4Thought Blog

Several months into the COVID-19 crisis, most nonprofit organizations have formulated at least temporary plan for sustaining operations. But short-term solutions should be complemented by long-term strategic planning that reprioritizes objectives.

Specifically, your nonprofit needs to focus on three areas: social impact, economic viability and capacity to deliver. Let's take a look.

Due to the COVID-19 pandemic, many small and mid-sized manufacturers expect to have significant net operating losses in 2020. What makes this prospect more discouraging is that some companies are still recovering from NOLs suffered in recent years.

The Coronavirus Aid, Relief and Economic Security Act provides some relief. It has revamped the NOL rules, undoing some of the effects of the Tax Cuts and Jobs Act passed in 2017. This means your company may be in line for a refund if you amend previous tax returns.

However, the CARES Act rules are complex. It's essential to consult recently released IRS guidance that covers some of the mechanics of requesting a refund — and talk with your CPA — before filing an amended return.

The Tax Cuts and Jobs Act substantially increased the gift and estate tax exemption. For 2020, the inflation-adjusted amounts are $11.58 million for individuals and $23.16 million for married couples filing jointly.

This creates a significant tax-saving opportunity for wealthy families. However, because the exemption amounts revert to their pre-TCJA level ($5 million and $10 million, adjusted for inflation) starting January 1, 2026, you can only give away substantial wealth gift-tax-free (either directly or in trust) for a limited time. However, there's a chance that Congress could change the rules or extend them.

What would happen if you took advantage of this opportunity now and later discovered you needed the money? That's where a spousal lifetime access trust can come in.

The U.S. Small Business Administration (SBA) has announced it will start accepting Paycheck Protection Program (PPP) loan forgiveness applications starting Aug. 10.

The SBA issued new loan forgiveness applications in June. You can read more about the two application options and access them in our previous article.

Borrowers are tasked with preparing the forgiveness application and submitting it to their lender. Borrowers also are responsible for calculating the specific forgiveness amount.

The second half of 2020 has begun. What steps can small business owners take today to lower taxes for the current tax year?

Alternatively, would it make more sense to maximize taxable income this year if you expect higher income and/or unfavorable changes to the tax law starting in 2021?

The extended July 15 deadline for filing your 2019 federal income tax return is behind us. Now it's time to think about your current federal tax situation.

Tax planning is especially complicated for 2020. There are a lot of moving pieces: The COVID-19 pandemic has caused some people to lose their jobs or take pay cuts. Many investors have suffered financial losses during the crisis — while other people have prospered by taking advantage of COVID-related business and investment opportunities. So, depending on your situation, you may have less (or possibly more) taxable income in 2020 than you did in 2019.

In addition, certain provisions in the Coronavirus Aid, Relief and Economic Security (CARES) Act may create opportunities for some taxpayers to save taxes or tap into alternative sources of cash (like retirement funds). Plus, it's a presidential election year — and a change in leadership could lead to changes in tax rates and other provisions for 2021 and beyond. Any change could possibly even be retroactive for 2020.

With all that in mind, individuals should consider the following tax planning moves midway through the year to lower their tax obligations for 2020.

If you're a business owner, do you have a plan in place that names who'll follow you as head of your company? You may feel you're too busy running the business today to waste time on long-term plans that seem so distant.

But there may be more reasons than you think to make decisions, some of which will benefit you today. A well-thought-out plan will:

During these financially challenging times, many nonprofit organizations have had to get creative to raise adequate revenue to sustain operations.

But new activities, however well-intentioned, can lead to tax trouble. Your nonprofit risks exposure to the unrelated business income tax if it operates outside its usual charitable scope.

Here's how to avoid unwanted tax exposure.

The COVID-19 crisis has probably changed your business operations. For example, in response to the crisis, you might need to alter your company's production line, cleaning and scheduling practices, supply chain partners, distribution methods and even product offerings.

Whether these changes are temporary or you're using recent product and operational shifts as blueprints for the future, you'll likely need to retrain or "reskill" workers.

Even before the pandemic, rapid technological advances made retraining workers necessary for many manufacturers. Perhaps you've already invested considerable time and money ensuring employees are proficient using the most innovative equipment. But if your business model is changing and you want it to be successful, you'll likely need to send workers back to "school."

Economic fallout from the COVID-19 crisis will cause many rental real estate properties to run up tax losses in 2020 — and possibly beyond. Here's a summary of important federal income tax rules for such losses.   

What You Can Write Off

Rental property owners can deduct mortgage interest and real estate taxes. They can also write off all standard operating expenses that go along with owning rental property. Examples include: