COVID-19 - Cheat Sheet
The three (3) new Acts signed into law are as follows.
(1) The Coronavirus Preparedness and Response Supplemental Appropriations Act
This Act was signed into law March 6th, it allows the SBA to provide loans to small businesses to help with payroll. These are called the Disaster Assistance Loans. These loans may be used by a businesses to pay fixed debts, payroll, accounts payable and additional bills that can’t be paid because of COVID-19’s impact. The interest rate is 3.75% for small businesses without other available means of credit. This loan can only be used for working capital
(2) H.R. 6201 - Families First Coronavirus Response Act
Highlights - Employer-side FICA tax credit to fund up 100% paid sick leave for small businesses. Effective April 1, 2020 thru December 31,2020.
These leaves are not available to employees whose workplaces are closed due to a federal, state, or local shelter-in-place or stay-at-home orders, or due to business slowdowns.
1 - Limit if the employee is sick
- The lessor of wages plus healthcare costs or $511/day
- 10 days
- Includes: Employees subject to a government quarantine or isolation order; Employee advised by a healthcare professional to self-quarantine; employee is experiencing symptoms and seeking diagnosis
2 - Limit for family leave:
- $10,000 maximum
- Includes: taking care of family member ordered or advised to quarantine; taking care of a child following a school closing
(3) H. R. 748, Coronavirus Aid, Relief, and Economic Security Act (CARES Act)
Highlights - Forgivable small business loans, FICA tax credits for employee retention, Deferred employer-side FICA taxes, Income tax relief
1 – Payroll Protection Program (PPP) (ROUND 2 of FUNDING SIGNED INTO LAW 4/24/2020)
- Covered Dates: February 15, 2020 thru June 30, 2020
- Eligibility – any business, non-profit, veterans organization or Tribal Business.
- Self Employed and independent contractors are eligible
- Payroll costs include: Salary/Wages, Tips, Paid Leave, Healthcare payments, Retirement benefit payments and some independent contractors
- Payroll costs do not include: Compensation of an individual employee in excess of an annual salary of $100,000 as prorated for the covered period.
- Loan Cap – Lesser of (Average monthly payroll incurred within 1 year period before the date on which the loan is made times 2.5) or $10,000,000.
- Allowable uses of covered Loans – Payroll costs, Group Healthcare Benefits, Employee Salaries/Wages, Payment of interest, rent, utilities, debt incurred before covered period.
- Loans are NONRECOURSE, NO PERSONAL GUARANTEE and NO COLLATERAL
- Good Faith Certification – Must state funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments.
- Forgiveness – Principal forgive in an amount equal to the following forgiveness eligible costs incurred during the eight weeks after the loan is originated, Payroll costs, Mortgage interest, Rent, Utilities
- Forgiveness Calculation – total forgiveness eligible costs times Avg FTE employees during the covered period divided by Avg FTE employees per month during Feb 15, 2019 thru June 30, 2019.
- Remaining Balance – guaranteed by the SBA, max maturity of 10yrs, interest rate not to exceed 4%, payment deferment 6-12 months, includes principal interest, origination fees reimbursed by SBA.
- Local Banks will be able to fund these loans in addition to the SBA. Need to make sure that the loan documents indicate the loans are non recourse, no personal guarantee and no collateral.
- Avoid the larger banks. Please reach out to use for referrals to lenders.
2 – Emergency EIDL Grants
- Economic Injury Disaster Loans (EIDL)
- Eligibility – any business, non-profit, veterans organization or Tribal business
- A borrower can request an advance up to $10,000 to provided within three days of applying. NOTE - The U.S. Small Business Administration's Massachusetts District Office announced in a bulletin on April 6 that, nationwide, the SBA has decided to implement a $1,000 cap per employee on the advance, up to a maximum of $10,000. So, a business with three employees, for example, would be eligible to receive only $3,000 up front, as opposed to the originally stated $10,000.
- Advance can be used for providing sick leave, maintaining payroll to retain employees, meeting increased material costs, making rent or mortgage and repaying obligations.
- Advance does not need to be repaid, even if the loan is subsequently denied.
- PPP loan forgiveness gets reduced by an EIDL advance.
- Apply by clicking on the following link
3 – 2020 Recovery Rebates for Individuals
- $1,200 Single ($2,400 Married Filing Joint) $500 for each qualified child, max of three children, children under 17 years old
- Credit reduced by 5% of the amount of AGI which exceeds $75,000 ($150,000 Married Filing Joint)
- No credits for non-resident aliens, dependents or trusts
- For those who have not yet filed a 2019 return, the rebates may be determined, using the taxpayers 2018 return or using the 2019 SSA-1099
- Confirmation letters will go out after payments are made.
- For taxpayers who did not provide direct deposit information on their most recent tax returns, in the coming weeks the Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online so that individuals can receive payments immediately as opposed to checks in the mail
4 – Retirement Plan Distributions
- $100,000 “coronavirus-related distribution” exemption from § 72(t)
- A person: diagnosed with COVID-19, whose spouse is diagnosed with COVID-19, who experiences adverse financial consequences as a result being quarantined, furloughed, or laid off or having work hours reduced, being unable to work due to lack of child care, closing or reducing hours of a business owned or operated or other factors determined by the Secretary.
- Income from the distribution recognized ratably over a three year period
Amount distributed can be repaid over a three year period
5 - Retirement Plan Loans
- Applies to loans made within 180-days of enactment
- Limit increased from $50,000 to $100,000
- Limit increased to 100% of the balance from 50%
- Outstanding loan repayment delayed due between enactment and year-end delayed one year
6- Temporary Waiver of Required Minimum Distributions from IRAs (RMDs)
- RMDs are generally not required in 2020
- Includes those with a 2020 RBD
- Taxpayers subject to the 5-year rule can “skip” 2020
7 - New Above-the-line Charitable Contributions Deduction - Beginning in 2020
- Cannot itemize
- $300 Limit
- Must be cash, must be allowed under § 170, No Donor Advised Funds (DAFs), Can’t “double-up” with an itemized deduction
8 – Employee Retention Credit
- 50% of qualified wages up to $10,000 ($5,000 credit)
- Credit against employment taxes and is refundable
- Reduced for credits in Section 7001 and 7003 of the Families First Coronavirus Response Act
- Eligible employers: (1) operations suspended by government (2) significant decline in gross receipts
- Can’t claim this credit and take the forgivable SBA loan – most small employers will opt for the forgivable loan
- This credit will be claimed on the 2020 income tax return
9 - Delay of Employer Payroll Taxes – No interest loan from the IRS for Over 20 months!
- Payroll tax deposits delayed until the applicable date
- Exception for taxpayers which had indebtedness forgiven by the Paycheck Protection Program in Sec. 1102 & Sec. 1106
- Applicable Date 12/31/2021: 50% of the amount due, 12/31/2022: the remaining amount due
- Includes 50% of SECA taxes
- If decide you this option, make sure you set up separate savings account to keep track of payroll funds held. Best not to leave up to the payroll company to hold the funds.
- You may need to contact your payroll company to setup this deferral.
10 – Net operating Losses
- Can carry back losses incurred in 2018 and 2019 5 years.
- We will review our clients records to see if losses can be carried back.