery of essential and discretionary products. Unfortunately, the stock prices of these companies have soared in recent years, so it’s time to consider what the “next big thing” in this arena will look like and who are the frontrunners.

With that in mind, take a look at 2020 demographics. Millennials recently surpassed Baby Boomers as the largest generation in the United States, but they aren’t expected to hold this mantle for long. Generation Z/Centennials are on track to enter the workforce in higher numbers during the next decade. This is a generation that has never known life without cell phones and the internet, so expect the technology sector to ramp up not just with consumer innovations, but with ways to help other industries enhance data management, blockchain supply chains, and artificial intelligence – which might become as omnipresent as retail strip malls.

In a post-pandemic world, employers seeking to strengthen their business models might come to embrace the idea of foregoing healthcare and other expensive benefits offered to employees. A subsequent world of higher pay and more public options could spur the growth of entrepreneurship and new small businesses. By taking advantage of remote employees, low overhead expenses, and emerging technologies, smaller companies or conglomerates might be able to compete with the likes of Amazon in both domestic and global markets.

As a short-term precaution, consider how you might defend your portfolio against the possibility of inflation as we stumble out of the pandemic economy. The federal government’s generous stimulus packages combined with a continued easing of monetary policy by the Federal Reserve could lead the United States to higher inflation. This could be exacerbated by the recent shutdown of production in many industries; the initial low supply of products also might contribute to price escalation. During this interim, investors may want to consider investing in commodities and Treasury Inflation-Protected Securities for inflation protection.

As always, it’s best to seek the advice of a professional in this ever-changing environment.

Answers to Common Questions About the Coronavirus Stimulus Checks

5 min read

Stimulus Checks Facts, Stimulus Checks FAQs

So many checks and even more questions! There is a lot of confusion out there over the details surrounding the coronavirus stimulus checks, so below we’ve compiled a list of frequently asked questions and answers.

  • How much will the check be for? Each adult will receive $1,200; if you filed as married jointly, you’ll get $2,400; with an extra $500 for each qualifying child.
  • How to check the status of my Stimulus Check? 

https://www.irs.gov/coronavirus/get-my-payment

  • What if I didn’t make any money last year or I was on a reduced income? It doesn’t matter. There is no minimum income threshold you need to pass to qualify. However, if you did not file an income tax return for the 2018 or 2019 tax year, you’ll need to provide your information at the following link so the IRS knows where to send your stimulus money:

https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

  • I heard that if I make too much money, I won’t receive a check? On the other end of the spectrum, there are income limits based on your tax filing status. If you are single and made more than $75k, married and earned more than $150k, or a head of household with more than $112.5k in adjusted gross income, your stimulus check amount will start to phase-out, and many above these incomes will not receive anything.
  • My income is under the threshold in 2018 but over in 2019. What are my options? In this case, you can wait to file your 2019 return and qualify to receive the check based on your 2018 tax return. This is easy to do this year given the automatic extensions granted for federal income tax returns.

  • In 2020, my income is going to be higher than in 2019 and put me above the thresholds. Will I have to pay back my stimulus check? No, there is no claw-back provision in the law, so you won’t have to pay it back.
  • Is my check taxable? No, it is not taxable income.

  • I didn’t need to file a tax return in 2018 or 2019 because my only source of income is Social Security Disability Income (SSDI) and my income was limited; do I have to file a return now to get a check? SSDI recipients don’t need to file a return or take additional action. Their checks will be direct deposited or sent via mail – the same way they normally receive their benefits.
  • I have a child in college who I claim as a dependent. Will either of us get a check? If your child is 18 years or older at the end of the tax year, you aren’t eligible for the $500 check due to his age – even if you claim him as a dependent. Your child likewise won’t get his own check since you claim him as a dependent – even if he works. There is a proposal to change this, but nothing firm currently.
  • What about a senior parent whom I claim as a dependent? The same rules as above apply, so no. In order to get the $500 check per dependent, the person must both qualify as a dependent and meet the age requirement. Similarly, the senior parent cannot get his own check since you are claiming him as a dependent.
  • We had a child in 2020. Will I receive a check for this child? Most likely not since the IRS would have no record of your new qualifying dependent based on your 2019 return.
  • How soon will I receive my check? The government is planning on processing and sending out checks as soon as possible. Based on what the U.S. Treasury has said, as soon as possible means starting to process taxpayer information in April. How soon you’ll receive your money after this depends on whether you’ve set up direct deposit with the government in the current or previous year tax filings. For taxpayers who don’t have direct deposit set up, go here to input your information so the IRS knows where to send your stimulus money:

https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

  • I heard I can get my stimulus check faster if I pay to have it processed. Is this true? No, and beware because this is a scam. There is no legitimate way to skip to the head of the line.
  • What happens if I owe the IRS back taxes? The stimulus checks are generally exempt from seizure for existing tax debts. This includes if you are on an installment payment plan to settle a tax bill. The one exception to this possibly could be for child support in arrears. 

