Tax Notes Talk

Tax Planning and the Coronavirus Pandemic

March 20, 2020 Tax Notes
Tax Notes Talk
Tax Planning and the Coronavirus Pandemic
Show Notes Transcript

Beverly Winstead, director of the University of Maryland’s Low-Income Tax Clinic, shares how the coronavirus pandemic has affected her as a practitioner and professor with Tax Notes Executive Editor for Commentary Jasper Smith.

For additional coverage, read these articles in Tax Notes:


David Stewart:   0:01
Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. Before we begin, I'd like to give an update on the next few weeks. With the spread of coronavirus, the Tax Notes Talk team will be working remotely for the time being. Like many offices around the world, we're trying our best to prevent the spread of this virus. And social distancing can be a bit challenging in a 10-foot-by-10-foot studio. Over the next couple weeks, we'll be recording and assembling Tax Notes Talk podcasts from home. We're working our hardest to bring you the best podcast, but we're doing a bit more over the phone, so sound quality will be a little more variable. Thank you for your patience, and we hope that you stay healthy.

David Stewart:   0:45
With that, let's get started. This week: coronavirus chaos. As the coronavirus pandemic grows in the U.S., officials and policymakers at all levels of government are trying their best to staunch the economic fallout through various tax measures. Executive Editor for Commentary Jasper Smith chatted with Beverly Winstead on March 17 about what this means for the 2020 tax filing season and the coronavirus's impact on low-income taxpayers. Jasper, welcome to the podcast.

Jasper Smith:   1:10
Thanks, Dave. Happy to be here.

David Stewart:   1:12
Why don't you start off and tell listeners about Beverly Winstead.

Jasper Smith:   1:14
Well, Beverly is a pretty dynamic person. She wears a lot of hats. She's a professor and director of the Low-Income Taxpayer Clinic at the University of Maryland. She's also a tax attorney who founded and manages her own private firm.

David Stewart:   1:27
What did you and Beverly talk about?

Jasper Smith:   1:29
Well, we discussed how the coronavirus is affecting her as a practitioner, and what she's advising clients to do amid the uncertainty.  She also discussed what she hopes to see from the IRS in wake of the pandemic to help out low-income taxpayers and how she's dealing with the business closures to slow the virus's spread.

David Stewart:   1:46
Alright, let's go to that interview.

Jasper Smith:   1:47
Hi, Beverly. How are you?

Beverly Winstead:   1:50
I am wonderful. How are you?

Jasper Smith:   1:52
I'm doing well. Thank you so much for taking the time to join us on the podcast in light of what I'm sure is a very busy and hectic time for you.

Beverly Winstead:   1:59
Yes, absolutely. It is tax season. So we're busy,

Jasper Smith:   2:03
Right. And in addition to it being tax season, this is probably a unprecedented tax season, if you will, in terms of the effects that COVID-19 is having on everyone.

Beverly Winstead:   2:12
I will agree. Definitely.

Jasper Smith:   2:13
Yeah. So let me ask you, with that being said, what type of impact are you seeing on your clients in terms of who you're dealing with as a practitioner, not necessarily in the clinic aspect?

Beverly Winstead:   2:25
So in addition to my role as the clinic director at the University of Maryland, I also have a private practice here in the Washington, D.C. area. And one of the things that I actually have been taking the time over the last couple of days is really to reach out to my business clients, and to see where they are and what strategies we need to put in place to help them weather the storm. Even before Maryland Gov. Larry Hogan announced yesterday that he was going to require all bars, restaurants, gyms, movie theaters to close, I emailed a lot of my clients that are restaurants last week and I said, "Hey, what's your plan for dealing with the coronavirus?" Because the one thing I can say about the University of Maryland and sitting in on a lot of those meetings is that I began to understand the severity of the time that we're facing. And I definitely want my clients, business clients as well as individual, to be able to weather the storm of what's happening right now in this economic time.

