Coronavirus Relief Resources for U.S. Business Owners
Sunday, April 12, 2020
SUMMARY OF APPLICABLE PROVISIONS – THROUGH 4-12-2020
We have received a lot of client inquiries centered around coronavirus COVID-19 relief resources for business owners. Below is a detailed summary of provisions.
- The due date for filing federal income tax returns and making federal income tax payments due April 15, 2020 has been extended to July 15, 2020. Such extension for both the payment of tax and filing of the income tax return is automatic and does not require taxpayers to file Forms 4868 and 7004. The relief is also available in respect to estimated income tax payments (including payments of tax on self-employment income) due on April 15, 2020
- The relief also applies to gift and GST tax filings
- Q2 Estimated Payment deadline has also been extended from 6/15 to 7/15
- IRA contributions for 2019 can be made until July 15, and the 10% additional tax on early distributions is due July 15 when the taxpayer pays his or her income tax.
- Contributions to health savings accounts for 2019 can be made as late as July 15.
- IRS suspended Installment Agreement payments and monthly Offer in Compromise payments due between April 1, 2020 and at least July 15, 2020 with interest continuing to accrue. It also suspended referrals to private debt collectors, most liens and levies and most audits during this period. HOWEVER, the IRS is not automatically suspending direct debit payments. The IRS initially stated that taxpayers should contact their bank to stop the drafted payment. Most banks have stated that they cannot stop the draft and taxpayers need to contact the IRS directly to void the draft. This put taxpayers are in a pickle: IRS phone lines are closed, so taxpayers cannot contact the IRS to “skip” the automatic payments during this time. The IRS has not provided any guidance on how it will enable taxpayers to initiate a skip on their scheduled drafted payments.
- 1031 Exchange Deadlines - any 45-day or 180-day deadline that occurs between April 1 and July 14 is extended to July 15, 2020. There is current petition in place to convince IRS t change the start date to January 20th so the extensions apply to more taxpayers.
- Federal Government will provide recovery rebate checks totaling up to $1,200 for individual U.S. residents ($2,400 for married joint filers) who aren’t dependents and have a Social Security number. Those amounts would increase by $500 for each dependent child.
- Recovery rebate checks would be reduced for higher income taxpayers and begin phasing out at $75,000 in adjusted gross income (AGI) for individual taxpayers, $150,000 AGI for married filers and $112,500 AGI for heads of household. The recovery rebate amount would be reduced by $5 for each $100 a taxpayer’s income exceeds the phase-out threshold; and it would phase out entirely for single taxpayers with incomes over $99,000 & married filers with AGI exceeding $198,000.
- The IRS would base these AGI amounts on the taxpayer’s 2019 tax return if it’s been filed, or on their 2018 tax return if not.
- The IRS would directly deposit the recovery rebate checks in the bank accounts of Americans who have set up Direct Deposit with the agency, and mail checks to those who haven’t. Recovery rebates via Direct Deposit would be available within about three weeks, while checks would be between six and eight weeks.
- The recovery rebates will use 2019 tax returns (2018 if the taxpayer has not filed in 2019) to determine the advanced rebate amount and reconcile the rebate based on 2020 income. This means that taxpayers who receive a smaller rebate than they are eligible for based on 2020 income will receive the difference after filing a 2020 tax return, but overpayments of rebates due to a higher income in 2020 will not be clawed back.
- Social Security, SSDI and Railroad Retirement beneficiaries with qualifying dependents will automatically receive $1,200 Economic Impact Payments even if they haven’t filed their tax return
- Those who don’t normally file a tax return because they are under the normal income limits for filing a tax return (single filers under $12,200 and married couples under $24,400), visit IRS.gov, and look for “Non-Filers: Enter Payment Info Here.” Then provide basic information including Social Security number, name, address, and dependents. The IRS will use this information to confirm eligibility and calculate and send an Economic Impact Payment. Using the tool to get your payment will not result in any taxes being owed. Entering bank or financial account information will allow the IRS to deposit your payment directly in your account. Otherwise, your payment will be mailed to you.
