April 15 (Extended to July 15)
– Individual tax returns due
– C corporation tax returns due
– First-quarter 2020 estimated tax due
The COVID-19 pandemic has sent the U.S. economy into a tailspin. For many small businesses, navigating these challenging times is now a race for survival. This issue highlights programs available to small business owners to help manage their companies through the coronavirus pandemic – the Paycheck Protection Program loan and a special tax credit to reimburse businesses for providing COVID-19 related paid leave for employees.
Call if you would like to discuss your tax or business questions. If you know someone who can benefit from this newsletter, feel free to send it to them.
A Lifeline for Small Businesses – The PPP Loan
URGENT information for all small businesses
Time is of the essence. If used properly, some or all of these loans can be forgiven (free money?), but demand is high.
Contact your bank or lending institution ASAP. This loan process is being handled by banks set up to handle SBA loans. So if you have not already done so, apply.
Go to www.sba.org to get details and application information.
Starting Friday, April 3, small businesses in the U.S. can apply for loans through the Small Business Administration (SBA) to help stay afloat during the COVID-19 pandemic.
The Paycheck Protection Program (PPP) provides loans of up to $10 million to qualified small businesses. Better still, some or all of the PPP loans will be forgiven if a business meets certain criteria.
If your business was open on or before February 15, 2020 and has 500 or fewer employees or independent contractors for whom the business paid salaries, compensation and payroll taxes, you qualify. Businesses with more than 500 employees are eligible in certain industries. One such example is the hospitality and food sectors that have multiple locations. These companies can have up to 500 employees per physical location.
Good faith certification required
In addition to the aforementioned qualification criteria, in order to participate in the PPP program a business is required to certify the following:
- That the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations of the eligible recipient;
- Acknowledging that funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments and utility payments;
- That the business does not have an SBA 7(a) loan pending for the same purpose and duplicative of amounts applied for or received under a covered loan;
- During the period beginning on February 15, 2020 and ending on December 31, 2020, the business has not received amounts under the Paycheck Protection Program for the same purpose or duplicative amounts applied for or received under a covered loan.
Attractive loan provisions
This loan has very few strings attached compared to other SBA loans.
- No collateral is required.
- No personal guarantees are required.
- No up-front or back-end loan fees are applied.
- If you keep your employees on payroll, some or all of the loan is forgiven.
- The forgiven portion of the loan is NOT considered taxable.
- For the portion of the loan that is not forgiven, repayment terms are up to 10 years at not more than 4% interest.
- Initial loan payments are deferred for a period of six months to one year.
- There is no prepayment penalty.
- You can borrow up to 2.5 times your average payroll costs, excluding pay over $100,000 to any one person.
How funds are used is important
These loans are meant to help your business stay afloat during the pandemic. In addition to using the funds for payroll you can use them for:
- Health care benefits; paid sick, medical or family leave; and insurance premiums;
- payments of interest on any mortgage obligation;
- utilities and
- interest on any other debt obligations that were incurred before the covered period.
Loan forgiveness is the key
What makes this loan unique is that if you keep your employees hired, some or all of the loan will be forgiven. There are many parts to the calculation of the forgiveness, but the primary two are employee retention and at least 75% of the forgiven loan amount must be used for payroll.
But even if you lay off employees, there are clauses that allow you to rehire those employees.
Check with the source!
The rules and application of the rules is rapidly changing. So check with your bank and visit Small Business Administration paycheck program for more up-to-date information.
Businesses Get Help Providing Employees With COVID-19 Related Paid Leave
What you need to know!
The Families First Coronavirus Response Act is a new program that offers COVID-19 assistance for both employees and employers.
Businesses Will Get Reimbursed: This new law provides a reimbursement for businesses with fewer than 500 employees for providing employees with paid leave, either for the employee’s own health needs or to care for family members, for COVID-19 related reasons.
Here is a summary of the new law’s benefits for employees and employers:
- Paid sick leave for workers. The new law provides employees of eligible employers two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay ($510 daily limit applies) where the employee can’t work because the employee is quarantined and/or experiencing COVID-19 symptoms and seeking a medical diagnosis.