Jasper Smith:   3:25
Sure, that's definitely understandable. And it's commendable to you for getting ahead of it like that. So what type of advice were you giving them? Obviously, things are changing very rapidly, and probably even since last week you have gotten additional thoughts or are seeing additional guidance as things become more restrictive. So what are you telling them? And how can they prepare?

Beverly Winstead:   3:44
For my business clients, a lot of the conversations really revolved around cash flow, and how they were going to be able to figure out how much cash flow they're going to have over the next, I say, 120 days. In particular, I have a client that's a construction company. His busiest season is about to normally happen going into the summer months. Well, there's a strong chance that he's not going to be working over the summer months. And so now it's about, 'Hey, do you need to cut your labor force? Or do you need to reach out to your banker and figure out if they can extend more lines of credit to you?' This is the conversation that -- I'm a part of your team as an attorney, but we also need to get the accountant involved. We need to get your banker involved for you to be able to weather the storm.

Jasper Smith:   4:28
Yeah, all of that makes sense. And I guess you're saying at this point you're really just raising the question, trying to help them to appreciate things they might not yet have considered. And then you'll advise them on a case-by-case basis based on the facts that they give you?

Beverly Winstead:   4:41
Yeah, so, you know, I played basketball undergrad and actually probably played all the way up until the last few years. You know, my sister tells me it's time for me to hang up sneakers because I can't run up and down the court like I used to, which I agree. And one of the things that basketball taught me is that it takes teamwork to make the dream work. So what I'm trying to press upon my clients is that I don't want you to work in silo. I want you to put your team together: your banker, your accountant, your attorney. And we need to figure out how you're going to be able to move forward in this economic time.

Jasper Smith:   5:14
Sure. That's wonderful advice. Now, as far as what you're seeing from the IRS and as it affects both your private practice clients and your low-income taxpayer clients, is there anything you've seen them do? Or maybe what you'd like to see them address going forward?

Beverly Winstead:   5:30
So I do know that there are rumors or talks that the IRS is planning to extend the April 15 filing deadline by I think up to about 90 days. I think that's good. What I would encourage IRS to do if I was sitting around the table -- and this actually may be some of the conversations that they're having right now I'm just not privy to -- is that you have a population of people, the low-income taxpayers who I deal with every day through the clinic, and they're the ones that I foresee are going to be hit the hardest in the economic time. They're the ones that are the wage earners. They're the ones that are working in service industries. And the service industry that you know, like the restaurants, movie theaters, all those are shut down, which means that they're not going to be able to earn anything during this period. And if they do earn something, then they also have the risk of being out in the public and coming back and actually being one of those people that get infected. So they're dealing not only with economic crisis right now, they're thinking about survival mode and whether or not their actions are going to impact them health-wise. So if I'm sitting around the table, one of things we do know is one of the major funding sources for low-income taxpayers is the earned income tax credit. This credit also is the one that is very highly scrutinized. And, you know, I know clients that will file for EITC refund, and it takes IRS three to four to five months to actually release that refund. I would encourage IRS, and like I said, they may already be having these conversations, that they should really expedite the processing of EITC, any returns that have EITC refund attached to it. And the situation is that occurs later, they find out that the client or a taxpayer wasn't entitled to it, then let's go back and do the audit. But in this economic time, they need the money.

Jasper Smith:   7:24
I think that makes complete sense. And certainly, as you so eloquently described, we're really talking about a human element here that goes beyond concerns at the [Treasury] at this particular moment. Is there anything you think they could do that or offered that would help you to work more efficiently on your end for clients?

Beverly Winstead:   7:40
You mean with IRS?

Jasper Smith:   7:42
IRS or Congress. Anything they could pass?

Beverly Winstead:   7:44
I heard I think this morning that Sen. Mitt Romney, R-Utah, was recommending that the government send each family a $1,000 as a stimulus. I know that a lot of people are living paycheck to paycheck. One slip, one glitch in their system is definitely devastating for them. So if there's a way to facilitate them actually getting bonds, then I definitely would be on board with that. What that looks like, I'm not totally sure.

