The information below includes releases issued by BenderCPA during the COVID-19 pandemic. These posts include summaries of tax law changes and relief provisions granted by the IRS and state/local authorities that impact our clients. While we try to be as detailed as possible, we ask that clients contact their BenderCPA advisor with any questions before taking action based on a post to ensure your intended outcome is achieved.
With the flurry of changes that have been announced over the past few days and weeks, we wanted to provide an update to clarify relief questions we’ve been getting as well as provide information on a few other programs that have been announced.
INDIVIDUAL RELIEF UPDATES
1. Recovery Check Distribution. IRS has clarified a few details about the Recovery Check program:
a. Recovery Check payments will begin sometime next week (week of 4/12/2020). No action is required to receive your payment, the IRS will process automatically.
b. The payment will be sent to the bank account you used on your most recent tax return for refund direct deposit. If the IRS is unable to process a payment to that account or you didn’t have direct deposit with a recent return, the IRS will mail a check to your address of record.
c. If you have not filed in several years, or if you do not have a requirement to file a 2019 return, you can provide bank information for your payment on IRS’ website here: https://tinyurl.com/sz9l387.
d. Detailed information on how the payment is calculated was included in our CARES Act Alert for Individuals, which can be found here: https://tinyurl.com/qwtuhss.
e. If you receive a Recovery Check based on your 2018 or 2019 income but are phased-out when reporting on your 2020 tax return, you do NOT have to repay the excess with your 2020 tax return.
f. If you do not receive a payment based on your 2018/2019 tax returns, but are eligible based on your 2020 tax returns, you will can claim a refund on your 2020 tax return.
2. Unemployment Options Available. Any furloughed or laid-off employees are eligible for state unemployment. Details are as follows:
a. Unemployment amount via the state typically ranges from 30-50% of the standard wage, depending on the state.
b. The amount a person will receive for unemployment over four months will be the amount the state would already provide, increased by $600 per week through July 31, 2020. For example, if an unemployed person is eligible for $300 weekly, they will receive $900 per week over four months or through July 31, 2020, whichever comes first.
c. If an employee is already unemployed due to COVID-19, the $600 weekly additional payment will be paid retroactively.
d. Self-employed individuals, independent contractors and gig workers are eligible for unemployment under this program. See your state unemployment office’s website for details on applying.
3. Tax Deadline Extension to 7/15. As of 4/11/2020, all 50 states have extended their 2019 tax individual income tax filing deadline to 7/15/2020. This includes both the 2019 tax filing as well as both the 2020 1st and 2nd quarter estimated tax payment normally due on 4/15 and 6/15. The deadline change is automatic in all cases (no separate extension forms required). If you have any other tax filings during this timeframe (especially those not handled by BenderCPAs), you should confirm whether those deadlines have changed as well.
4. IRA and HSA Funding Deadlines Moved to 7/15. The deadline to make eligible IRA or HSA contributions retroactively for the 2019 tax year has also been extended to 7/15/2020. No changes have been made to the income or health coverage qualifications for being eligible to make such a contribution, only to the timeframe to make a retroactive contribution.
BUSINESS RELIEF UPDATES
1. SBA Loan Programs Continue. The Paycheck Protection Program (PPP) and Economic Injury Disaster Loan (EIDL) programs are still open to affected businesses.
a. PPP loans provide a loan of 2.5 month’s average ‘payroll cost’ with full tax-free forgiveness if the loan is used for payroll, rent, utilities, or mortgage interest within 8-weeks of getting the loan funded. Any unforgiven amount is a 2-year loan with 1% annual interest (no personal guarantee or collateral required). Applications are through your local SBA banker.
b. EIDL loans are calculated based on six-months of operating expenses for your business. Each loan can include an advance of $1,000 per employee, up to $10,000 per business, which does not need to be repaid. The unforgiven amount is a loan at 3.75% interest with an up to 30-year term. Personal guarantees are required, and collateral may be required if your loan is over a certain dollar amount. Expenses used for the PPP loan cannot be used for the EIDL calculations (and vice versa). In addition, any EIDL grant will reduce the otherwise available loan forgiveness on a PPP. Applications are directly through the SBA website.
c. On both programs, we recommend you speak with your BenderCPA advisor before proceeding, if you haven’t already, to ensure you are maximizing your benefit under each program and fully understand what the implications are of getting these loans.
2. Families First Coronavirus Relief Act (FFCRA) Payroll Tax Credits. The FFCRA added a mandate that employers provide Paid Sick Leave and Paid Family Leave to employees unable to work due to the coronavirus. For more detailed information on eligibility, see our Alert on the mandate and related credits. Based on Department of Labor FAQs issued earlier this month, it appears that your business must be otherwise open for employees to work in order to qualify for this credit (either physically open or able to work remotely). See FAQ #23 and 24 here: https://tinyurl.com/tagubjb. Employers can claim eligible hours and related payroll tax credits for hours beginning April 1st when included in payroll.
3. Employee Retention Payroll Tax Credit. Added by the CARES act, the Employee Retention Payroll Tax Credit equals 50% of qualified wages (up to $10,000 in wages per employee). Employers are not eligible for the credit if they participated in the Payroll Protection Program or any other loan where payroll costs are forgiven. To qualify, the employer’s gross receipts must be 50% or less than the same calendar quarter in 2019. For employers with 100 or less employees, qualified wages include wages paid for all employees during the period—whether they were able to work or not. For employers with 100 or more employees, qualified wages are defined as wages paid to employees not providing services.
4. Deferral of Employer Social Security Taxes. The CARES Act also provides the opportunity to defer the employer’s portion of Social Security Taxes until as late as December 2022. This deferral, however, is not available to employers who took advantage of the Payroll Protection Program. If eligible, an employer can defer their part of Social Security taxes from March 27, 2020 to January 1, 2021. 50% is due by December 31, 2021 and the remainder by December 31, 2022.
5. Qualified Improvement Technical Correction. The Tax Cuts and Jobs Act (TCJA) effective for 2018 tax years included a technical error that made building improvements ineligible for bonus depreciation. Under the CARES Act, building improvements made in 2018 and later years are eligible for 100% bonus depreciation. Any amounts not claimed in 2019 can be claimed now via an amended return or a Form 3115 accounting method change.
We hope this overview provides some clarity on your situation and gives you useful information as you plan for the remainder of the current crisis. If you have any questions about how the above apply to your situation, please reach out to your BenderCPA advisor to discuss.