IRS Source for Non-Filer/Direct Deposit Information:

https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

New to Remote Working? Here are Some Tips for Staying Productive

4 min read

Remote Working, Work From Home, RDP WorkThe COVID-19 pandemic has seen a rise in remote working. Even organizations that have always been against it have their employees working from home. With some areas experiencing complete lockdowns, this means you find yourself in an unfamiliar work environment.

Remote working means that you have to work outside a traditional office environment. Although some people already have experience working remotely, there are a good number of workers who might have a hard time getting anything done from home. This is particularly true for those  with a family that includes young children.

But with the current epidemic, many don’t have much choice other than to agree with the concept that work doesn’t have to be done in a specific place to be performed successfully. Your employer may have already set a work-at-home policy, but how do you ensure you are productive? Here are a few tips to help you retain your employment.

Create a Workspace

If you don’t already have a home office, then it’s time to be resourceful and create a workspace. Unfortunately, since this is unplanned, you might not have an ergonomically friendly work area. This means you could hurt yourself while working; for example, sitting too long in an uncomfortable position. But think outside the box and utilize what you have, such as using pillows to create a comfortable posture. Also, ensure you take frequent breaks.

Don’t forget to choose a space with minimal distractions.

Establish a Routine and Stick to It

The fact that you no longer have to wake up early to get to the office might tempt you to sleep more. It is important to have a work mindset. To achieve a sense of normalcy that you were used to in the office, you need to plan a schedule for your work hours and stick to it. Failure to create a work routine may find you wasting work hours.

Remember, if you live with family or friends, let them know your work hours and have them respect that.

Be Flexible

It’s important that you be flexible, especially if you have kids in the house. This makes it hard to work a 9 to 5 job. A lockdown means you probably do not have someone to come over and help with chores or childcare. The way out is to experiment with different plans. Try working late at night, early in the morning or when your children take a nap.

Use Time Management Apps

Your employer already set goals and roles for you. But achieving them while working at home is challenging. Use time management apps to track the amount spent working on tasks. Such apps, whether web or mobile-based, can help minimize distractions.

Avoid Social Media

There is so much information on the coronavirus pandemic and there is a need to stay updated. But this can turn out to be a distraction that causes you to miss out on work time. Set a time to check such updates and stick to it.

Informal Communication Groups

Apart from official online meetings or discussions, it’s good to keep in touch with colleagues. If your company did not set up such meetings, then you should. There are many communication tools available today that you can use. Keep in mind, isolation can lead to depression, especially if you live alone and are used to an active social life.

Work-Life Balance

Don’t spend all of your day working. Set daily tasks and stick with them. Set a time to exercise; it’s good for productivity and helps you avoid getting sore, which will generally affect your health. Log off from your work and do a different activity.

Use Secure Connections

Cybercriminals are now more likely to target remote workers. There are already reported cases of coronavirus ransomware and malware. This not only affects your work but can put your company at risk. Ensure that you use a secure wifi and virtual private network (VPN). Most importantly, don’t ignore your company’s security policies just because you are working from home.

Final Thoughts

There is a lot of debate surrounding remote working. Employers may see the benefit of remote working and adopt it more. Whether this will be the case, only time will tell. But we should brace for unexpected changes in the workplace when things finally get back to normal.

The most important thing right now is to keep in mind that your productivity will depend on your self-discipline, time-management skills, technology skills (to use new apps) and adaptability. 

CARES Act – Coronavirus Aid, Relief, and Economic Security Act

7 min read

CARES Act – Coronavirus Aid, Relief, and Economic Security ActU.S. Government Provides Relief to Individuals, Businesses in Midst of COVID-19 Crisis

On March 27, President Donald Trump signed into law a historic $2 trillion stimulus package designed to provide economic relief to individuals and businesses affected by the coronavirus pandemic.

