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Payroll Tax Provisions for Businesses in the CARES Act

NOTICE – As of April 1, the IRS has posted frequently asked questions that will answer some details not known at the time of this article.  For additional information, please visit the IRS website, click here

These payroll tax provisions are intertwined with many other law changes. Further guidance will be forthcoming from the Internal Revenue Service. We encourage you to reach out to your payroll processing company for additional guidance if you believe these credits will apply to you.

Employee Retention Credit for Employers Subject to Closure due to COVID-19

Certain employers are eligible for a refundable payroll tax credit on wages paid during the crisis (specifically, between March 13, 2020 and December 31, 2020). The credit applies to employers whose businesses are disrupted, suspended, or closed due to COVID-19 but continue to pay their employees during the crisis.

A business becomes eligible if either of two situations occurs:

  1. The operation of the business is fully or partially suspended during any calendar quarter during 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19, or
  2. The business continued to operate, but during any calendar quarter in 2020, gross receipts for the calendar quarter are less than 50 percent of gross receipts for the same calendar quarter in 2019. In this case, the credit applies to each quarter until the business has a quarter in which its gross receipts exceed 80% of gross receipts for the same quarter in 2019.

For each eligible quarter, a business receives a credit against its 6.2% share of Social Security payroll taxes equal to 50% of the qualified wages paid to each employee for that quarter, ending on December 31, 2020.

The business’s qualified wages depend on its size, as follows:

  • If the business averaged more than 100 full-time employees during 2019, qualified wages are limited only to those wages that were paid during the quarter for the period of time during which the business was fully or partially suspended. In other words, these are wages paid to employees who are not providing services during a shutdown.
  • If the business averaged less than 100 full-time employees during 2019, qualified wages include wages paid to employees during a shutdown as well as wages paid during each quarter during which the business saw a significant decline in gross receipts, as described above.

In either case, qualified wages cannot include amounts paid in excess of what an employee would have been paid for working an equivalent amount of time in the 30 days prior to the period of closure or significant reduction in gross receipts.

Also, in either case, qualified wages include any qualified health plan expenses, such as amounts paid or incurred by the business to provide and maintain a group health plan.

Finally, in either case, the amount of qualified wages for each employee for all calendar quarters may not exceed $10,000.

Any wages taken into account in determining the new payroll tax credit for family medical leave or sick leave as part of the previously passed Coronavirus Relief Act may not be taken into account in determining qualified wages for the employee retention credit. An “employer” for purposes of this credit is defined in the same way as it has been in certain other contexts, namely, the rules governing controlled groups of corporations in Section 52 of the Internal Revenue Code, and the “ERISA” rules governing employee benefit plans in Section 414 of the Internal Revenue Code. These rules are complex and should be discussed with your tax advisor or payroll service provider.

Further guidance will likely be produced as to the mechanics of how this credit will be handled with payroll services. Discussion is ongoing and there is a possibility that payroll tax deposits made by the employer will be reduced by the amount of the credit, giving immediate relief.  Until additional guidance is given by the Internal Revenue Service, the relief as currently written would come at the filing of the quarterly payroll report, which is due at the end of the month following the close of a quarter.

The payroll retention credit is refundable if it exceeds a business’s liability for payroll taxes.  It is our understanding that this credit will also be made available at the close of a quarter.

Note that if an employer takes a small business interruption loan under Section 7(a) of the recently passed CARES Act, no employee retention credit is available.

Delayed Payment of Employer Payroll Taxes

In addition to the new payroll tax credits created by the Coronavirus Relief Act and the CARES Act, the CARES Act allows deferral of payment of payroll taxes. The employer’s share of the 6.2% Social Security tax that would otherwise be due from now through December 31, 2020 may be paid, without penalty, by December 31, 2021 (first 50% of 2020 payroll taxes) and by December 31, 2022 (remaining 50% of 2020 payroll taxes).

Note that if an employer takes a small business interruption loan under Section 7(a) of the recently passed CARES Act, no deferral of payment is available.

As your trusted advisors, we are committed to keeping you well-informed with any new legislation passed by Congress as well as any new pronouncements by the Department of Treasury that may affect you. Please do not hesitate to reach out to KHA with any additional questions you may have.  

These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. This is intended for illustrative and discussion purposes only.

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CARES Act Individual Tax Provisions

Individual Tax Provisions Found in the CARES Act

The CARES Act provides tax relief for individuals, specifically in the form of cash rebates and generous deductibility of charitable contributions. 