Jasper Smith:   8:10
With that being said, I'm sure you're still thinking it through because things are changing rapidly. How does it affect your business in terms of obviously, you're talking to your clients about their cash flow, but the way you survive is by getting paid from your clients. So have you given any thought to that?

Beverly Winstead:   8:25
I have the good thing of where I sit. I mean, it is tax season and people are still coming in because I do do some tax returns and people are still coming in. They are getting their tax returns done. In terms of my, in the private clients, I'm not really seeing a shift change through my law practice. But I will say for low-income taxpayers, people that typically go to the VITA site and AARP and CASH campaign, all of those free volunteer income tax assistance sites. They're all shut down right now.

Jasper Smith:   8:55
Right.

Beverly Winstead:   8:55
So because they're shut down -- and that's why I believe the extension is definitely warranted for people, -- but they're in a position where now they have to figure out how they're going to do their own tax returns. If they might be entitled to a refund because they need to refund or they may go to somebody who will, let's say we talk about those bad tax preparers. Somebody that will now use this whole economic situation to really say, 'Hey, I'll do your tax returns, but I want maybe a third of whatever I get you in a refund.' So that's when you have the uptick of people that are doing unscrupulous things. And really, it's the low-income taxpayer that has fallen victim to this because they're trying to survive.

Jasper Smith:   9:35
Yeah, that's a very real concern. And, as many may know who are listening, you are the former chair of the Maryland State Bar Association's tax section. Is there anything that you think that bar associations could do to step in and fill the void? Obviously, each individual member is dealing with this just like the rest of us are in society. So it's not like we can have a large gathering. Is there anything they could do to maybe help mitigate some of the potential harm that could come from this?

Beverly Winstead:   10:00
One of the things I enjoyed about my role as the chair, when I was chair of the Maryland State Bar Association, I had a wonderful group of colleagues that brought innovative ideas to what I was trying to do or what we were trying to do as a group. One thing we did, we started as a bar association, was a tax hotline, where you had attorneys, CPAs, EAs from the state that would volunteer their time to the public to answer questions regarding tax law, regarding tax filing situations. If they had collection issues with IRS or the state of Maryland, they were able to get their questions answered for free. So I think because the reality is we are privileged as attorneys, and we may not be struggling as much as other people, other segments are struggling. So I would encourage as bar associations is that we really figure out as a group how to use our resources to be of assistance to people that really need help during this time.

Jasper Smith:   11:03
Very well said. I would certainly like to see how that plays out. Now, obviously, when it comes to your role at the University of Maryland Low-Income Taxpayer Clinic, you have the clients that you all served, but you also have these students. And how is this pandemic affecting your role as a professor?

Beverly Winstead:   11:19
Wow, that's a great question. We're on spring break this week, right? And I said, 'Yes. Spring break is really my time to kind of just get my break too, right?' And my students, I mean, as wonderful as they are, I think they're an amazing group of students. They are still working over the break. Before I left I told them to enjoy their spring break. But that's just the quality and caliber of students that we have at the University of Maryland. So my students, I will say, are still working. And one of the things that I commend the University of Maryland on is, even before this really became a pandemic, they went straight into, 'Look, we need to figure out how we're going to be able to navigate through what's going on.' We were actually one of the first, in I want to say the nation, that set up remote teaching. And then everybody followed suit after us. So again I commend the University of Maryland system and their foresight in really navigating through the climate and being the leader in this kind of remote technology and teaching setup.  

Jasper Smith:   12:22
That's great to hear. And that definitely speaks to the quality of students and probably a credit to you as what you've instilled in them as their professor. The fact that they're still working and concerned about others even while they're certainly dealing with this on their own. Now, I know you probably have developed relationships with other directors of low-income taxpayer clinics, both here in the area and maybe even nationally. Have you been in contact with any of them to see what they're doing yet?