Our aim in this alert is to give a brief overview of both the tax and non-tax provisions of the government’s new stimulus legislation, including what type of assistance is available for individuals and businesses, how to apply for it, and what to do if you become unemployed. The summary is divided into two sections, one for individuals and one for businesses.

Individual Provisions

Stimulus Payments: Amounts and Eligibility

  • Most adults will receive $1,200; each qualifying child under 16 years old will receive $500.
    • The amount you receive is based on your tax filing status and reported adjusted gross income (AGI).
      • Single filers with an AGI of $75k or less will receive the full $1,200; with a full phase-out at $99k
      • Married filers with an AGI of $150k or less will receive the full $2,400; with a full phase-out at $198k
      • Heads of households with an AGI of $112.5k or less will receive the full $1,200
  • Having qualifying children will increase the phase-out threshold slightly for all groups
  • Those claimed as a dependent by another taxpayer will not receive any stimulus money
  • Recipients need to have a legitimate Social Security number to receive payment, except for military members
  • Currently there is only one stimulus payment scheduled; however, there has been discussion of additional future payments

Proof of Income

  • If prepared, your 2019 tax return is the basis of your eligibility; if not, use your return from 2018
  • If you still have not filed for 2018, you can use a 2019 statement from the Social Security administration as proof of income to qualify

Applying for the Payment and Receipt

  • If the IRS has your bank information from prior tax filings, then you don’t need to do anything. The money will simply be direct deposited into your account based on already filed income tax information
  • Most people should expect to receive the money approximately three weeks from the bill’s passage date

Other Considerations

  • Unemployed persons are eligible to receive payments
  • You will not need to pay income tax on these payments
  • Generally, this payment is exempt from all forms of wage garnishment; however, not in all cases for child support garnishments

Unemployment Benefits: Who is Covered?

  • The bill expands eligibility for unemployment benefits, including part-time and self-employed workers
  • Self-employed persons are newly eligible for unemployment benefits and their benefit is calculated based on previous income using a formula from the Disaster Unemployment Assistance program
  • Part-time worker benefits are state dependent

Amount of the Benefit

  • Unemployment benefits still vary by state, but generally the bill aims to compensate for the average worker’s paycheck by providing extra payments to cover the gap between traditional state unemployment and actual wages
  • Eligible workers can get as much as $600 per week in addition to their state benefit; this includes self-employed and part-time workers
  • States are free to pay the whole amount at once or send the top-up portion separately

How Long Will It Last?

  • The bill provides an additional 13 weeks on top of whatever each state already provides; however, unemployment benefits cannot last more than 39 weeks total
    • Those already receiving unemployment benefits are still eligible for the 13-week benefit extension as well as the $600 weekly benefit top-up
  • The incremental $600 payment is only good for up to four months, through the end of July

Other Considerations

  • Coverage also extends to those who can’t work because they are required to self-quarantine and people unable to travel to work because of imposed quarantine restrictions
  • If the main household earner dies as result of the coronavirus, the survivor is eligible for their unemployment benefit
  • People who can work from home or are already receiving paid sick or family leave are not eligible

Student Loans

  • For six months (April 2020 to September 2020) there is an automatic suspension of student loan payments for loans held by the federal government (private loans excluded)
    • You may choose to keep paying down the principal if you desire

Retirement Account Rule Changes

  • For 2020, the minimum distribution requirements on IRAs, 401(k), 403(b) plans, etc. are suspended
    • This is not applicable to pensions
  • Up to $100k may be withdrawn early without being subject to the typical 10 percent early withdrawal penalty; and income taxes owed on withdrawals may be spread over three years from the date of distribution
    • To qualify for these exemptions, you need to prove the need was related to the COVID-19 outbreak, which includes if you, your spouse or a dependent tested positive for the virus or if you suffered adverse economic costs due to the COVID-19 crisis
  • Loan limits on workplace retirement plans (401k, etc.) are doubled, allowing participants to take loans of as much as $100k if they can prove they’ve been affected by the pandemic

Charitable Contributions

  • The bill creates a new charitable deduction of up to $300 available for those who can’t itemize their deductions for donations to qualified charities
  • The limit on charitable deductions (those that are itemized) are increased, allowing donors to deduct up to 100 percent of donations against 2020 AGI. For example, if you have $1.3 million in income, you can donate $1.3 million and deduct the entire amount
    • Only cash gifts to public charities qualify; you cannot donate stocks or gift via private foundations to be eligible

Miscellaneous Provisions: Renter’s Relief

  • The law puts a temporary 120-day nationwide stop to evictions if the landlord has a mortgage from a governmental agency, such as Fannie Mae, Freddie Mac and others. Additionally, landlords are not allowed to charge penalties for delinquencies during this period.