Recovery Rebates for Individuals

Amount of Assistance

Subject to limitations, an eligible individual will receive $1,200 ($2,400 for individuals filing a joint return).  They are also eligible for an additional $500 per child under age 17.

Eligibility

All U.S. citizens or residents with adjusted gross income under $75,000 ($112,500 for head of household and $150,000 married), who are not a dependent of another and have a social security number are eligible. 

Reduction in Rebate

For those taxpayers whose income exceeds the threshold, the amount of the refund will be reduced by 5% for every dollar the taxpayer’s income exceeds the thresholds stated above.  If a 2019 tax return has not been filed, the 2018 tax return will be used. If a 2018 return has not been filed, information from Form SSA-1099 Social Security Benefit Statement or Form RRB-1099 Social Security Equivalent Benefit Statement will be used.

Date of Payment

The Treasury has not issued information on an expected payment date.  The bill states that the payment will be made as rapidly as possible.  We should anticipate that the payments will be made in batches over a period of time.  There is mention in the bill of a communication campaign by the IRS.  We would recommend regularly visiting the IRS website at www.irs.gov.

Method of Payment

The payment will be sent via direct deposit to any taxpayer that received a tax refund electronically on their 2018 or 2019 Form 1040.  If the bank information is not available, the payment will be mailed in the form of a paper check.  After the IRS payment is sent, the Treasury Secretary will provide written notice to the taxpayer’s last known address. The notice will inform the taxpayer of the method the payment was made, the amount of the payment, and a phone number to contact the IRS to report failure to receive payment.

2020 Tax Return Filing Related to the Rebate

The rebates are essentially an advance payment of a tax credit to be received on each taxpayer’s 2020 individual income tax returns.

The 2019 or 2018 tax returns will be used to calculate the rebate advance to taxpayers, but taxpayers eligible for a larger rebate based on their 2020 income will receive it when filing their 2020 tax return.  Taxpayers with higher incomes in 2020 than in 2018 or 2019 will have their excess rebate forgiven.

The rebates will not be taxable income for 2020.

Allowance of Partial Above the Line Deduction for Charitable Contributions

For 2020, a new deduction of up to $300 of qualified charitable contributions will be allowed. This deduction will be taken as an “above the line” deduction to arrive at your adjusted gross income.  In other words, taxpayers who do not claim itemized deductions will be able to benefit from the charitable contribution of up to $300.

An eligible individual is a taxpayer who files a tax return and does not elect to itemize their deductions.  The charitable contribution must be made in cash and donated to a qualified charity and not a donor advised fund or a private non-operating foundation.

Sec. 2205. Modification of Limitations on Charitable Contributions during 2020

For 2020, there is a temporary suspension of limitations on certain cash contributions. Prior to 2020, cash contributions were limited to 60% of a taxpayer’s adjusted gross income. For 2020, the deduction will be allowed for up to 100% of adjusted gross income with any excess carried over to the next five years.

As your trusted advisors, we are committed to keeping you well-informed with any new legislation passed by Congress as well as any new pronouncements by the Department of Treasury that may affect you. Please do not hesitate to reach out to KHA with any additional questions you may have.  

These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. This is intended for illustrative and discussion purposes only.

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Business Tax Provisions in the CARES Act

Modifications for Net Operating Losses

The net operating loss (NOL) rules applicable to individuals and C Corporations recently changed and will now change again. To avoid confusion, let’s review:

Prior to 2018, NOLs could be carried back two years and carried forward 20 years, and there was no limit to the amount of income to which such losses could be applied.

When the Tax Cuts and Jobs Act (TCJA) was passed late in 2017, one of the revenue raising provisions was a change in the NOL rules. Such losses could no longer be carried back to years prior to 2018, they could now be carried forward indefinitely, and they were limited to 80% of taxable income in any given year.

Under the CARES Act, NOLs from 2018, 2019, and 2020 can now be carried back for up to five years. The election to forgo the carryback and carry losses forward instead has returned, and any losses carried to 2019 and 2020 may offset 100% of taxable income, rather than the 80% limit imposed by the TCJA.

We want to emphasize that this new provision allows taxpayers to take losses back to tax years when the tax brackets were higher. Given the right scenario, this could be an excellent tax saving opportunity. This new provision may provide opportunities to file amended returns and obtain refunds for taxes paid in prior years. Reach out to KHA to assess your specific tax situation if you think this might apply to you.