- Coming next week: Get My Payment shows Economic Impact Payment date, helps with direct deposit. To help everyone check on the status of their payments, the IRS is building a second new tool expected to be available for use by April 17. Get My Payment will provide people with the status of their payment, including the date their payment is scheduled to be deposited into their bank account or mailed to them.
- An additional feature on Get My Payment will allow eligible people a chance to provide their bank account information so they can receive their payment more quickly rather than waiting for a paper check. This feature will be unavailable if the Economic Impact Payment has already been scheduled for delivery.
- For security reasons, the IRS plans to mail a letter about the economic impact payment to the taxpayer’s last known address within 15 days after the payment is paid. The letter will provide information on how the payment was made and how to report any failure to receive the payment. If a taxpayer is unsure, they’re receiving a legitimate letter, the IRS urges taxpayers to visit IRS.gov first to protect against scam artists.
- Be on the lookout for scam artists trying to use the economic impact payments as cover for schemes to steal personal information and money. Remember, the IRS will not call, text you, email you or contact you on social media asking for personal or bank account information – even related to the economic impact payments. Also, watch out for emails with attachments or links claiming to have special information about economic impact payments or refunds.
- A temporary Pandemic Unemployment Assistance program would be created through December 31, 2020 to provide payments to those who wouldn’t be traditionally eligible for unemployment benefits, including the self-employed, independent contractors, those with limited work history, and others who are unable to work as a direct result of the coronavirus public health emergency.
- An additional $600 per week payment would be made to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.
- If you already receive Social Security income, but have some Self-Employment income as well and applying for unemployment as Self Employed individual, your unemployment benefits will be reduced in a proportional manner by your Social Security income. You need to disclose the amount of Social Security income when making application for unemployment.
- You can apply for unemployment if you are waiting for PPP loan, but once you’ve received the PPP loan, your paycheck is essentially being covered by the U.S. Government. If you receive the loan, from that date forward for 8 weeks, you are receiving payroll continuation through the PPP therefore you are not eligible for unemployment compensation benefits during that period of time
Retirement Account Distributions
- Withdrawal penalty for distributions up to $100,000 per individual from qualified retirement accounts would be waived for coronavirus-related purposes. Income from these distributions would be subject to tax over three years, and the taxpayer could recontribute the funds to an eligible retirement plan within three years without regard to that year’s contribution cap.
- Coronavirus-related distributions would include those:
- Made to an individual diagnosed with COVID-19;
- Whose spouse or dependent is diagnosed with COVID-19,
- Who experience adverse financial consequences as a result of being quarantined, furloughed, laid off, have work hours reduced, are unable to work due to lack of child care, the closing or reduced hours of a business owned or operated by the individual, or other factors as determined by the Treasury Secretary
- For ”impacted” individuals, an increased loan amount from $50,000 to $100,000 is available for the 180-day period beginning on the date of enactment of the CARES Act.
- Loans can be taken up to 100 percent of the present value (increased from 50 percent) of the individual’s vested account balance.
- Impacted individuals may also take advantage of a 12-month delay for loan repayments due through date of enactment through the end of the 2020 calendar year.
- Interest on plan loans is still payable into the individual’s retirement plan account, and remains taxable upon withdrawal.
- Required Minimum Distributions are not required for 403(b), 401(k), and IRAs for calendar year 2020.
- 2020 minimum required contributions for single-employer plans can be delayed until 2021.
- To encourage Americans to contribute to churches & charitable organizations in 2020, they would be permitted to deduct up to $300 of cash contributions “above the line” (i.e. whether or not they itemize their deductions). This new provision will be permanent until changed by future law.
- The bill also modifies the AGI limitations on charitable contributions for 2020, to 100% of AGI for individuals and 25% of taxable income for corporations. The bill also increases the food contribution limits to 25%. This change is NOT permanent.
Student Loan Repayments
- Employers would be able to provide a student loan repayment benefit to employees on a tax-free basis. They could contribute up to $5,250 annually toward an employee’s student loans and those payments would be excluded from the employee’s income for tax purposes.
- The $5,250 employer cap would apply to both the new student loan repayment benefit and other educational assistance (for tuition, fees, books) allowed under current law.