Business Provisions

Charitable Deductions

  • The 10 percent limitation on charitable donations is increased to 25 percent of taxable income

Qualified Property Improvements

  • Businesses will have the option to write off costs that are typically only depreciable over a 30-year period, especially businesses in the hospitality industry

Small Business Administration (SBA) Loans

  • Small businesses and non-profits that have 500 employees (full- and part-time) or fewer are eligible to receive SBA loans of up to $10 million
  • The loans may be used to cover the cost of payroll, paid leave, group health benefits, mortgage and rent payments, utilities and interest on other debts
  • No collateral or personal guarantees are required

Employee Retention Credit

  • Employers are eligible for a payroll tax credit of up to 50 percent of wages paid during the COVID-19 crisis, which is defined as March 13, 2020, through the end of the year, up to a maximum credit of $5,000 per employee
  • The credit is limited to employers whose operations have been suspended due to the virus outbreak or whose gross receipts have fallen by more than 50 percent compared to the same quarter in the prior year

Payroll Tax Deferral

  • Employers can defer their 6.2 percent portion of the FICA tax (Social Security portion only), delaying payment over two years with 50 percent due in 2021 and the other 50 percent due by 2022.

Net Operating Loss (NOL) Changes

  • The Tax Cuts and Jobs Act disallowed the carryback of NOL completely; and before this in 2018, only a two-year carryback was allowed. This bill allows a five-year carryback for losses from 2018, 2019 and 2020; and taxpayers can amend prior year’s returns as well.
  • The 80 percent limit on NOLs for these same years is removed, allowing a 100 percent reduction in taxable income.

Business Interest Expense Deductions

  • Business interest that falls under Section 163(j) gets an increased deduction limit from 30 percent to 50 percent of taxable income for 2019 and 2020.
  • 2019 taxable income can be used to calculate the interest limitation for 2020 if it’s more favorable
    • The above is not applicable to partnerships

Focused Almost Exclusively on Mitigating the Health and Economic Impact of the Coronavirus

HR 6074, HR 6201, HR 4998, S 3548

3 min read

HR 6074, HR 6201, HR 4998, S 3548Coronavirus Preparedness and Response Supplemental Appropriations Act, 2020 (HR 6074) – Introduced by Rep. Nita Lowey (D-NY), this was the first bill passed to authorize funding in response to the COVID-19 outbreak. It was introduced on March 4 and signed into law on March 6. The legislation provides $8.3 billion in emergency funding for federal agencies to respond to the coronavirus outbreak. It includes appropriations for the Department of Health and Human Services, the State Department and the Small Business Administration for the development, manufacture and procurement of vaccines and other medical supplies; grants for state, local and tribal public health agencies and organizations; loans for affected small businesses; evacuations and emergency preparedness activities at U.S. embassies and other State Department facilities; and humanitarian assistance and support for health systems in affected countries.

Families First Coronavirus Response Act (HR 6201) – Introduced by Rep. Nita Lowey (D-NY) on March 11, this bill authorizes funding and support for Americans suffering from the consequences of the COVID-19 outbreak. Specifically, the legislation includes allocations for: 1.) $500 million to provide access to nutritious foods for low-income pregnant women or mothers with young children who lose their jobs or are laid off due to the COVID-19 emergency; 2.) $400 million to assist local food banks to meet increased demand for low-income Americans during the emergency; 3.) approve state plans to provide emergency food assistance to households with children who would otherwise receive free or reduced-price meals at school; 4.) $100 million for nutrition assistance grants to Puerto Rico, American Samoa and the Commonwealth of the Northern Mariana Islands; 5.) $82 million to cover the costs of COVID-19 diagnostic testing for beneficiaries receiving care through the Defense Health Program; 6.) $15 million for the IRS to implement tax credits for paid sick and paid family and medical leave; 7.) $64 million for the Indian Health Service to cover the costs of COVID-19 diagnostic testing; 8.) $250 million for the Senior Nutrition program to provide additional home-delivered and pre-packaged meals to low-income seniors; 9.) $1 billion to reimburse the costs of COVID-19 diagnostic testing and services provided to individuals without health insurance; 10.) $60 million to cover the costs of COVID-19 diagnostic testing for veterans. The Act also includes provisions to enhance unemployment insurance and increase federal Medicaid funding. This legislation passed in both the House and Senate and was signed by the president on March 18.