Modification of Limitation on Losses for Taxpayers other than Corporations

Ordinarily, taxpayers face several limitations on whether they are allowed to deduct losses from certain activities. These factors include a taxpayer’s basis in an investment, whether the taxpayer is at risk if an investment does not succeed, and whether the taxpayer is active or passive in the activity.

A second revenue raising provision of the Tax Cuts and Jobs Act (TCJA) of 2017 was a fourth limitation on using certain losses. A new subsection of the Internal Revenue Code, Section 461(l), limited an individual’s net business loss (which could be used to offset other income) in any given year to $250,000 (if single) or $500,000 (if married filing jointly). Any excess loss is now converted into a net operating loss (NOL) in the following year. See prior section for changes to the NOL rules.

The CARES Act temporarily suspends Section 461(l) for 2020 and retroactively to 2018. This may provide opportunities to file amended returns and obtain refunds if Section 461(l) limited deductions in 2018 and 2019.  Reach out to KHA to see if this change in the tax law applies to you.

Modifications of Limitation on Business Interest

A third revenue raising provision of the Tax Cuts and Jobs Act (TCJA) of 2017 was a new limitation on the deductibility of business interest expense. In very simple terms, the limited amount was 30% of “adjusted taxable income,” which in the TCJA’s initial years was an amount similar to EBITDA (earnings before interest, taxes, depreciation, and amortization). For tax years beginning after December 31, 2021, adjusted taxable income will approximate 30% of EBIT and will not be adjusted for depreciation and amortization.

The CARES Act expands the limitation for 2019 and 2020, from 30% of adjusted taxable income to 50% of adjusted taxable income. Since many businesses could experience losses and have no taxable income for 2020, the Act also allows businesses to use their 2019 adjusted taxable income when computing their 2020 limitations. Therefore, this provision will allow businesses to take on more debt during the crisis without being penalized as heavily by the tax code.

Any excess business interest expense is carried forward, at the business level for S corporations, and at the partner level for partnerships. Under the CARES Act, partnerships cannot use the 50% limit for 2019, but in 2020, 50% of any interest suspended at the partner level will be fully deductible, and 50% of the remaining amount will be suspended until the partner has accumulated enough excess taxable income or excess interest income to take the suspended deduction.

Technical Amendments Regarding Qualified Improvement Property

In the tax professional community this was a much-anticipated technical correction.  Sadly it took a pandemic to get the fix we have been awaiting since 2017.

Qualified Improvement Property (QIP) came into being in 2016 as a result of the PATH Act, passed late in 2015. QIP is “any improvement to an interior portion of a building which is nonresidential real property if such improvement is placed in service after the date such building was placed in service.” It does not include expenditures for the enlargement of a building, elevators or escalators, or the internal structural framework of a building. Unlike asset classes that preceded QIP, like qualified leasehold improvements, qualified restaurant property, and qualified retail improvement property, QIP does not need to be subject to a lease between unrelated parties, and there is no longer a three year waiting period for a property to be considered QIP.

When the Tax Cuts and Jobs Act (TCJA) was passed late in 2017, it was clear from the record that Congress intended to allow greatly accelerated depreciation on qualified improvement property (QIP). However, Congress infamously failed to give QIP a 15-year life instead of a 39-year life, which excluded QIP from those types of property that are eligible for bonus depreciation, which is 100% depreciable from September 27, 2017 through December 31, 2022. This oversight became known as “the retail glitch,” and Congressional Republicans sought to make a “technical correction” as part of various larger bills over the past couple of years, but were unable to negotiate enough support to repair the glitch.

The CARES Act includes the needed technical correction. QIP now has a 15-year life and is eligible for bonus depreciation. The change has been made retroactive to January 1, 2018.  This will provide opportunities for certain taxpayers to amend previously filed tax returns and obtain refunds.  Reach out to KHA if you think this might apply to you.

As your trusted advisors, we are committed to keeping you well-informed with any new legislation passed by Congress as well as any new pronouncements by the Department of Treasury that may affect you. Please do not hesitate to reach out to KHA with any additional questions you may have.  

These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. This is intended for illustrative and discussion purposes only.

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New Unemployment Provisions Established in the CARES Act

Last week Congress provided relief for Americans, businesses, and healthcare institutions through a record stimulus deal in response to the COVID-19 pandemic, The Coronavirus Aid, Relief, and Economic Security Act (CARES).  The Senate passed H.R. 748 Wednesday March 25, 2020, later approved by the House on Friday March 27, 2020, and ultimately signed by the President on March 27, 2020.