- This provision would apply to student loan payments made by an employer on behalf of an employee after the date of enactment and before January 1, 2021.
- Credit reporting agencies who agree to account forbearance or agree to modified payments with respect to an obligation or account of a consumer that has been impacted by COVID-19 would be required to report that obligation or account as either “current” or as the status reported prior to the accommodation (unless the consumer becomes current).
- This credit protection would be available beginning January 31, 2020, and end at the later of 120 days after enactment or 120 days after the termination of the coronavirus national emergency declaration.
- Foreclosures on all federally-backed mortgage loans would be prohibited for a 60-day period beginning on March 18, 2020. Up to 180 days of forbearance for borrowers of a federally backed mortgage loan who have experienced a financial hardship related to the COVID-19 emergency. This would include mortgages purchased by Fannie Mae & Freddie Mac, insured by HUD, VA, or USDA, or directly made by USDA.
- For 120 days after the enactment of this legislation, landlords would be prohibited from initiating legal action to recover possession of a rental unit or to charge fees, penalties, or other charges to the tenant related to such nonpayment of rent where the landlord’s mortgage on that property is insured, guaranteed, supplemented, protected, or assisted in any way by HUD, Fannie Mae, Freddie Mac, the rural housing voucher program, or the Violence Against Women Act of 1994.
- Payments automatically suspended for federal student loans through Sept. 30, 2020, with no interest accruing or penalties during the period of suspension.
- Be careful of any significant debt modifications as they may result in cancellation of debt income! (deferral of payments of interest, extension of maturity date, change in interest rates, reduced collateral, etc). Treasury regulations define what a significant modification is, so please seek advice on potential tax impact.
Payroll Tax Credit Under Families First Coronavirus Response Act
- Provides 100% refundable tax credit to private-sector employers with fewer than 500 employees that are required to provide paid sick leave and paid family leave benefits as follows:
- Under Emergency Paid Sick Leave Act (EPSLA), covered employers will pay employees their full wages for 80 hours of leave up to $511 per day and $5,100 in the aggregate when an employee cannot work due to Federal, state, or local ordered quarantine or isolation, an employee has been told by a healthcare provider to self-quarantine, or the employee is experiencing symptoms of COVID-19.
- Employers are required to pay employees two-thirds of their full wages, up to $200 per day and $2,000 in the aggregate when employees are unable to work due to providing care to an individual subject to Federal, state, or local ordered quarantine or isolation, care for a child whose school or place of care has been closed due to COVID-19, or due to another similar condition specified by federal officials.
- EPSLA leave must be provided first, prior to the employee having to exhaust any other form of PTO provided by the employer
- Under Emergency Family and Medical Leave Expansion Act (EFMLEA) , the amount of mandated paid leave may not exceed $200 per day for 10 weeks and $10,000 in the aggregate.
- EFMLEA only applies to employees who must care for their own child who is under the age of 18 if the child’s school or place of child-care has been closed, or if the child-care provider is unavailable due to Coronavirus AND the employee cannot work remotely. The first 10 days of public health emergency leave may consist of unpaid leave, after which paid leave is required.
- Labor Provisions state that an employer shouldn’t be required to pay more than $200 per day and $10,000 in the aggregate for each employee in paid family & medical leave. Additionally, employers wouldn’t be required to pay more than $511 per day and $5,110 in the aggregate for sick leave; or more than $200 per day and $2,000 in the aggregate to care for a quarantined individual or child for each employee in paid leave.
- These Provision will apply from April 1, 2020 through December 31, 2020
8B. Employee Retention Credit
- Employers whose operations were fully or partially suspended due to a coronavirus-related shutdown order, or whose gross receipts declined by more than 50% compared to the same quarter the prior year, would be eligible for an employee retention credit
- It would be a refundable payroll tax credit for 50% of wages paid by employers to employees during the COVID-19 crisis and based upon qualified wages paid to the employee.
- For employers with 100 or fewer full-time employees, all employee wages would qualify for the credit, whether the employer is open for business or subject to a shutdown order.
