two new hires

WFY Welcomes Two New Hires to Audit Department

This month, Wright Ford Young & Co. is pleased to announce we have two new hires joining our team. Mimi Duong will be joining as an Audit Staff and Lauren Gilmour will be joining as an Audit Intern in our audit department. WFY is pleased to welcome these new hires to our team.

Mimi Duong

At the end of May, Mimi Duong started a position with WFY as Audit Staff.  She will be graduating CSUF later this year with a Business Administration degree with a concentration in Accounting.  In her spare time, she enjoys spending time with friends and family, experimenting with makeup, and trying new foods.

Lauren Gilmour

Lauren Gilmour joined WFY as an Audit Intern in May. She is currently attending USC as a Junior, and this will be her first experience working at a CPA firm.  Other than attending her classes, she loves to hike, go to the beach, and be outdoors.

 

Interested in joining WFY in one of our departments? Please email your resumes careers@cpa-wfy.com or go to our Careers page.

 

roth ira

Roth IRA Conversion During Coronavirus – Is Now the Right Time?

By Cheryl Shelton, JD

Wright Ford Young & Co., CPAs

 

Roth IRA’s have two big tax advantages:  Tax-free withdrawals and exemption from required minimum distributions.  But converting a traditional IRA into a Roth IRA is a taxable distribution.  While in the midst of the coronavirus, is 2020 the right time to make the conversion?

Here are some reasons why it might be the ideal time to do a complete or partial conversion:

  • Low tax rates
  • Stock market decline
  • Reduced income

The tax rates are the lowest they have been in a while due to the TCJA (they are scheduled to last through 2025).  If your tax rate during retirement will be the same or higher than your current rate, then considering a conversion now may be a good idea for you.

It’s in the news every day; the stock market is down more than usual.  But this could be another good reason to make the conversion to a Roth IRA.  You’ll pay taxes on the current value of the pre-tax assets being converted, which would be lower because of reduced share prices.   In the future when we all return to normal and the market rebounds, you’ll enjoy tax-free growth potential and tax-free withdrawal of the assets.

Since the start of the coronavirus pandemic, you may be anticipating your income for 2020 to be much lower than the previous year. This could put you in a lower tax bracket for the current tax year.  If so, the tax required to be paid on the conversion could be significantly lower.

Completing a Roth IRA conversion when tax rates are lower and the market is down may save you money on the taxes due upon conversion.  Therefore, this might be the ideal time to consider the tax advantages of converting your traditional IRA to a Roth IRA.

If you would like to explore whether a Roth IRA conversion is right for you, please contact your WFY advisor or contact us here.

© Copyright 2020. All rights reserved.

gifting

Why Gifting During an Economic Downturn May Be Right for You

Janelle Tokunaga, CPA, MST

Wright Ford Young & Co., CPAs

 

While it may seem like there has been a shortage of good news lately, we wanted to bring your attention to a few bright spots that have come about during our current economic downturn.  With the extra time you have at  sheltering in place, it may be a good time to revisit your current estate and gift plan.

To recap: the 2020 Federal lifetime exemption is $11.58 million per person, including inflation, and the 2020 annual Federal gift exclusion is $15,000 per donee and donor.  The current economic market is showing decreased values in the public securities arena and lower overall real estate values in light of the COVID-19 environment.

The current lifetime exemption gives you the opportunity to make larger gifts of assets. But when combined with lower current asset values you can gift now with less exemption utilization, it leaves more exemption available for future gifts.  So, now, may be a good time to think about gifting those depressed value assets that are expected to increase considerably in the future. Then, when the markets eventually recovers and your gifted asset values increase, they will already be outside of your taxable estate.

If you aren’t ready to gift assets directly, setting up and transferring ownership of real estate and marketable securities into closely held entities (such as FLPs and LLCs) may be a good option as well.

We encourage you to use this unique time to reflect on your current estate plan. Considering whether gifting is something for you may benefit you and your loved ones now and in the future.  WFY advisors are available to discuss the tax benefits of gifting during our economic downturn and look forward to hearing from you. If you’d like to contact us, click here.