Congress provided generous provisions found within Title II, Subtitle A.  This legislation is known as the “Relief for Workers Affected by Coronavirus Act.”  It provides for substantial unemployment compensation for the unemployed, under-employed, and self-employed, among others. Additional installments will address the other major components of The Coronavirus Aid, Relief, and Economic Security Act (CARES).  You may access the full text of the law at the following link: https://www.congress.gov/bill/116th-congress/house-bill/748/text/enr?q=%7B%22search%22%3A%5B%22hr748%22%5D%7D&r=1

Eligibility

Aid is available for covered individuals who are not eligible for regular compensation or standard state unemployment compensation benefits.  The definition of a covered individual is quite broad and describes many situations in which the individual could request aid.  Essentially, if the worker is affected by COVID-19 in any way, the individual is a covered individual for these purposes.  It’s important to emphasize that this law includes the self-employed as covered individuals.  The only specific exclusions identified in the law are those who can telework with pay and those receiving paid sick leave or paid family leave.

Amount of Assistance – Employed Individuals

The amount of assistance allowed in this bill is the amount that the state unemployment commission would calculate, plus $600 per week.  This additional amount is considered, “Federal Pandemic Unemployment Compensation.”  In the state of Texas, the maximum amount of assistance that can be requested is $465 per week.  With the added pandemic payment, the maximum payment will be $1065 per week.

Amount of Assistance – Self-Employed Individuals

The amount of assistance to self-employed individuals will be equal to one-quarter of the state’s average weekly benefit amount, plus $600.  The House of Representatives Ways and Means Committee estimates this to be approximately $675 a week on average.  Contact your state unemployment commission for further information and for a calculation that applies to your situation. 

Time Periods, Duration, Waiting Period

The Act states that relief can be made available for weeks of unemployment, partial unemployment or inability to work including the dates January 27, 2020 through December 31, 2020 as long as the reason for the inability to work continues to be related to COVID-19.  The duration of the assistance is an additional 13 weeks.  This is in addition to what the state typically covers.  Most states cover up to 26 weeks.  The maximum coverage under this law is 39 weeks, subject to certain limitations.  Additionally, the Act dictates no waiting period for this assistance.

Coordination with Other Benefits

If an individual is already receiving unemployment benefits, this new law provides the additional $600 per week pandemic payment to be paid out for four months.

Other Considerations

There are other special considerations for those individuals who were about to start work, job entrants, nonprofits, tribal organizations, and local governments. 

It’s important to note that considering the pay history, certain individuals might be paid more than their regular compensation under this provision.  There is risk that employees will not be incentivized into returning to work until the benefit period is exhausted.

Next Steps

If you believe you qualify for the new federal unemployment benefits, visit your state’s unemployment commission for additional information on how to apply.

As your trusted advisors, we are committed to keeping you well-informed with any new legislation passed by Congress as well as any new pronouncements by the Department of Treasury that may affect you. Please do not hesitate to reach out to KHA with any additional questions you may have.  

These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. This is intended for illustrative and discussion purposes only.

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Other Provisions Found in Title I: Keeping American Workers Paid and Employed Act

Other Provisions within Title I of the CARES Act

Last week Congress provided relief for Americans, businesses, and healthcare institutions through a record stimulus deal in response to the COVID-19 pandemic, The Coronavirus Aid, Relief, and Economic Security Act (CARES).  The Senate passed H.R. 748 Wednesday March 25, 2020, later approved by the House on Friday March 27, 2020, and ultimately signed by the President on March 27, 2020.

Other Provisions found in Title I: Keeping American Workers Paid and Employed Act

The majority of the Keeping American Workers Paid and Employed Act is focused on lending to small businesses to allow for payroll to be maintained during the COVID-19 pandemic.  We will address only the minor provisions of Title I here.  Additional installments will address the other major components of The Coronavirus Aid, Relief, and Economic Security Act (CARES).  You may access the full text of the law at the following link: https://www.congress.gov/bill/116th-congress/house-bill/748/text/enr?q=%7B%22search%22%3A%5B%22hr748%22%5D%7D&r=1

The less impressive section of Title I focuses on increases in SBA Express loan maximums, economic injury and disaster loan grant funds, and SBA Loans originated under the Community Advantage Pilot Program.

SBA Express Loans Increased Amount

As part of the Act, SBA express loans were increased from $350,000 to $1,000,000.

Economic Injury Disaster Loan Grants

The Act also allocates $10 billion in grant funds up to $10,000 per business entity that must be disbursed within 3 days of application received. The administrator will verify eligibility and certification.

