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Professional Advice

The CARES Act (New Contacts)

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Newsletter from

Steve Richardson & Company

Certified Public Accountants

March 27, 2020

The CARES Act

Dear Friends and Clients:

Essential Services
The City of Tuscaloosa and Mayor Maddox consider CPA firms to be ‘essential services’. CPAs will play an important role in the efficient distribution of COVID-19 economic benefits. Our clients need us; we are here for you!

When people are out of work, tax refunds become very important. Too many people in our society live paycheck to paycheck. Some of our trade and craftsmen are self-employed or otherwise exempt from unemployment benefits. People are already going hungry; it is going to get worse. Many small businesses will disappear forever. This crisis is going to hurt – badly. What are we going to do? Unfortunately, I do not have good answers.

COVID-19 is frightening.
I have read estimates that the economic shut down in the USA is costing the economy one-trillion dollars a month! Wow! The post COVID-19 economic recovery could take five or six years.

The post COVID-19 world will not be the same.

The new law is 800 Pages!
I can’t pretend that I’ve read all 800 pages. This law is a beast; I mean to say, it is complicated. There is a lot I do not know.

The ‘I do not know’ part will cause me to write more newsletters. I plan to write follow-up newsletters for individuals, small businesses, and for the church and not-for-profit sector.

The CARES Act
On March 25, by unanimous vote, the Senate passed the third of four coronavirus relief laws (CARES Act, H.R. 748, ‘The Act’)

A few additional tax provisions were included in the bill that will prove helpful. These provisions are related to:

  • the non-taxability of certain loan forgiveness,
  • advance refunding of certain tax credits, and
  • the suspension of certain aviation taxes

I will write more about these as I know more. The non-taxability of loan forgiveness and advanced refunding of certain tax credits could prove very helpful. I’m even okay with the suspension of certain aviation taxes; we do need to keep the commercial air carriers flying.

Individual recovery rebates/credits
The crux of the CARES Act is COVID-19 relief direct to individuals.

Under the CARES Act, an eligible individual is allowed an income tax credit for 2020 equal to the sum of:

  • $1,200 ($2,400 for eligible individuals filing a joint return) plus
  • $500 for each qualifying child of the taxpayer (the child tax credit).

The credit is refundable.

As rapidly as possible
These are complicated calculations that relate to the 2020 tax year. The law indicates that the IRS will do these calculations and send money out “as rapidly as possible” – whatever that means.

There is good news
Most eligible individuals won’t have to take any action to receive an advance rebate from the IRS. This includes many low-income individuals who file a tax return to claim the refundable earned income credit and child tax credit.

Direct Deposit
The IRS may make the rebate electronically to any account to which the payee authorized, on or after January 1, 2018, the delivery of a refund of federal taxes or of a federal payment.

IRS Notification
No later than 15 days after distributing a rebate payment, the IRS must mail a notice to the taxpayer’s last known address indicating how the payment was made, the amount of the payment, and a phone number for reporting any failure to receive the payment to IRS.

More Good News!
Tax credits are complex, data-driven calculations. The IRS will make errors. The Act has a Get-Out-Jail-Free card! If the taxpayer received an advance rebate during 2020 that was less than the credit to which the taxpayer is entitled for 2020, the taxpayer will be able to claim the balance of the credit when filing the 2020 return. If, on the other hand, the advance rebate received was greater than the credit to which the taxpayer is entitled, the taxpayer won’t have to pay back the excess. That is because the 2020 credit can’t be reduced below zero.

I hope this means what I think it means. I think it means this: if the IRS calculates a larger credit than you are entitled to, you do not have to pay it back! Cool!

No 10% additional tax for coronavirus-related retirement plan distributions
This does not mean that you should withdraw all your retirement savings! Please don’t!!

A coronavirus-related distribution is any distribution (subject to certain dollar limits) made on or after January 1, 2020, and before December 31, 2020, from an eligible retirement plan to a qualified individual. A qualified individual is one:

  • who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention (CDC),
  • whose spouse or dependent (as defined in Code Sec. 152) is diagnosed with such virus or disease by such a test, or
  • who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury.

A qualified individual should be most of us.

Oh, yeah: the distribution can’t be more than $100,000, and the income tax on the qualified distributions can be paid over three tax years.

RMD requirement waived for 2020
Need I say more?

$300 above-the-line charitable deduction
Theoretically this is to encourage charitable giving in these bleak times. I think it’s silly. I mean, $300! Give me a break. Make it $3,000 or even $30,000 and now we can make a difference.

There are other changes to the tax code designed to enhance charitable giving but, frankly, these relate to wealthy people. My wealthy clients most often customize their annual giving plans with my direct assistance.

Student Loans!
This is a hot-button issue. The law allows for an employer to pay up to $5,250 per year on an employee’s student loans under an educational assistance program for the employee’s education – tax free! Unfortunately this does not include the student loans or education of employee spouses or dependents.

Not too bad, but not nearly enough, either.

More to come
This is only one of four major bills related to the COVID-19 crisis. I will release additional information as I am able to study the materials.

Best regards,
Steve Richardson, CPA

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Ethics, Opinion, Professional Advice

The Growing Hunger for Authenticity

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Newsletter from
Steve Richardson & Company, Certified Public Accountants

December 18, 2019

The Growing Hunger for Authenticity

To Our Clients and Friends:

Truth, accuracy and accountability

A Pew Research report issued in 2019 included an article headlined as, “Americans’ struggle with truth, accuracy and accountability.”

