Searle Business Solutions

Just like a lot of businesses, museums, and parks, IRS service centers have been closed for about three months to reduce the spread of the coronavirus. Many IRS services are fully automated and have kept on chugging, like processing e-filed tax returns and sending refunds. However, all IRS services that are performed by a human being stopped cold when services centers closed, including mailing out “balance due” notices to taxpayers.

Most, if not all, of those unmailed balance due notices reflect payment due dates that have already passed. The IRS determined that the time and expense of generating all the notices again with new due dates was too high. So, they are mailing out those “old” notices with an insert of another notice saying that the due date printed on the first notice is extended. What? Based on my experience, taxpayers find it challenging to read one IRS notice – unlikely they will read two.

When you are freaking out about getting an envelope from the IRS is not the best time to grasp this Two Notice Concept. In case this happens to you, here’s what to do:

• Take a Breath – We are getting used to our “normal” being anything but normal. Don’t let your existing stress from the pandemic escalate. Deeply inhale and exhale to calm yourself, then open the envelope – procrastination will only increase your stress.

• Read All Contents – Read all contents of the envelope thoroughly. Check the amount(s) due, dates and reasons for underpayment with your records to verify the accuracy of the notice. These notices are boring and long, making it easy to overlook important information.

• Pay by the New Due Date – If you verify that the balance due notice is accurate, avoid incurring additional interest and penalties by paying the balance by the new due date. For most unpaid income tax balances, the new due date will be July 15, 2020. 

• Follow-up on Inaccuracies – Any inaccuracies or questions should be followed-up on before paying anything. Notice recipients are directed to visit the listed website or call the phone number on the notice. Unfortunately, IRS phone lines are extremely busy. It’s going to be several weeks before taxpayer service lines are fully staffed.

IRS service centers are re-opening and mailing out all the notices that didn’t make it out the door before the pandemic shutdown. Balance due notices with due dates that have passed will include an insert of another notice saying that the due date printed on the first notice is extended. Confusing? Yes. Need more information than what’s provided here? Check out www.irs.gov/coronavirus.  

Preparing to open your workplace in the COVID-19 environment is a complicated subject. Expensive, too. Some guidance for keeping your workers and customers safe is available from OSHA and the CDC, but none of it includes guidance for budgeting for all those extra costs. It’s up to you as a business owner to figure it out.

Although federal workplace guidance for COVID-19 doesn’t address budgeting, it can be used as a tool to think through all factors to consider for opening your workplace safely. Identifying the costs that you will need to consider is a good starting point to develop a COVID-19 workplace budget. OSHA and CDC guidance spells out four categories that business owners need to consider to safely open their workplace the COVID-19 environment:

• Health and Safety Policies

Establishing policies and procedures might not sound like it should be a budgeted expense, but it really is. Not only do you have to decide workplace rules about personal hygiene (e.g., hand washing), distancing to prevent infection, and cleaning the workplace; you also need signage, floor markers and other methods to communicate the policies you have implemented to protect your workers and customers.

• Health Resources 

Most workplaces do not commonly spend much of their budgets on worker health. In the COVID-19 environment, almost all businesses will need to add expenses for items and services they never considered before, like personal protection equipment, testing to identify infected employees, special cleaning services, and extra supplies for cleaning and disinfecting. These added expenses could be part of your budget for a long time.

• Human Resource Issues 

New or augmented rules may be needed to support workers and help them feel safe in your workplace. Managing worker needs during a pandemic does not absolve employers from following privacy and nondiscrimination protections. Topics that employers should address include identifying and protecting at-risk employees, informing employees of possible workplace exposure, and protecting employee confidentiality.

• Operational Impacts 

Costs to operate your business safely will definitely go up, it’s just a question of how much. Physical workplace modifications to achieve social distancing is an obvious cost. You may also need to consider regulatory compliance and legal issues, as well as the risk of legal liability for employee illness or death. You could need to budget for legal or regulatory expertise for input. And don’t forget to factor in the reduced productivity that is bound to occur due to the COVID-19 environment.

Preparing to open your workplace in the COVID-19 environment is complicated and expensive. Federal guidance does not address how to budget for all the extra costs to keep your workplace safe, but you can use it to identify the factors and costs to develop your COVID-19 workplace budget.

