Yesterday evening, the
Senate passed an updated version of the Coronavirus Aid, Relief and Economic
Security (CARES) Act (Stimulus Phase III).
The bill is intended to be a third round of federal government support for
individuals and businesses and is the product of negotiations between Democrats
and Republicans for a bipartisan response to the crisis. Please note that at this time it has not
been enacted into law but is expected to be by Friday, March 27th.
We are fielding a
number of questions from our business owner clients, who have already been
significantly impacted by COVID-19, regarding their options for access to
short- and long-term liquidity to minimize business disruption. If this applies to you, please feel free to
read ahead to the “business” section of this letter.
In response to the COVID-19 pandemic, Treasury
Secretary Steven Mnuchin announced yesterday that individuals can defer April
15th tax payments up to $1 million, and Corporations can defer up to $10 million
of tax payments, for 90 days. Please
note that many details remain unclear with respect to this relief, and no
official written policy has been released yet, but we expect additional
guidance from the IRS in the coming days and will provide details once
available. For now, here is an overview
of what to expect:
Tax payments due April
15th can be deferred until July 15th without incurring any interest or penalties. This extension is available for all
individual taxpayers who owe < $1 million for 2019.
This 90-day extension of time to pay will likely also apply to 1st and 2nd quarter 2020 estimated tax payments due April 15th and June 15th respectively.
Mnuchin’s statement did
not extend the tax filing due date, so all taxpayers must still file their tax
returns or request extensions (Form 4868 automatically extends the filing
deadline to October 15th) by April 15th.
For anyone that
anticipates a refund for 2019 taxes, as usual we recommend you go ahead and
file by April 15th, if not sooner, to have that money refunded.
“We encourage those Americans who can file their
taxes to continue to file their taxes by April 15,” Mnuchin said,
especially encouraging people who will be getting tax refunds to do so.
“Just file your taxes,” he said, and “you will automatically not
get charged interest and penalties” on payments made within the 90-day
deferral period.
We are following the Families First Coronavirus
Response Act (FFCRA) closely, which will address relief in the form of tax
credits and/or cash payments to businesses and employees affected by COVID-19
and will send an update once there is an agreement.
For our business owners, we are also closely
monitoring federal and state incentives (including low interest loans, grants,
unemployment for employees, etc.) and will send details and guidelines once
available.
As we briefly highlighted a few weeks ago, as the
equity markets began to sell-off, we continue to monitor the economic turmoil
and remain confident that global markets will recover from the economic
uncertainty that we are facing with COVID-19 (Coronavirus). As we have told
clients in the past, volatility and economic/political uncertainty is very
normal in financial markets and it’s important to not overreact and panic. It
is very normal for investors to feel like this time is different as we go
through a correction. While the circumstances driving each are always
different, one thing we know is that we eventually emerge, and over time, the
markets continue to move higher.
Of course, we are closely following all the headlines
and like everyone else don’t know how long this will persist; but what we do
know is that the underlying US economy appears strong and the financial system
is well-capitalized. We are still in the early stages of truly understanding
the full economic, financial and social impact to our economy and globally.
There is no doubt at this point that global GDP will slow, but we remind
clients that the market is forward looking and already pricing this in to some
extent. That said, the possibility of more downside is very real, and the bottoming
process may take a while.
We are closely monitoring client portfolios and will
adjust as new information becomes available, but we are not in the business of
timing markets and calling tops/bottoms. Each of our clients are allocated
based upon the plan that we set in place for them and we do not believe it’s a
time to deviate from that by either dialing up risk or by bringing it down
significantly. With the range of outcomes being so vast, we feel it best to
stay the course. It’s not time to sell but it’s also not a time to ditch your
bonds and cash for stocks.
We are hard at work trying to identify how we can use
this downturn to our advantage: tax loss harvesting, buying great companies at
steep discounts, & shedding exposure to areas of the economy that we view
as being unstable, such as Energy. You have heard us harp on the importance of
diversification and periods like we are currently experiencing are a reminder
of why it is vitally important. Our bonds and other diversifying strategies
have performed quite well over the last few weeks.
As always, we are here to answer any questions and be
a resource. Please feel free to reach out at any time.