Funds can be used for providing paid sick leave to employees unable to work due to the direct effect of COVID-19, maintaining payroll to retain employees during business interruptions or substantial downturns, meeting increased costs to obtain materials unavailable from original sources, making rent or mortgage payments, and repaying obligations that cannot be met due to revenue losses.

No repayment is required if used for appropriate purposes. This program ends on December 31, 2020 or until funds have been exhausted.

Relief for 6 Months for Certain Currently Outstanding SBA Loans

For those SBA loans originated under the Community Advantage Pilot Program, the Act sets aside funds to pay the principal, interest, and any associated fees for 6 months after enactment.

Where to Go to Apply

For SBA Express Loans, visit www.SBA.gov.

For Economic Injury Disaster Loan Grants, visit https://www.sba.gov/disaster/apply-for-disaster-loan/index.html

For relief relating to certain currently outstanding SBA Loans, those qualifying should automatically be receiving the assistance. For further details visit www.SBA.gov.

What may be most impactful for the small business owner is knowing the options available to you for loans, possible grants, and existing SBA loans. Also, in the event you do have to lay off employees, or already have, there are provisions for Unemployment Insurance in Title II of the Act.  Future installments will cover other provisions of the CARES Act that we find will provide value for our clients.

As your trusted advisors, we are committed to keeping you well-informed with any new legislation passed by Congress as well as any new pronouncements by the Department of Treasury that may affect you. Please do not hesitate to reach out to KHA with any additional questions you may have.  

These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. This by no means is a recommendation to obtain a loan or attempt to apply for a loan. There are many unknowns at this time regarding what other stimulus (grants or other loan options) that may become available with pending and future bills, executive orders, or emergency declarations to follow, that may become laws. Consult your legal and business advisors prior to making financing decisions. This is intended for illustrative and discussion purposes only.

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Lending Provisions Found in Title I: Keeping American Workers Paid and Employed Act

New Lending Provision Known as CARES-7(a)

Last week Congress provided relief for Americans, businesses, and healthcare institutions through a record stimulus deal in response to the COVID-19 pandemic, The Coronavirus Aid, Relief, and Economic Security Act (CARES).  The Senate passed H.R. 748 Wednesday March 25, 2020, later approved by the House on Friday March 27, 2020, and ultimately signed by the President on March 27, 2020.

Lending Provisions found in Title I: Keeping American Workers Paid and Employed Act

The majority of the Keeping American Workers Paid and Employed Act is focused on lending to small businesses to allow for payroll to be maintained during the COVID-19 pandemic.  We will address only the loan provisions informally known as CARES-7(a). Future installments will address  other major components of The Coronavirus Aid, Relief, and Economic Security Act (CARES).  You may access the full text of the law at the following link: https://www.congress.gov/bill/116th-congress/house-bill/748/text/enr?q=%7B%22search%22%3A%5B%22hr748%22%5D%7D&r=1

The most impressive section of Title I focuses on relief for businesses with fewer than 500 employees, including self-employed individuals and nonprofits.  The Title refers to these loans as “paycheck protection loans” and are very generous in terms.  Additionally, there are provisions in the bill that allow for certain loans to be forgiven.  For those qualifying businesses, it will be hard to find reasons not to seriously consider applying for this loan.    

Eligibility

The Act defines eligible businesses very specifically. If the organization was in operation on February 15, 2020, had employees for whom salaries and payroll taxes were paid or independent contractors, and employs less than 500 employees, it is an eligible business.  Unique to this loan as compared to other SBA loans, the Act also extends the potential of a covered loan to sole proprietors, independent contractors, and eligible self-employed individuals, to include the “gig” worker economy.

Employee Count

The Act defines employee count in a unique way.  When defining 500 employees, it states that any employee, whether full-time, part-time, or other basis is to be counted.  It also states that if the business meets the size standards as defined by the Small Business Administration for its industry, it can apply.  Also uncommon to this definition is that businesses who fit in code 72 of the North American Industry Classification System (NAICS) are granted the ability to count each physical location separately.  Code 72 generally includes the restaurant industry.

Allowable Loan Amount

The Act sets aside $349 billion for these loans and the SBA will participate 100% in these loans. Barring a few minor exceptions, the maximum loan amount under the Act is derived by taking the average monthly payroll related costs, excluding compensation in excess of $100,000, for the 1-year period preceding the loan date and multiplying by 2.5.  From that number any disaster loan already taken under EIDL January 31, 2020 or after is added to the provisional loan amount.  The maximum loan amount cannot exceed $10 million.