Recent dips in the stock market might have you wondering if this is a good time to convert your eligible pre-tax retirement accounts to a Roth IRA. Your account values have taken a hit, so yes, this could be the perfect time. But is it the right time for you? Well, it depends on your situation.

No matter what, you will have to pay current income tax on any untaxed portions of your Roth IRA conversion amount. Paying taxes on pre-tax contributions and earnings can take a bite out of your account balances but it could be beneficial in the long run if you: 

• Will be in the same or higher tax bracket when you withdraw.

It’s important to assess what your current tax bracket is and what you anticipate that your tax bracket will be when you plan to withdraw IRA funds. You also want to check whether an IRA conversion would bump you into a higher tax bracket. If the tax bracket bump is slight, the conversion benefits might still outweigh the difference in income tax.

• Won’t need the converted funds for at least five years.

Converted IRA funds are not available for distribution until after a five-year waiting period from the conversion date. If you are close to retirement age and anticipate needing to tap those funds, you could end up paying a 10% penalty on withdrawals of money from the conversion of an eligible pre-tax retirement plan to a Roth IRA.

• Can pay the conversion tax in cash.

You will be responsible for paying income taxes on any funds you convert, aside from prior after-tax contributions. It’s important to pay the conversion taxes with non-IRA assets, or you will lose the benefits of tax-free growth on the amount you take out. The cost of the taxes and loss of tax-free growth could outweigh the advantage of converting.

• Want to leave a tax-free financial legacy to your heirs.

A Roth IRA doesn’t require minimum distributions, which means your account can continue to grow tax-deferred until you pass it on to your heirs. A spouse who inherits a Roth IRA also doesn’t have to take minimum distributions. You also eliminate the income tax your heirs would pay on withdrawals because you already paid it.

Another important thing to note – even if you want to do a full conversion of your traditional IRA to a Roth IRA, you don’t have to do it all at once. Under current tax law, you can split up the conversion amounts to avoid getting pushed into a substantially higher tax bracket.

The decision to convert your eligible retirement funds to a Roth IRA depends on your personal and financial situation and should factor in your potential for a greater ending portfolio value, your estate planning goals, and your tax-risk. Paying taxes on pre-tax contributions and earnings can take a bite out of your account balances but it could be time to convert to a Roth IRA. 

IRS imposters and other scammers have been out there for years, using any angle they can to get your money. Economic Impact Payments and other COVID-19 funding from the federal government is incredibly tempting to those criminals. To them, those funds are a huge pot of opportunity to scoop up some cash with little extra effort – just a few tweaks to their existing methods, including phishing.I

“Phishing” is wordplay for “fishing” because the scammer uses bait to lure and reel in his prey. The scammer uses fraudulent emails to induce the recipient to share valuable personal information, such as passwords and credit card numbers. Recently, taxpayers have reported being phished with emails purporting to help them get their Economic Impact Payment faster by registering on the link. Of course, the link is to the scammers, not the IRS!

So, how can you identify phishing and what if it happens to you?

• Check the sender’s email address.

The easiest way to check for phishing is to place your cursor over the sender’s name, revealing the sender’s e-mail address. An address that doesn’t look legitimate is probably a scam. For example, anything other than “irs.gov” for the IRS is suspect. Another clue is when the sender’s name in the email title doesn’t match the sender’s e-mail address.

• Look for spelling and grammar errors.

Whether scammers are just in a big hurry, or did poorly in school, phishing emails often contain spelling and grammatical mistakes. Legitimate communications from a charity or an employer are unlikely to be sent in such a sloppy and unprofessional manner. Stilted language or awkward syntax could also indicate a scam.

• Resist temptation to open or click on a link.

Do not open or reply to any suspicious email, no matter how enticing. Scam email titles could be telling you about all kinds of cash prizes, refunds, or other goodies to tempt you into opening a message that will unleash malicious code that infects your computer or mobile phone. And don’t even think about clicking on a link in a suspicious email!

• Report to authorities and delete.

Federal authorities and private groups are fighting against phishing scams. They need your help catching these criminals. You can report phishing emails to the Federal Trade Commission at www.ftc.gov/complaint and to the Anti-Phishing Working Group at [email protected]. Forward tax-related emails to the IRS at [email protected]. After reporting, delete the original email.  

Don’t get phished! When you get an e-mail that looks suspicious or is from an unfamiliar sender, stop and check it out before deciding to open it. Don’t fall victim to a scammer phishing for your Economic Impact Payment.