- The credit would be provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee or incurred from March 13, 2020 through December 31, 2020.
- Wages also do not include paid family and/or sick leave under the Families First Coronavirus Response Act for which a credit is taken
- Employers may file new Form 7200, Advance Payment of Employer Credits Due to COVID-19, to obtain advances of employment taxes that are refundable as a result of the new tax credits
- Employers can file the form for advance credits anticipated for a quarter at any time before the end of the month following the quarter in which the employer paid the qualified wages. Employers are permitted to file Form 7200 several times during each quarter. Employers should not file Form 7200 after they file Form 941, Employer’s Quarterly Federal Tax Return, for the fourth quarter of 2020, and should not file the form to request advance credits for any anticipated credit for which the employer has already reduced its employment tax deposits.
- Employers file Form 7200 by faxing the completed form to 855-248-0552.
- Any wages for which the employer receives tax credits for qualified leave wages are not includable in ‘payroll costs’ for the loan forgiveness under the CARES Act.
8C. Deferment of Payroll Tax Payment
- Employers & self-employed individuals would be allowed to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government (employers are responsible for paying a 6.2% Social Security tax on employee wages).
- The deferred employment tax would be required to be paid over the following two years, with half to be paid by December 31, 2021, and the other half by December 31, 2022.
- Does not apply if employer receives loan forgiveness under the Payroll Protection Loan Program.
Net Operating Losses
- This provision would allow losses from 2018, 2019, or 2020 to be carried back five years, and would temporarily remove the taxable income limitation of 80% to allow an NOL to fully offset income. These changes would allow companies to utilize losses & amend prior years’ returns to free up cash flow & liquidity during the COVID-19 pandemic, and would also be available to passthrough businesses & sole-proprietors.
- Businesses (especially those in the hospitality industry) can immediately write off costs associated with improving facilities instead of having to depreciate those improvements over the 39-year life of the building
Paycheck Protection Program Loans/Small Business Interruption Loans (Forgivable Loans, under Phase III Relief, issued by SBA 7(a) lenders)
- Loans under the Paycheck Protection Program would equal 250% of an employer’s average monthly payroll, up to a maximum loan amount of $10 million, and would have a 100% federal guarantee. Covered payroll costs include salary, wages, commission, and payment of cash tips up to an annual pay rate of $100,000; employee group healthcare benefits, including insurance premiums; retirement contributions; and covered leave. Payments to independent contractors do not count as ‘employee’ payroll costs.
- For Sole Proprietors, Independent Contractors, and Self-Employed Individuals: The sum of payments of any compensation to or income of a sole proprietor or independent contractor that is a wage, commission, income, net earnings from self-employment, or similar compensation and that is in an amount that is not more than $100,000 in one year, as pro-rated for the covered period
- Other allowable uses under business interruption loans include mortgage payments, rent, utilities, and any other debt obligations that were incurred before the covered period
- Borrowers would be eligible for loan forgiveness equal to the amount spent by the borrower on payroll costs during an 8-week period after the loan origination date (including additional wages to tipped workers), interest payment on any mortgage incurred prior to February 15, 2020, rent payment on a lease in force prior to that date, and utility payment for service which began prior to that date.
- To encourage employers to rehire employees who have already been laid off due to the COVID-19 crisis, borrowers that re-hire workers previously laid off wouldn’t be penalized for having a reduced payroll at the beginning of the loan period. You have until June 30 to restore your full-time employment and salary levels for any changes made between February 15 and April 26.
- The amount of any loan forgiveness will be reduced by any reductions in employee wages (in excess of 25% for any employee) or a reduction in the number of employees during the covered period
- At least 75% of the forgiven loan amount must have been used for payroll
- Debt forgiveness under this section is excluded from gross income
- Loans will have maximum maturity of 2 years, rate of 1%.
- There is no personal guarantee or collateral associated with the loan.
- You will not have to make payments on the loan for at least six months.