Allowable Uses

The funds can be used for payroll costs, benefits, rent, utilities, and interest on any debt obligation incurred before the covered period.

Loan Forgiveness

In certain circumstances, these loans can be forgiven.  In general, the period beginning on the loan date and ending 8-weeks from that date will be used.  Expenses such as payroll costs, interest, rent, and utilities are added together.  From that total, a ratio of FTE employees is derived based on specific reporting dates.  Generally, employees that are paid in excess of $100,000 are excluded from this calculation.  From that multiple the SBA will forgive that portion of the loan. 

The borrower will be able to choose the FTE count.  The choices are either February 15, 2019 to June 30, 2019 or January 1, 2020 to February 29, 2020. Employers with tipped workers may receive forgiveness for additional wages paid to those employees. For those employers with workers who have already been laid off or experienced reduced pay, there is a re-hire exemption if corrected by June 30, 2020.

Once documentation is submitted, the lender has 60 days to make such a determination on the validity of forgiveness documentation. We want to point out that this forgiveness will be excluded from gross income for taxation purposes.  We believe it’s important to repeat this statement.  Loan forgiveness will be excluded from taxable income.

The remaining balance not forgiven could have a repayment term not to exceed 10 years and will be determined at the time of the forgiveness amount validation.

What’s the catch?

Does this sound too good to be true right?  There really are not many negatives.    

Are they recourse? No.

Are there fees? Not as many as normal SBA loans and the guarantee and annual fees are waived along with fees and penalties for early repayment.

Are there personal guarantees or collateral requirements? Not during the covered period.

Can I apply if I have credit at another institution? Yes.

The interest rate must be high? The Act directs that the loans should not bear interest above 4 percent.

I won’t have the funds to start repaying this loan immediately. It’s okay, the Act requires that payments are deferred for 6 to 12 months, which includes principal, interest, and fees.

I already applied for and accepted a loan made under 7(b)(2) EIDL Disaster Loan.  Can I have both? The EIDL loan may be refinanced into this loan as the maximum allowable loan amount for the CARES 7(a) loan includes components for the inclusion of the principal outstanding on an EIDL loan originated on or after January 31, 2020.  You are prohibited from applying to both at the same time. 

Can I take the Employee Retention Credit (payroll tax credit for employers subject to closure)? No.

Can I delay the payment of employer payroll taxes to December 31, 2021 and December 31, 2022 as provided under this law? No.

Where to go to apply

The Act allows the Small Business Administration and Secretary of the Treasury to extend the loan application process and administration to qualified lenders. As such, contact your lender or feel free to reach out to your primary KHA contact for referrals.

What may be most impactful for the small business owner is knowing the options available to you for loans, possible grants, and existing SBA loans. Also, in the event you do have to lay off employees, or already have, there are provisions for Unemployment Insurance in Title II of the Act.  Future installments will cover other provisions of the CARES Act.

As your trusted advisors, we are committed to keeping you well-informed with any new legislation passed by Congress as well as any new pronouncements by the Department of Treasury that may affect you. Please do not hesitate to reach out to KHA with any additional questions you may have.  

These sources are simply included for informational purposes. KHA Accountants, PLLC, its partners and others do not provide any assurance as to the accuracy of these items or the information included therein. As such, KHA Accountants, PLLC cannot be held liable for any information derived from referenced sources. This by no means is a recommendation to obtain a loan or attempt to apply for a loan. There are many unknowns at this time regarding what other stimulus (grants or other loan options) that may become available with pending and future bills, executive orders, or emergency declarations to follow, that may become laws. Consult your legal and business advisors prior to making financing decisions. This is intended for illustrative and discussion purposes only.

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FFCRA Exemptions for for Health Care Providers and Emergency Responders

FFCRA Exemptions for Health Care Providers and Emergency Responders

By:  Shannon D. Norris
Norris Law Firm, PLLC
735 Plaza Boulevard, Suite 200
Coppell, Texas 75019
Direct: (214) 396-3345
sdnorris@norrisfmrm.com

FFCRA Requirements

The Families First Coronavirus Response Act (FFCRA) generally provides that covered employers must provide to all employees:

  • Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
  • Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor.

A covered employer must provide to employees that it has employed for at least 30 days:

    • Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee’s regular rate of pay where an employee is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.

Employer Exclusion for Health Care Providers and Emergency Responders

The FFCRA provides that an employer of a health care provider or emergency responder may exclude the employee from eligibility for paid sick leave and family leave under the Act.