© Copyright 2020. All rights reserved.

ppp

Non-Deductibility of PPP Related Expenses to the Extent of Forgiven PPP Funds (IRS Notice 2020-32)

Janet Kim, CPA, MST

Wright Ford Young & Co., CPAs

 

The IRS released Notice 2020-32 on April 30, 2020, which provides guidance on the deductibility of expenses paid with Paycheck Protection Program (PPP) loan proceeds that are forgiven and excluded from the borrower’s income. The IRS has determined otherwise deductible expenses that are paid with PPP funds may not be deductible for federal income tax purposes to the extent the expenses were reimbursed by a PPP loan that was then forgiven.

The PPP was created by Section 1106 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Under the PPP, the borrower can receive forgiveness of indebtedness in the amount equal to the sum of payments made for the following expenses during the 8-week “covered period” beginning on the covered loan’s origination date: payroll costs, mortgage interest, rent, and utilities during the COVID-19 crisis. The forgiven amount is excluded from gross income under the PPP. The IRS notice explains that to the extent that Sec 1106 excludes from gross income the amount of a covered loan forgiven, this results in a “class of exempt income” under Sec. 265 which disallows otherwise allowable deduction for the amount of covered loan forgiveness because such payment is allowable to tax-exempt income. This treatment prevents a double tax benefit.

The CARES Act did not address whether deductions otherwise allowable under the Code for payments of eligible Section 1106 expenses paid by the PPP borrowers are allowable if the covered loan is subsequently forgiven as a result of the payment of those expenses. According to Senate Finance Committee Chairman Chuck Grassley “the intent was to maximize small businesses’ ability to maintain liquidity, retain their employees and recover from this health crisis as quickly as possible, this notice is contrary to that intent.” It may take clarification in a future bill if the original intent of Congress is that these expenses remain tax deductible.

We continue to monitor all newly issued legislation and guidance to assist you in making informed decisions.  If you have any questions or concerns regarding this latest guidance, please contact your WFY advisor or contact us here.

business transition

Business Transition Preparedness Post COVID-19

During the ongoing management of COVID-19 restrictions, we are all trying to determine and assess the short- and long-term damage on businesses, the economy, and the capital markets. While we don’t pretend to have answers better than others, we would like to share our thoughts on the impact of the virus on M&A transactions. First off, we don’t want to trivialize the health impact imposed by the pandemic nor the human element of lost jobs, life disruptions, and family separations. Our intent is to provide our strategic thoughts while we try to maintain a sense of normalcy.

Prior to the onset of COVID-19—only a month ago—the M&A markets were as strong as ever. We had all heard about the strength of economic fundamentals. The combination of a strong US economy, tremendous amounts of capital raised, liquid debt markets, low interest rates, and favorable demographics were the driving forces. Deal values and volumes were at a record pace.

Today, the economy is certainly shaken but several favorable factors remain—significant capital ready to be deployed, favorable debt markets, and demographics. But with hopes of slowing the spread of the virus and escalating medical capabilities, coupled with the massive CARES Act and PPP aid packages passed by Congress, many analysts have suggested the US economy should start showing signs of recovery in the coming quarters. With this optimism in mind, we believe M&A volume will once again strengthen later in the year.

As companies approach the M&A market, we believe there will be a need to defend current financial results, projected financial forecasts, and valuation expectations. These discussions will need to be fact-based, convincing interested parties that first half declines in revenue and earnings were temporary and a result of extraordinary circumstances, and therefore nonrecurring in nature. We believe valuations will likely be impacted short-term, but we expect to see a return to higher levels especially with the return of competition from private equity investors and strategic acquirers and for those companies that experience less business interruptions.

For business owners who are or were considering ownership transition, we believe now is a good time to prepare and plan ahead. This may include estate and tax planning, retirement and wealth management, accounting clean-up (such as pre-transaction quality of earnings), thoughts on succession management, pre-market activities (such preparing a confidential investment presentation), and strategizing with your M&A advisor on likely investors/acquirers. Accordingly, now is a good time to think and plan ahead. There will be a return to normalcy soon and pent-up demand from investors and acquirers will create a competitive M&A market once again. Those who are prepared for the opportunity will fare well.

We know these remain uncertain times but if you would like to learn more about how we can help, please visit us at www.cpa-wfy.com.

cares act

Learn the Business Benefits of the CARES Act

Our WFY Tax Partner, Richard Huffman, has created a 15-minute video presentation to illustrate the benefits your business may qualify for under the CARES Act.  Included are the Paycheck Protection Program Loans, Employee Retention Credit and deferral and income tax benefits. Watch the video to learn which benefits apply to you.

