We hope this message finds you healthy and optimistic about the days ahead. We are in uncertain times and facing uncharted territory, but together, we will persevere! We are with you and have spent the weekend reviewing the hundreds of pages that make up the country’s largest ever stimulus package. This law seeks to assist individuals and businesses by providing grants, loans, and tax credits. There are also some regulatory changes that provide temporary relief under certain circumstances. The list below contains some of the most helpful components of the new and previous acts. Please review and let us know if you have any questions. We are here to help!
Families First Coronavirus Response Act, P.L, 116-127, signed into law on March 18, 2020
The law requires eligible employers to pay full time employees up to 80 hours of paid sick leave, it expands family and medical leave for workers affected by the coronavirus, and it created refundable credits for eligible employers. The law also requires employers with fewer than 500 employees to provide paid leave to employees who are impacted by COVID-19 and offer tax credits to employers that do so.Key Points:
- Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the act.
- Businesses with under 50 employees are exempt from the requirement if it jeopardizes the continuity of the business.
- Under the Act, employers can reduce payroll taxes to cover the cost of paid leave up to specified maximums for these purposes. Paid leave in excess of payroll tax liability can be requested through an IRS claim.
- The Self-Employed (without payroll) will claim the credits on their income tax return and can, therefore, reduce estimated tax payments
- Effective date: April 1, 2020 – Dec. 31, 2020.
Coronavirus Aid, Relief, and Economic Security (CARES) Act signed into law on March 27, 2020
Individuals will receive a one-time direct payment in the amount of $1,200 for individuals earning $75,000 or less, $2,400 for individuals filing a joint return earning $150,000 or less, $1,200 for heads of household earning $112,500 or less, and $500 per child.
- Payment is reduced by 5 percent for earnings over those dollar amounts and would go away at $99,000 for individuals and $198,000 for married people.
- Folks who have been claimed as a dependent will likely not receive a check
- 2019 returns or social security documents will be used to determine payment amounts.
- Generally, TIN filers will not receive a stimulus check.
Federal Student loan payments are suspended and no new interest will be accrued on the loans until September 30, 2020.
Generally, landlords will be unable to evict tenants in federally backed/secured properties.
No Penalty and Deferred Taxes on Retirement DistributionsThe Act provides no early withdrawal penalty on distributions from retirement plans or IRAs to “impacted” individuals of up to $100,000.
- Applies to distributions from January 1, 2020 through December 31, 2020
- The distribution may be taxed over three years instead of 100 percent in 2020.
- These distributions can also be repaid at any time during the three years after the distributions.
Employee Retention Credit for EmployerEmployers can claim a refundable tax credit against employer Social Security tax equal to 50 percent of wages paid by employers to employees during the COVID-19 crisis, up to $10,000 per employee.
- The credit is available to employers whose operations are either fully or partially suspended due to the virus or who experienced a 50% reduction in gross receipts when compared to the same quarter of the prior year.
- Employers taking advantage of other credits or taking a small business interruption loan are not eligible for this credit
Deferral of Employer Social Security Taxes
- Employers can defer payment of the employer share of the Social Security tax, beginning after the effective date of the CARES Act through December 31, 2020. Deferred tax amounts would be paid over two years, in equal amounts due on December 31, 2021 and December 31, 2022.
- Businesses who have debt forgiven from Payroll Protection Program loans are not allowed to delay their payments
Tax Exclusion for Employer Student Loan Repayment Benefits allow employersto provide a student loan repayment benefit to employees, without including it in income.
- Up to $5,250 can be contributed annually toward an employee’s student loans.
- Payments can be made through December 31, 2020.
Real Estate owners may request forbearance for up to 180 days on federally guaranteed mortgages.
Loan Options for Economically Impacted by the Coronavirus Pandemic :
Economic Impact Disaster Loan (EIDL) Apply Now
- Up to $2 million
- Loan will provide working capital to cover operating expenses
- $10K advance available (may not require repayment)
- 3.75% APR
- Up to 30 Year Term
Paycheck Protection Program
- Applicants may be eligible for loan amounts up to 2.5 times the average monthly payroll (some independent contractor payments may be factored into the calculation).
- If at least 75% of the loan amount was used to cover payroll and employee levels are maintained, the eligible loan amount may be forgiven.
- Loans that are not forgiven are to be repaid in 2 years and will carry a 0.5% interest rate
- Loan payments may be deferred for 6 months. However, interest will continue to accrue.
- Applications will be processed through banks
The links below were provided by the SBA and will help to prepare for the application process, which is expected to officially open on Friday, April 3.
- Overview of the Payment Protection Program (PPP)
- Paycheck Protection Program Information Sheet (for Borrowers)
- Payment Protection Program Application Form
Please note, these laws and related policies will continue to evolve in the coming weeks and are subject to change/clarification. Therefore, information contained within this communication is provided for informational purposes only and is not intended to substitute for obtaining accounting, tax, or financial advice from a professional accountant. Presentation of the information via the internet is not intended to create, and receipt does not constitute, an accountant-client relationship. ATS CPA & Consulting Services, Inc. specifically disclaims any liability for any direct, indirect, incidental, consequential or special damages arising out of or in any way connected with access to or use of this information.