It’s no surprise. We live in an age of “fake news”, it seems that all of the news media have become editorial-opinion platforms instead of sources for legitimate news.  The few legitimate news sources are drowned out; their voices muted.  Most Americans admit they at times have trouble distinguishing the truth from falsehood from certain sources.” [Lee Rainie, Scott Keeter, and Andrew Perrin, Pew Research Center,

Trust and Distrust in America (July 2019), 46, available at https://www.people-press.org/2019/07/22/americans-struggles-with-truth-accuracy-and-accountability/.]

We are now at a point where most Americans do not trust their own news media. It does seem that most news media is in the business of entertainment and ratings, and no longer overly concerned with reporting legitimate news.

Once, the most trusted profession in America was the local pharmacist.  That is certainly no longer true – for good reasons.

Do CPAs hold the high-ground?

I have always held out hope that my profession as a CPA still held the high ground of trust in America and, for good reasons, that is no longer true either.  Here are the top 10 accounting frauds of the 21st century:

  1. Enron
  2. HealthSouth
  3. Tyco
  4. WorldCom
  5. Waste Management
  6. Freddie Mac
  7. American Insurance Group (AIG)
  8. Lehman Brothers
  9. Satyam
  10. And, let’s never forget Bernie Madoff

Each of these frauds involved CPAs who willfully misrepresented the truth. That’s polite language for “They Lied!”  CPAs cannot lie and be legitimate.

In simplest terms CPAs are paid professional tellers of the truth.  We are required to support our opinion of the truth with high-quality work, backed-up by our professional standards and Code of Conduct.  The professional standards and Code of Conduct are very important, but, if the CPA is not hard-wired to tell the truth, these important documents become meaningless.

Our first job, as CPAs, our highest client responsibility, is to tell the truth. 

Does the “truth” really matter?

Yes, it matters a great deal.

The single most powerful reason that poverty persists in much of the world is corruption.  In many countries, graft is a pervasive part of the culture. It permeates every level of third world society: government, police, military, business, banking and even in the local operations of the charitable organizations that many of us support. Bribery is seen as a necessary cost of doing business. 

Billions of dollars of foreign aid and other funding seems to disappear into the Swiss bank accounts of a few high level leaders. 

It is a simple economic rule: corruption breeds poverty. We need to stop the erosion of the basic ethical underpinning of our culture.

I, unfortunately, have no idea how I or we can work to overcome the crisis in “truth, accuracy and accountability”; that is way beyond my skill level.

What can we do?

In business and in our professional lives we can work to make positive changes.

  1. Business and professional leaders, year-in year-out, must focus on maintaining integrity standards as the key to building trust, and rightly so. High moral, financial, and other standards are a must – in any business organization, integrity comes from the top. 
  2. Integrity must be integral in all tax and financial matters.  We must be held accountable. In business maintaining appropriate transparency is a basic building block to healthy business activities.  In the non-profit industry, independent board oversight is essential.

Blind trust in our leadership is not healthy.  The Russian proverb comes to mind, “Trust but verify.”  Authentic leadership is built on integrity.

Authentic is defined as “genuine or real.” Authenticity, the state of being authentic, is being “true to oneself or to the person identified.” Furthermore, when something is authentic, it is “entitled to acceptance or belief because of agreement with known facts or experience; reliable; trustworthy.” The opposite of authentic is false.  Look up the definition. 

[https://www.dictionary.com/browse/authentic?s=t.]

When leaders live authentically, it spreads throughout the organization and becomes part of the culture and DNA. On the other hand, when leadership lacks authenticity, it corrupts the organization, and it’s just a matter of time before public perception will catch up.

Practice humility.  Ok; I admit that this is a hard principal for me.  I’ve had to learn humility the hard way and my lack thereof occasionally rears its ugly head.  Fortunately, I married a woman whose mission in life seem to be keeping Steve humble. Also, I have a remarkable staff.  Amy and Todd, as are the rest of my staff, are people of high integrity.  If I make a mistake, my staff has no problems with disagreeing with me.  In fact, they will vigorously disagree with me if they feel it is important.

I have great respect for my staff; they keep me humble – sort of. Mostly.

The first proof of functional humility is a willingness to admit limitations and mistakes.  To tell the truth – especially when it hurts.  To say, I made a mistake; here is what we can do to make it right. 

Andrew Murray, Humility (Radford, VA: Wilder, 2008), 23. Dan Busby and John Pearson two people I respect, issue these major warning signals of troubled leadership: lack of humility and pompous self-interest over the common good. See Busby and Pearson, “More Lessons from the Boardroom”, 23.

“The public face of perfection always hides a troubled soul.”

My solution.

I can’t change culture or even make significant changes in my own profession.  The only thing I can do is to practice honesty in my business and personal life.  It doesn’t sound like much; frankly, it’s not much. If that is all I can do, then, it is enough.

  • Speak openly and honestly
  • Avoid the “spin”
  • Tell the whole truth not the “selective” version
  • Work hard to do a thorough professional job

Admit when you cannot do a good job due to a lack of competency on a project, a lack of time or staff or whatever.  Do not take on a task that you know will not be well done.

Authenticity is the latest buzzword of our Millennial Generation.  I like that!  The Millennials care about authenticity, honesty, accuracy and accountability. 

I believe in our Millennial Generation. They are beginning to bring us back to a place where authenticity is required before trust is given. I find that appropriate.

CPAs

Obviously, from the tone of this letter, you can tell I’m worried about our profession.  I’m going to do my very best to be a good example of what a CPA should be.

In audits, reviews, tax work or any other professional work, we will do our best to be honest while we work to the highest standards of our profession.

That will have to be enough.

Sincerely,

Steve Richardson, CPA

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