Please contact your WFY advisor to discuss how your business can benefit from these programs or you can contact us here.

economic impact payment

IRS Launches Economic Impact Payment Direct Deposit Portal

Today, the IRS launched a portal specifically focusing around the Economic Impact Payment. The portal is designed for taxpayers to check the status of their stimulus payment, set up direct deposit, and more.  Click here to visit the Economic Impact Payment Direct Deposit portal.

When clicking the “Get My Payment” button, taxpayers will be able to:

  • Get their payment status
  • Confirm their payment type (direct deposit or check)
  • Other information if needed, such as their bank account information

Taxpayers who want to accelerate the process of receiving their payment must add their bank account information and provide the following information:

  • Their AGI from their most recent tax return filed, either 2019 or 2018
  • The refund or amount owed from their latest filed tax return
  • Bank account type, account and routing numbers.

When clicking the “Non-Filers: Enter Payment Info Here” button, taxpayers who have not filed their 2018 or 2019 federal income tax return and their gross income didn’t exceed $12,200 will be able to:

  • Enter your current information such as your name, current mailing address, bank account information, and more
  • Find out if you’re eligible for an Economic Impact Payment

If you need more information on COVID-19 resources for your business and employees, click here.

Disaster Relief Payment Tax Assistance to Employees Affected by COVID-19

By Richard A. Huffman, CPA, MST

The national emergency declaration on March 13 triggered a tax benefit which allows employers to make non-taxable qualified disaster relief payments to employees for reasonable and necessary expenses resulting from the coronavirus pandemic.

Reimbursable expenses excludable from employee taxable income are as follows:

  1. Unreimbursed medical expenses including co-pays, deductibles, vitamins and supplements
  2. Increased expenses associated with being quarantined at home (e.g., increased utilities and home office expenses)
    1. Home office expenses include expenses associated with setting up or maintaining a home office such as enhanced internet connections, computer monitors, laptops, printers, office supplies, etc.
  3. Housing for additional family members (e.g., transportation and living expenses for college students returning home including duplicate meal expenses)
  4. Nonperishable food purchases/reserves
  5. Increased childcare expenses
  6. Expenses to enhance mental health and physical well-being from social distancing such as meditation apps and home health fitness
  7. Alternative commuting means in lieu of mass transit

Due to the extraordinary circumstances surrounding a qualified disaster, there is no dollar limit to what qualifies just as long as the expenses in question are reasonable and necessary with respect to the coronavirus.  Furthermore, employees are not required to account for or substantiate actual expenses in order to qualify for the exclusion and payments are not subject to discrimination testing.

With generous tax benefits and easy administration, qualified disaster relief payments are a valuable benefit that all employers should consider when trying to respond to the adverse financial impact that the coronavirus has on its employees.

If you have any questions, please contact your WFY tax specialist or email us at info@cpa-wfy.com.

Copyright 2020.  All Rights Reserved

coronavirus

Avoid Phishing in the Time of COVID-19

As the uncertainty of the coronavirus pandemic continues, scammers are using different ways to gather your information and use it for ransom.

Some websites are offering information on COVID-19 relief programs in exchange for signing up through them as a subscription or requesting a fee. With this, the websites hold your basic information ransom and could possibly cause you problems in the near future.

WFY wants to make sure there aren’t any more problems for our clients who are already going through an ambiguous period of time. Fraud will only increase as the coronavirus pandemic goes on. Therefore, we advise you to only work with sources you know are safe and whom you’ve worked with before. On our WFY website, we have provided a COVID-19 relief page with safe links that can help you with any questions on resource programs at https://www.cpa-wfy.com/covid-19-resources/

If you have any questions or concerns on a COVID-19 relief program, please contact your WFY tax advisor.

coronavirus enacted laws

Summary Analysis of Coronavirus Enacted Laws

By Richard A. Huffman, CPA, MST

With the recently enacted laws to help companies with the current Coronavirus pandemic, there has been confusion regarding which benefit programs will apply to what companies.

In our efforts to assist you in which benefits can help you and your company, WFY has created a breakdown summary spreadsheet and flowchart below.