The U.S. Department of Labor has issued the following guidance on applying this exception:

Who is a “health care provider” for purposes of determining individuals whose advice to self-quarantine due to concerns related to COVID-19 can be relied on as a qualifying reason for paid sick leave?

The term “health care provider,” as used to determine individuals whose advice to self-quarantine due to concerns related to COVID-19 can be relied on as a qualifying reason for paid sick leave, means a licensed doctor of medicine, nurse practitioner, or other health care provider permitted to issue a certification for purposes of the FMLA.

Who is a “health care provider” who may be excluded by their employer from paid sick leave and/or expanded family and medical leave?

For the purposes of employees who may be exempted from paid sick leave or expanded family and medical leave by their employer under the FFCRA, a health care provider is anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, employer, or entity. This includes any permanent or temporary institution, facility, location, or site where medical services are provided that are similar to such institutions.

This definition includes any individual employed by an entity that contracts with any of the above institutions, employers, or entities institutions to provide services or to maintain the operation of the facility. This also includes anyone employed by any entity that provides medical services, produces medical products, or is otherwise involved in the making of COVID-19 related medical equipment, tests, drugs, vaccines, diagnostic vehicles, or treatments. This also includes any individual that the highest official of a state or territory, including the District of Columbia, determines is a health care provider necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.

To minimize the spread of the virus associated with COVID-19, the Department encourages employers to be judicious when using this definition to exempt health care providers from the provisions of the FFCRA.

Who is an emergency responder?

For the purposes of employees who may be excluded from paid sick leave or expanded family and medical leave by their employer under the FFCRA, an emergency responder is an employee who is necessary for the provision of transport, care, health care, comfort, and nutrition of such patients, or whose services are otherwise needed to limit the spread of COVID-19. This includes but is not limited to military or national guard, law enforcement officers, correctional institution personnel, fire fighters, emergency medical services personnel, physicians, nurses, public health personnel, emergency medical technicians, paramedics, emergency management personnel, 911 operators, public works personnel, and persons with skills or training in operating specialized equipment or other skills needed to provide aid in a declared emergency as well as individuals who work for such facilities employing these individuals and whose work is necessary to maintain the operation of the facility. This also includes any individual that the highest official of a state or territory, including the District of Columbia, determines is an emergency responder necessary for that state’s or territory’s or the District of Columbia’s response to COVID-19.

To minimize the spread of the virus associated with COVID-19, the Department encourages employers to be judicious when using this definition to exempt emergency responders from the provisions of the FFCRA.

Further Information

The U.S. Department of Labor has published guidance that answers many common questions about the FFCRA. You may obtain that information here:

Fact Sheets

Questions and Answers

Posters

Employers should watch for additional updates. The U.S. Department of Labor will be issuing additional compliance assistance and intends to issue implementing regulations in April.

This post was prepared for informational purses only.  To obtain more information please contact:  Shannon D. Norris 

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FFCRA Exemptions for Small Businesses

FFCRA Exemptions Small Businesses

By:  Shannon D. Norris
Norris Law Firm, PLLC
735 Plaza Boulevard, Suite 200
Coppell, Texas 75019
Direct: (214) 396-3345
sdnorris@norrisfmrm.com

FFCRA Requirements

The Families First Coronavirus Response Act (FFCRA) generally provides that covered employers must provide to all employees:

  • Two weeks (up to 80 hours) of paid sick leave at the employee’s regular rate of pay where the employee is unable to work because the employee is quarantined (pursuant to Federal, State, or local government order or advice of a health care provider), and/or experiencing COVID-19 symptoms and seeking a medical diagnosis; or
  • Two weeks (up to 80 hours) of paid sick leave at two-thirds the employee’s regular rate of pay because the employee is unable to work because of a bona fide need to care for an individual subject to quarantine (pursuant to Federal, State, or local government order or advice of a health care provider), or care for a child (under 18 years of age) whose school or child care provider is closed or unavailable for reasons related to COVID-19, and/or the employee is experiencing a substantially similar condition as specified by the Secretary of Health and Human Services, in consultation with the Secretaries of the Treasury and Labor.

A covered employer must provide to employees that it has employed for at least 30 days:

  • Up to an additional 10 weeks of paid expanded family and medical leave at two-thirds the employee’s regular rate of pay where an employee is unable to work due to a bona fide need for leave to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19.