- Retroactive to February 15, 2020, so that 7(a) SBA loans originated from February 15, 2020 on are subject to the PPP
- Waives borrower and lender fees related to loan as well as prepayment penalties
- Can apply for this loan until June 30th 2020
- Lenders can rely upon specified documents provided by the borrower to determine qualifying loan amount and eligibility for forgiveness. You should determine the appropriate process and required documentation that the lender will require as application processes may vary by lender. In addition, some lenders have indicated that they will not begin their application process on April 3, 2020, as they seek additional guidance from the SBA. You should confirm with your lender on final application procedures and timing. Note the SBA allows e-signatures or e-consents if a borrower has multiple owners.
SBA’s Economic Injury Disaster Loan – Phase II relief
- Loan size up to $2 million
- Small businesses are eligible
- The following requirements of traditional EIDL’s are waived for as to the expanded EIDL’s provided under the CARES Act: (i) borrowers provide personal guarantees; (ii) borrowers must have been in business for one year before the disaster; and (iii) borrowers show that they are unable to get credit elsewhere.
- SBA can determine loan eligibility based solely on the applicant’s credit score or use of an alternative appropriate method for determining an applicant’s ability to repay
- Interest rate is 3.75%
- Up to 30 years term
- Used for Accounts payable, payroll, debts, and other bills
- The SBA must waive any personal guarantee on loan advances or loans under $200,000
- $10,000, which is forgivable debt, to small businesses within 3 days of the business applying for the loan
- Deadline to apply is December 31st 2020
- If a borrower received an SBA EIDL loan from Jan. 31, 2020 through April 3, 2020, it can apply for a PPP loan. If the EIDL loan was not used for payroll costs, it does not affect eligibility for a PPP loan. If the EIDL loan was used for payroll costs, the PPP loan must be used to refinance your EIDL loan. Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.
Florida Annual Reports
- The time requirements for business entities to file annual reports are suspended and tolled until June 30, 2020. Any profit corporation, limited liability company, limited partnership or limited liability limited partnership annual report filing will have until July 1, 2020, before a $400 late fee is assessed.
The Florida Small Business Emergency Bridge Loan Program
- Application remitted to Florida Department of Economic Opportunity org.
- Used to bridge liquidity gaps during holding period while business is awaiting insurance proceeds, resumption of normal business and recovery, and federal disaster relief loan proceeds.
- Application deadline of May 8th
- Loan Amount: Up to $50k ($100k in special cases)
- Interest free for one-year term
- Borrower eligibility i. for profit; ii. privately owned; iii. maintains a place of business in any Florida county; iv. existing prior to 3/9/20; v. must have between 2 and 100 employees;
- Borrower must demonstrate significant economic injury as a result of the virus, and the need for loan assistance and use of the proceeds must be directly related to the economic injury caused by the virus.
- Borrower required to sign an agreement that the proceeds of the loan will be used only for purposes of maintaining or restating the business in Florida. Proceeds may be used to pay off exiting debts for business maintenance or restart purposes on a case-by-case basis.
- Borrower must use proceeds to repay in full any previous bridge loans acquired.
- Borrower must certify that the proceeds of insurance claims, other loans applied for or to be applied for, or other financial assistance will be used to repay the bridge loan. This creates an apparent issue and conflict with the initial terms of the Paycheck Protection Program loan which restrict the use of the program’s loan proceeds and the repayment of the Florida bridge loan does not appear to be included in the list of permitted uses.
- Eligibility may be affected by the availability of alternative financial resources.
Tangible Personal Property
- Sarasota County - A 45-Day TPP Filing Extension is being automatically applied to all TPP accounts. For the 2020 tax year, you do not need to complete an extension request to receive it. Should you have TPP related questions, email [email protected].
- Manatee County - Tangible Personal Property (TPP) accounts will be granted an automatic 30-day extension to file their TPP returns, extending the due date for the returns toMay 1st, 2020. Please note that while businesses are not required to submit a request form for an extension, the completed return and all supporting documentation must be submitted to our office by May 1st, 2020.
IRS accepting email and digital signatures on tax documents
- The Internal Revenue Service is now accepting email and digital signatures on tax documents to make it easier for tax professionals and taxpayers to communicate with the agency during the novel coronavirus pandemic.
If you still have questions about COVID-19 relief resources, please email [email protected]
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