Secure and Trusted Communications Networks Act of 2019 (HR 4998) – This legislation prohibits the federal government from obtaining communications equipment or services from a company that poses a national security risk, such as from the Chinese company Huawei Technologies. The bill also establishes a reimbursement program to supply small communications providers with funds to replace this type of prohibited equipment or services from their networks with more secure options. The Act was introduced on Nov. 8, 2019, by Rep. Frank Pallone Jr (D-NJ) and signed into law by the president on March 12.

Coronavirus Aid, Relief, and Economic Security (CARES) Act (S 3548) – Senate Majority Leader Mitch McConnell (R-KY) introduced this legislation on March 19. The bill is designed to address the economic impact of the coronavirus by providing direct cash payments to Americans, loan guarantees for impacted businesses and more resources for testing and development of vaccines. The current version of the bill includes: 1.) a substantial boost in unemployment insurance benefits (expanded eligibility and an additional $600 a week for four months); 2.) $367 billion loan program for small businesses; 3,) $150 billion for state and local stimulus funds; 4.) $130 billion for hospitals; 5.) $500 billion lending fund for large employers – subject to independent oversight with exclusions for members of Congress and the executive branch. The bill is expected to pass in both houses and be signed by the president.

6 Financial Tips for an Emergency

4 min read

6 Financial Tips for an EmergencyThe effect of the coronavirus on our lives is unprecedented. While we’re all sheltering in place while trying to manage our daily tasks, it’s undoubtedly taking a toll on us mentally, physically and financially. Here are some tips to help you weather this storm of economic uncertainty.

Get Started on Being Liquid

Experts suggest having three to six months of savings on hand. However, this might not be realistic for some. Don’t despair: start saving now. If your employer pays you via direct deposit, ask if they’ll deposit a percentage into your savings. If that’s not an option, have your bank withdraw a portion and deposit into your savings on payday. This way, putting aside money for a crisis will be part of your routine. Further, a good rule of thumb is to budget 50 percent of your income to essentials like housing and utilities, 30 percent toward non-essentials and 20 percent toward financial goals like savings and paying down debt. You can do this!

Analyze Your Expenses

Perhaps setting aside a small amount of money just won’t work for you. Mariel Beasley, co-founder of the Common Cents Lab at Duke University, an organization that aims to improve the financial well-being of low- to moderate-income Americans, suggests taking a hard look at your expenses.

  1. See if you can downgrade. For instance, consider getting a cheaper phone, cable or internet plan.
  2. Set up a restrictive budget. When it comes to discretionary spending, think about using a pre-paid card. You can reload this weekly. If seeing the green stuff actually leave your wallet helps you cut back, then a cash-only system might be a good solution.
  3. Try to find extra work. While this situation is causing furloughs in some industries, it might create jobs in others. For instance, Amazon is said to have hired 100,000 new employees. Research other companies that specialize in deliveries. Since everyone is homebound, this could pan out well — if you like this kind of work. If you do, remember your hand sanitizer, gloves and mask. If you don’t, scour the job boards in your area. You might be surprised at what you find.

Solutions for People Over 59

There is an upside to aging: you can make withdrawals from your IRA or 401(k) if things get really rough. However, Beasley suggests that you withdraw funds in small amounts. If you’re under 59 and really have no other alternative, you can withdraw from your retirement. But know that there will be penalties and taxes. However, in times like this, sometimes you’ve got to do what you’ve got to do.

Avoid High-Cost Credit Cards

While these modern conveniences can be lifesavers, the downside is high-interest rates. Apply for cards with lower rates; or even better, find those that offer balance transfers at zero percent for a limited time.

Disregard the Goal

Many financial experts say: keep your eyes on the prize – build your nest egg. But if you’re just getting started, it might feel overwhelming. Or, if you’re in the midst of a world crisis like we are now, it can feel doubly overwhelming. Instead, focus on saving a little at a time. Baby steps. Even having a small amount of money set aside can help in times of need, like buying groceries during a quarantine.