- Paid leave for workers. Employees can receive two weeks (up to 80 hours) of leave at two-thirds of the employee’s pay ($200 daily limit applies) if they need to care for someone in the following situations: The need to care for an individual subject to quarantine, to care for a child whose school is closed or childcare provider is unavailable for reasons related to COVID-19.
- Extended leave. In some instances, an employee may receive up to an additional ten weeks of expanded paid family and medical leave at two-thirds the employee’s pay ($12,000 overall twelve week payment limit applies).
- Companies will get paid back. Businesses who pay employees the mandatory sick and childcare leave according to the new law will get reimbursed through a payroll tax credit.
What it means for you
- Employees can take the necessary time to recover from being infected with COVID-19, or to care for a loved one, without fear of losing their job or salary.
- Employers can help their employees financially while navigating COVID-19 related shutdowns.
What you need to do now
EMPLOYEES. To take advantage of the Act’s paid leave provisions, you must provide your employer with documentation in support of your paid sick leave. There is yet no official application that needs to be completed. If you believe that your employer is required to provide paid leave but is not making paid leave available, or for other questions or concerns, you may call the Department of Labor’s Wage and Hour Division at 1-866-4US-WAGE or visit www.dol.gov/agencies/whd.
EMPLOYERS. While the details are being worked out on how to implement these new rules, here is what you need to do now:
- Keep detailed records – Be prepared to defend your request for federal assistance. Keep good records of who’s asked for paid time off because of COVID-19 related circumstances. Ask your employee to provide a doctor’s note when appropriate, along with a narrative written by the employee describing who in their family is infected or suspected of being infected with COVID-19 along with symptoms. Make sure the note is dated and relates to an approved reason for leave.
- Talk to your payroll provider – If you have someone doing your payroll, they are often the first ones who will know how you will receive reimbursement. This new law will take time to fully roll out. Payroll companies will eventually issue guidance on how to report paid leave provided under the Families First Act and which forms need to be completed to obtain the corresponding tax credits.
- Post this notice! – Employers MUST post a notice of the Families First labor requirements in a conspicuous place on its premises. Click here to download and print this notice.
- E-mail the notice! – An employer may satisfy the posting requirement by e-mailing or direct mailing the notice to employees, or by posting this notice on an employee information internal or external website. If your employees are working from home, this may be the only way to let them know the benefit exists.
Remember, there are upper limits to compensation that you may need to review and there are many other federal programs being rolled out. It will take time to implement them. Be patient, be safe and stay alert for any updates.
COVID-19 Bill Enhances Unemployment Benefits for Employees
Furloughed employees get more help
The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act provides your employees with more financial relief when you need to lay them off during the coronavirus pandemic.
Here is a snapshot of the unemployment benefits section of the bill and how it affects employees that you must furlough.
- There is help for your employees. The Act provides individuals who are not already eligible for state and federal unemployment programs, including self-employed individuals and part-time workers, a set amount of unemployment compensation.
- Let employees know how much help there is. There are different components to the new law’s unemployment benefits:
- Each worker will receive unemployment benefits based on the state in which they work, and
- In addition to their state unemployment benefits, each worker will receive an additional $600 per week from the federal government.
- The calculation includes part-time workers! Benefits for self-employed workers are calculated based on previous income and are also eligible for up to an additional $600 per week. Part-time workers are also eligible.
- Adding 13 weeks of unemployment. The CARES Act provides eligible workers with an additional 13 weeks of unemployment benefits. Most states already provide 26 weeks of benefits, bringing the total number of weeks that someone is eligible for benefits to 39.
- Adding money to the initial unemployment benefit amount. Remember, in addition to extending the number of weeks of state unemployment, the federal payment can add up to $600 per week of benefits through July 31, 2020.
- Help your laid off employees. Let your furloughed employees know they must apply for unemployment benefits through your state unemployment office. Most state applications can now be filled out online. Those who normally don’t qualify for unemployment benefits, such as your part-time workers, need to monitor their state’s unemployment office website to find out when they can apply.
- Subject to changes. With the rapid implementation of this brand new program, changes are sure to be made. So tell employees to keep in touch with state unemployment websites to get updates and clarification of these new programs.
What to do NOW!
If you need to lay off employees, coach them to contact your state unemployment office as soon as possible. State offices and websites are being slammed, so the sooner they get in the queue the better for their situation.
As always, should you have any questions or concerns regarding your tax situation please feel free to call.
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