Small Employer Exemption

Employers with fewer than 50 employees may also claim an exemption from providing childcare-related paid sick leave and expanded family and medical leave if providing the leave would jeopardize the viability of my business as a going concern. It is not necessary to submit any materials to the U.S. Department of Labor when seeking the small business exemption.

The DOL has issued the following guidance on this exemption:

When does the small business exemption apply to exclude a small business from the provisions of the Emergency Paid Sick Leave Act and Emergency Family and Medical Leave Expansion Act?

An employer, including a religious or nonprofit organization, with fewer than 50 employees (small business) is exempt from providing paid sick leave and expanded family and medical leave due to school or place of care closures or child care provider unavailability for COVID-19 related reasons when doing so would jeopardize the viability of the small business as a going concern. A small business may claim this exemption if an authorized officer of the business has determined that:

    1. The provision of paid sick leave or expanded family and medical leave would result in the small business’s expenses and financial obligations exceeding available business revenues and cause the small business to cease operating at a minimal capacity;
    2. The absence of the employee or employees requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the small business because of their specialized skills, knowledge of the business, or responsibilities; or
    3. There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee or employees requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the small business to operate at a minimal capacity.

If I am a small business with fewer than 50 employees, am I exempt from the requirements to provide paid sick leave or expanded family and medical leave?

A small business is exempt from certain paid sick leave and expanded family and medical leave requirements if providing an employee such leave would jeopardize the viability of the business as a going concern. This means a small business is exempt from mandated paid sick leave or expanded family and medical leave requirements only if the:

    • employer employs fewer than 50 employees;
    • leave is requested because the child’s school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons; and
    • an authorized officer of the business has determined that at least one of the three conditions described in the previous question is satisfied.

Further Information

The U.S. Department of Labor has published guidance that answers many common questions about the FFCRA. You may obtain that information here:

Fact Sheets

Questions and Answers

Posters

Employers should watch for additional updates. The U.S. Department of Labor will be issuing additional compliance assistance and intends to issue implementing regulations in April.

This post was prepared for informational purses only.  To obtain more information please contact:  Shannon D. Norris 

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IRS Unveils New People First Initiative

The IRS unveiled the new “People First Initiative” which intends to temporarily adjust and suspend some compliance programs.

IRS has established a series of relief to assist taxpayers.  Highlights of the initiatives are:

Existing Installment Agreements

Taxpayers who are in an existing installment agreement are being relieved of payments due between April 1 and July 15, 2020. The IRS will not default any installment agreements; however, interest will continue to accrue on unpaid balances.

Offers in Compromise (OIC)

For pending applications, the new deadline will be July 15, 2020 to provide information.

Taxpayers have the option to suspend payments on accepted OICs until July 15, 2020 although interest will continue to accrue on unpaid balances.

Liens and Levies

Liens and levies will be suspended during this period.  High-income non-filers will still be pursued by field revenue officers during this time. 

Passport Certifications

This activity will be suspended during this time.

Private Debt Collection

This activity will be suspended during this time.

Field, Office and Correspondence Audits

Most new audits are currently suspended at during this time.

More details will continue to be revealed by the Internal Revenue Service.  For the most current information visit: https://www.irs.gov/newsroom/irs-unveils-new-people-first-initiative-covid-19-effort-temporarily-adjusts-suspends-key-compliance-program

Please be advised

We have summarized available public information about this program and how it could affect you.  We make no representations that we will update this information for subsequent changes.  There are details that are not yet finalized.  Please check the IRS website frequently for updated information or contact KHA Accountants, PLLC for additional information.

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Stimulus deal will include checks

Client Communication – March 27, 2020

Stimulus deal will include checks

The stimulus deal expected to be passed by the House and signed into law by the President will include sending checks directly to individuals.  It is expected to take several weeks before the checks are distributed. 

The Treasury plans to mail checks to the last address listed on the most recently filed tax return; either 2019 or 2018.  If the tax returns were electronically filed, its possible that the refund will be generated sooner. 

If a taxpayer or taxpayer’s dependent has moved since filing a tax return, then a form 8822, “Change of Address” should be completed.  Time is of the essence, as it will take the Internal Revenue Service some time to process the change of address form.  

A link to the Form 8822 is provided here: https://www.irs.gov/pub/irs-pdf/f8822.pdf

Please be advised

We have summarized available public information about this program and how it could affect you.  We make no representations that we will update this information for subsequent changes.  There are details that are not yet finalized.  Please contact KHA Accountants, PLLC for questions regarding additional information.

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