Ask for Help

If you’re really feeling the pinch, reach out to your landlord, mortgage lender, utility provider, credit card companies or anyone else you owe. In Seattle, the public utility companies are promising they won’t shut off services during this pandemic. The same might be true for your community. But the point here is this: make the call. Send the email. Propose a payment plan. It’s reasonable to assume that most people have a heart and don’t enjoy adding financial stress to the already difficult situation we’re in.

If you can’t apply any of these tips your present circumstances, don’t worry. Be well and stay safe. Perhaps when this passes, you might look back at these ideas and see which works best for you. Remember, we’re all in this together.

Sources

https://abc13.com/finance/financial-tips-to-help-you-through-a-pandemic-or-other-crisis/6021876/

Understanding the Oil War between Russia and Saudi Arabia

5 min read

Understanding the Oil War between Russia and Saudi Arabia, Oil WarOver the past six years, domestic crude oil has experienced a volatile ride. 2014 saw the emergence of American shale as producers were attracted to the $114 price levels. However, in 2016 the price for a barrel eventually fell to $27 as a global supply glut developed. 2016 also saw Russia and Saudi Arabia form an oil pact that drew together Russia and OPEC, leading to the so-called OPEC+ to navigate the global oil market. This agreement would eventually culminate into the current crude oil tensions that exist between Saudi Arabia and Russia.

Through the early 2000s – up until the financial crisis of 2008 – increasing global demand accounted for the rising price per barrel of oil. After reaching a high of $147.27 the week of July 7, 2008, the financial crisis’ effects brought the price of West Texas Intermediate Crude down to a low of $32.98 in December of 2008, according to the U.S. Energy Information Administration. However, with the economy recovering through 2009, the price of WTI crude oil rose to the high $70s and low $80s.

After the world emerged from the financial crisis, world oil markets were rocked by geopolitical tensions from the political revolution in Egypt during January 2011, spiking the price of crude oil to $100 a barrel. Prices stayed in the $90 to $100 per barrel range, until the end of 2014. With increased production in North America, reduced demand from emerging economies and increased storage of crude worldwide, the price per barrel of crude oil in 2016 traded in the low $30s per barrel. The price of oil fell because Saudi Arabia attempted to flood the world market with excess oil to lower the per-barrel price to bankrupt the emerging U.S. frackers.   

In reaction to the low oil prices, OPEC and its non-OPEC oil-producing countries agreed to reduce their total output by 1.8 million barrels in December 2016, taking effect in January 2017. After OPEC reversed itself and increased output in June 2018, it again cut output for 2019. The price of WTI rose to the mid-$70s by October 2018, which can also be attributed to a drop in Venezuela’s oil production, and the re-introduction and increase in severity of sanctions against Iran.

A November 2018 report by the U.S. Energy Information Administration (EIA) relayed that the U.S. produced 11.3 million barrels in August 2018. With the report’s news, additional Russian oil production and even some OPEC countries producing more, it brought WTI down to $51 per barrel. Fast forward to March 2020, with the coronavirus sending shockwaves and diminishing demand, oil prices fell.

This led to a meeting in Vienna on March 5 for OPEC and its (+) or other major oil-producing companies throughout the world to discuss production cuts in hopes of increasing the price of oil. During this meeting, OPEC and its (+) members discussed whether to reduce production by 1.5 million barrels a day through the end of June 2020. OPEC asked Russia and those (+) members to cooperate with the production cuts. However, on March 6, Russia did not agree to reduce oil production. This immediately dropped the price of oil by 10 percent.

With the coronavirus pandemic beginning at the end of 2019, manufacturing and transportation decreased, reducing the global thirst for oil. Based on these events, the International Energy Association (IEA) announced in the middle of February that global consumption would fall to 825,000 barrels per day.

Russia said that reducing production was premature because it was and still is uncertain of how the coronavirus will affect global oil prices. Additionally, they cited political instability in Libya, where approximately one million barrels per day were expected to be offline from production.

In light of the unknown extent of the coronavirus pandemic’s impact on oil demand, Russia and its oil producers reportedly offered to maintain the existing 1.7 million barrels per day cut for the next three months that OPEC+ already had in place. However, OPEC didn’t agree to this offer.

