Wealth Management

When we sent out the note that IRS Extends Filing Due Date and Payments, we took that information off the IRS website. As it turns out, the information was slightly incorrect. All payments have been extended to July 15th for Federal and June 15th for State. However, all filing must be made by April 15th with or without payment. To extend your filing, just simply ask your accountant to file an extension and that can push your filing date out to the summer as well.     

The tax relief postpones various tax filing and payment deadlines that occurred starting on March 3. As a result, affected individuals and businesses will have until July 15, 2020, to file returns and pay any taxes that were originally due during this period. This includes 2019 individual and business returns normally due on April 15th, as well as various 2019 business returns due on March 15th. Among other things, this also means that affected taxpayers will have until July 15th to make 2019 IRA contributions.

The July 15th deadline also applies to quarterly estimated income tax payments due on April 15th and June 15th and the quarterly payroll and excise tax returns normally due on April 30th.

It also applies to tax-exempt organizations, operating on a calendar-year basis, that have a 2019 return due on May 15th.

At this time California is only allowing a 60-day extension until June 15th.

On March 13, 2020, the California Franchise Tax Board (FTB) announced special tax relief in response to the COVID-19 pandemic. Affected business and individual taxpayers are granted an extension to file 2019 California tax returns and make certain payments, until June 15, 2020. This relief is in line with the Executive Order issued by the Governor on March 12, 2020. The extended California deadline of June 15 may be pushed back even further if the Internal Revenue Service grants a longer relief period.

What about the IRS?

The White House and the Treasury Department have indicated they intend to postpone the filing deadline. However, the IRS has not yet issued an official notice or any guidance on the issue.

Caution: To be safe, we suggest filing extensions for all your calendar-year partnerships and S corporations today.

California’s extension

The relief includes moving various tax filing and payment deadlines that occur to June 15, 2020, including:

• Partnerships and LLCs that are taxed as partnerships whose tax returns are due on March 15th now have a 90-day extension to file and pay by June 15th.
• Corporations and individual filers whose tax returns are due on April 15th now have a 60-day extension to file and pay by June 15th; and
• Quarterly estimated tax payments due on April 15th now have a 60-day extension to pay by June 15th.

How to claim the benefit

Taxpayers claiming the special COVID-19 relief should write the name of the state of emergency (for example, COVID-19) in black ink at the top of the tax return to alert the FTB of the special extension period. If taxpayers are e-filing, follow the software instructions to enter disaster information. The software may need some time to reflect on these recent changes.

Who qualifies?

According to the FTB, a taxpayer does not have to be directly impacted to qualify for relief. Taxpayers who experience any difficulty in filing or paying, as a result of COVID-19, are included in this relief.

We recently have seen a dramatic shift in interest rates in response to the ongoing global crisis. Over the last month, we have seen the 10-year treasury drop from 1.88% on January 1st to 0.81% on 3/12/20.

This is important to note because historically mortgage rates tend to move with the 10-year treasury. With the recent drop-in rates, it is logical to assume now would be an excellent time to refinance. While that certainly can be the case depending on when you got your mortgage or last refinanced, but unfortunately rates have not come down as you might have suspected. Recently we have seen mortgage rates essentially break up with the 10-year treasury for the time being as they have chosen to not really go any lower. Mortgage rates continued a relentless surge higher. 

The recent decoupling has occurred for a couple of reasons. Mortgages have costs associated with them so that limits how low rates can go, and the mortgage market is currently over-supplied.  Like anything else, a rampant excess of supply puts downward pressure on prices.  When we’re talking about bonds or mortgages, lower prices mean higher rates and it’s really that simple.  The investors that ultimately buy the mortgage debt created by new refinances have been so overwhelmed with the available supply on the market that sellers have desperately lowered prices in order to find buyers.  And again, lower prices on mortgage debt mean higher rates for consumers.

Should you consider a refinance? If you have not refinanced in the last couple of years now may be a good time to investigate a refinance and see if it makes sense. Another reason to consider a refinance is to switch from a 30-year mortgage to a 15-year or 20-year mortgage. This can help save years of payments potentially and the payment may not increase as much as you might think. Please contact us if you would like us to review your current situation or if you would like a referral to someone that can help you with refinancing.

The markets have been anything but friendly with several gap downs. It has felt like being in an elevator that falls straight to the bottom. In fact, the market has never dropped as fast or precipitously as it has from the recent all-time highs. Below is a chart summarizing the daily return over the last ten days for the Dow Jones Industrial Average (DJIA):

Looking at the chart you can see that we have only had 2 up days in the last two weeks and several days of large losses. The last number (-2,013.76) is today and represents the worst day since 2008. The question becomes what do you do now?

The short answer is don’t panic. It is safe to expect volatility to continue until we have more clarity as to the impact of the coronavirus but we recommend staying the course. The good news is historically if we have losses quickly (like we just experienced) the markets tend to recover faster. If you have questions or concerns, please do not hesitate to contact us.