Beverly Winstead:   12:45
I'll just say I'm bad about returning calls. People have called me. So I will say before this airs I will reach back out to the people that have called me and figure out what they're doing.

Jasper Smith:   12:56
I appreciate you doing that, and I'm sure, honestly, before this airs, there may be more news that will come down the pike. Beverly, I certainly appreciate you taking the time to talk with us here today. I think you've addressed a lot of concerns that people might have, and things that are on people's minds regarding the coronavirus. Is there anything else that you thought about that you really wanted to discuss right now?

Beverly Winstead:   13:17
There's one more thing. Earlier you had asked me about what kind of initiatives that we're currently working on. And one of the things we're in partnership right now with the Catholic Legal Immigration Network.

Jasper Smith:   13:28
OK.

Beverly Winstead:   13:29
And we are working with their population, the separated families, to try to help them in terms of understanding their tax obligations. And in light of the coronavirus, this is even much more of a need for them because they have so much more to even worry about, with a lot of them being undocumented, and now they definitely can't work. A lot of times they work in the restaurant industries where they're paid, so to speak "under the table." And now that the restaurant industry is closed, they're another one of those populations that we have to figure out how we're going to be able to help and help them navigate. So I wanted to definitely give a shoutout to Michelle Mendez with the Catholic Legal Immigration Network. She's the one who reached out to us and said, 'Hey, let's do this partnership.'

Jasper Smith:   14:13
Absolutely. We appreciate you bringing that up, and certainly if there's anything else that we can do as far as helping to publicize, feel free to reach out any time. Is there a website or Twitter handle you wanted to promote where people can find more information about you or about your initiatives?

Beverly Winstead:   14:28
Sure. My Twitter handle is @IRSHelpAttorney. I'm also on Instagram and LinkedIn. If you're interested in more information on the clinical law program, definitely can visit University of Maryland, Baltimore. That's the law school's website. And my website for my private practice is www.irshelpattorneys.com.

Jasper Smith:   14:53
OK, wonderful. Well, Beverly, thank you so much for taking the time to talk with us. Maybe we can have you back on as things unfold and discuss this a little more. Or in the future, maybe we can have a conversation that relates more to normal everyday activities hopefully.

Beverly Winstead:   15:06
Sounds good.

Jasper Smith:   15:06
Alright. Thank you.

Beverly Winstead:   15:07
Alright, thanks.

David Stewart:   15:08
And now, coming attractions. Each week we preview commentary that'll be appearing in the Tax Notes magazines. And due to social distancing, I'm not joined in the studio by anyone. In Tax Notes Federal, professors at the University of Houston, Victoria explain how the TCJA can make employment-related bad debt nondeductible. Jay Soled considers why courts have granted taxpayers more license to abuse transfer tax rules than income tax rules. In Tax Notes State, Sujata Yalamanchili and Henry Zomerfeld discuss New York’s rules regarding the ability to challenge property tax assessments. Jeffrey Friedman and Dennis Jansen look at the Opportunity Zone proposals pending before the Maryland General Assembly. In Tax Notes International, Peter Barnes and David Rosenbloom consider the state of digital services taxation. Srishti Singh discusses the impact of the proposed end of India’s dividend distribution tax. In the Opinions page, Ben Willis discusses bipartisan payroll tax solutions to help offset the economic crisis due to coronavirus.  

David Stewart:   16:04
You can read all that and a lot more in the March 23 editions of Tax Notes Federal, State, and International. That's it for this week. You can follow me online at @TaxStew, that's S-T-E-W. If you have any comments, questions, or suggestions for a future episode, you can email us at podcast@taxanalysts.org. And as always, if you like what we're doing here, please leave a rating or review wherever you download this podcast. Stay healthy, and we'll be back next week with another episode of Tax Notes Talk.