Beginning on March 8, Saudi Arabia gave crude oil buyers discounts of between $6 and $8 per barrel to European, Asian and American buyers. This set a downward cascade of the price of oil, lowering Brent Crude by 30 percent and West Texas Intermediate by 20 percent.

Starting March 9, the drop in oil prices coupled with the global coronavirus pandemic exerted a major impact on world markets. Russia’s ruble dropped by 7 percent shortly thereafter. While the price of oil recovered a little after the impact, it set off a production war between Russia and Saudi Arabia. Beginning March 10, Russia began pumping an additional 300,000 barrels per day, and Saudi Arabia ramped up its production to 12.3 million barrels per day, up from 9.7 million.

Impact on Markets

These two factors led the Dow Jones Industrial Average to drop more than 1,300 points in pre-market trading on March 9, with the DOW ultimately falling 2,000 points during intraday trading. Along with NASDAQ falling by nearly 7 percent and the S&P 500 dropping more than 7 percent, global markets fared worse. This was evidenced by the Italian FTSE MIB Index losing more than 11 percent. 

Producer Implications

When it comes to how the crude oil war is impacting shale producers in North America, it’s important to note that prices of $40 per barrel must be sustained to keep producers afloat, according to consultant Enverus. However, production cuts are imminent at the bottom of the $30 a barrel price point, and there’s certainly no expectations of new oilfield development.

Based upon forecasts from the U.S. Energy Information Administration, May 2020 U.S. production of crude oil is expected to drop from 13.2 million barrels per day to 12.8 million barrels per day by December, finally leveling off to 12.7 million barrels per day in 2021.   

Much like the volatility going on with the coronavirus pandemic, global markets are also expecting further volatility for the world’s energy market.

Should You File an Amended 2018 Return?

3 min read

Amended 2018 Tax ReturnDuring the holiday season in December, Congress passed the Consolidated Budget Appropriations Act of 2020. Included in this Act was a tax package that renewed more than 24 tax provisions through what are known as extenders. An extender makes a tax provision effective retroactively. Some of the extender provisions are rather esoteric, so we’ll only focus on those most applicable to the broader taxpayer base.

Extenders in More Detail

Among the widely applicable extender provisions, there are the following. It’s best to check with your tax professional to see which of the more than two dozen extenders may apply to your personal situation.

  • Deducting PMI (private mortgage insurance) if you itemize
  • The delusionality of some types of tuition and fees
  • The ability to exclude debt forgiveness on a qualified residence

Wait, I Don’t Understand What Happened?

Most people are probably wondering at this point how they can obtain the benefit of these retroactive changes, which were not allowed when they filed their original 2018 tax return. The answer is to file an amended tax return – or Form 1040X.

Taxpayers often need to file an amended return when they receive updated or changed inputs, such as when a brokerage sends a corrected Form 1099. Unlike this situation where the basis of your filing changed due to updated information, with the extenders you’ll only want to file if it’s to your benefit.

But Do I Have to File an Amended Return?

Tax law does not actually require that a taxpayer file an amended return when learning the original return submitted did not reflect the correct amount of tax. The assumption is that it was correct the first time. Amendments are allowed, but they are not mandatory.

If you do choose to file an amended return, you have to adjust everything to reflect the tax law and any changes in the information received. You are not allowed to pick and choose only the favorable difference between the original and amended filing.

OK, But Should I File an Amended Return?

The answer to this question is probably a tax accountant’s favorite – it depends.

The most frequent worry among taxpayers is that filing an amended return will trigger an IRS audit. This fear arises from the fact that generally returns are filed and processed electronically, but all amended returns are processed by live people. The biggest risk here is to not include a full explanation of the changes in the return, including what is different, why it’s changed, and the basis for the difference.

Refund or No Refund – Does it Matter?

Another question that often perplexes taxpayers is whether they should file an amended return if doing so will not result in an additional refund. Just because your amended tax return won’t result in a check in your mailbox, there are situations where it’s still to your benefit. One example is if the amended return will increase your capital or passive loss carryforwards.

The Sands of Time

Since amended returns are processed by people and not electronically, the turn-around time is a bit longer than most returns. The IRS says amended tax returns typically take eight to 12 weeks, but it’s often longer.

Conclusion

While you might not have to file an amended return, it could be to your benefit from either the tax extenders, corrected information that arrived after your initial filing or a combination of both. Every taxpayer situation is different, so it’s best to consult us.