COVID-19 What Small Business Need to Know

“We aim for a transformative relationship with each of our clients.  We want to see tangible results in your business because you are achieving your goals. Each business is different, and each entrepreneur is different.  It’s time to meet a business services firm that is different,” CEO of Stander & Company.

We’ve spent the time researching what all this means because we care about small businesses, you can see this in our mission statement. “Advancing Entrepreneurship by developing and supporting the community of business owners through an evolving range of services and solutions,” we hope you find the information useful and you decide to come back to us when this is all over so we can discuss further advancing your business.

Families First Coronavirus Response Act (FFCRA)

FFCRA in Three Parts

Emergency Paid Sick Leave Act

• REQUIRES employers with fewer than 500 employees to provide paid sick leave to all employees

Emergency Family and Medical Leave Expansion Act

• Amends the FLMA to temporarily require employers with fewer than 500 employees to provide public health emergency leave

Paid Family Leave and Paid Sick Leave Tax Credits

• Employers with fewer than 500 employees are allowed a credit against employer Social Security tax liability equal to 100% of the qualified sick leave wages paid by the employer. (Subject to Exceptions, Caps)

Emergency Paid Sick Leave Act (EPSLA)

Basics

• Full-time employees must be provided with 80 hours of paid sick leave.  Part-time are entitled to paid sick leave amounting to the average number of hours they work over a two-week period. Average based on the last 6 months

When

• The employee is subject to quarantine or to care for other
• Healthcare provider has advised the employee to self-quarantine or to care for other
• The employee has symptoms and is seeking medical diagnosis or to care for other
• The employee is caring for a child due to closures

Exception

• the healthcare provider or Emergency responder may elect to exclude
• DOL may exclude if less than 50 employees and requirement would jeopardize the viability of the business

Benefit

• Pay employees their regular rate up to $511 per day (total of $5,110) if leave is for them.  If leave is to care for others, compensation at 2/3 of the employees’ regular rate up to $200 per day (total of $2,00)
• Employers Must Post Notice
• Employers must not retaliate

Paid Family Leave & Paid Sick Leave Tax Credits

• Employers with fewer than 500 employees are allowed a credit against employer Social Security Tax Liability equal to 100% of the qualified sick leave wages paid by the employer, subject to the caps discussed prior.
• The credit is increased by certain specified health expenses such as employer-paid health plan premiums.
• The tax credit reduces the amount of federal employment taxes that must be deposited with the IRS.  This is intended to provide the funds needed to pay benefits.  

Coronavirus Aid, Relief, and Economic Security Act (CARES)

Tax Deadlines

• Federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020
  • Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment extension. Individual taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.
• Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed.
• This deferment applies to all taxpayers
  • Individuals
  • Trusts and estates
  • Corporations
  • other non-corporate tax filers as well as those who pay self-employment tax
• You should still as soon as possible – file if you think you are due a refund!

Coronavirus Relief

• Provides one-time checks of $1,200 to Americans with AGI up to $75k for individuals and $150k for married couples with an additional $500 per child.  Phase-out occurs at $5 for each $100 of income over so $99k for individuals and $198k for MFJ.
• Checks will be available to those who have no income as well as people who rely on income benefit programs such as supplemental security income from the SSA
• This will be in addition to the expansion of unemployment benefits that now includes non-traditional employees such as gig workers and freelancers.
• The package also includes $350b in loans to small businesses
• Loans to cover payroll, rent, interest on mortgage obligations and utilities will be forgiven
• Cost is currently estimated at $2 trillion

Economic Impact Payments

• All U.S. residents with adjusted gross income up to $75,000 ($150,000 joint filers) are eligible for a $1,200 ($2,400) payment, as well as an additional $500 per child (under age 17).There are no minimum income requirements for the payment. Individuals with little or no income are eligible provided they are not a dependent of another taxpayer and have a work-eligible Social Security number.
• This amount is reduced by $5 for every $100 over the income limit above, so it would be fully phased out for those with incomes over $99,000 (single) and $198,000 (joint filers) with no children

Economic Impact Payments FAQ

How will the IRS know where to send my payment?

• Most people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.
• For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

The IRS does not have my direct deposit information. What can I do?

• In the coming weeks, 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.

I am not typically required to file a tax return. Can I still receive my payment?

• Yes. People who typically do not file a tax return will need to file a simple tax return to receive an economic impact payment. Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.

How can I file the tax return needed to receive my economic impact payment?

• IRS.gov/coronavirus will soon provide information instructing people in these groups on how to file a 2019 tax return with simple, but necessary, information including their filing status, number of dependents and direct deposit bank account information.

I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment?

• Yes. The IRS urges anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.

I need to file a tax return. How long are the economic impact payments available?

• For those concerned about visiting a tax professional or local community organization in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.

Where can I get more information?

• The IRS will post all key information on IRS.gov/coronavirus as soon as it becomes available.

Employee Retention Credit

• Private-sector employers are allowed a refundable tax credit against employer SS Tax equal to 50% of wages paid by employers to employees during the COVID-19 crisis, up to $10k per employee.
  • For employers with fewer than 100 full-time employees, all wages qualify for the credit, without regard to whether the employer was in operation
• Wages paid may not exceed the amount such employee would have been paid for working an equivalent duration during the 30 days immediately preceding such period.
• Wages do not include FFCRA payments for which a credit is taken.
• Applies to wages paid after March 12, 2020

Defined Contribution Plan Changes

Distributions

• Impacted individuals are eligible for a distribution from retirement plans or IRA’s up to $100,000 and not subject to the 10% early-withdrawal penalty.
  • Maybe taxed over 3 years rather than all in 2020
  • Standard 20 percent federal tax withholding is not required
  • Distribution can be repaid at any time during the 3 years after taking

Loans

• For impacted individuals, an increased loan amount of $100k is available for the 180-day period beginning April 1, 2020
• Required Minimum Distribution is not required for 2020

Other Items

Qualified Improvement Property

• Businesses will be able to write off all of the costs of certain interior renovations as 15-year property and eligible for expensing in nonresidential real property instead of using straight-line depreciation over a 39-year period
• Qualified improvement property technical correction, allowing qualifying interior improvements of buildings to be immediately expensed rather than depreciated over 15 years

Charity

• The new provision provides an above-the-line deduction for charitable contributions

Net Operating Losses

• TCJA net operating loss rule is modified.  The 80% is lifted, and losses can now be carried back 5 years

Coronavirus testing

• All testing and potential vaccines for COVID-19 will be covered at no cost to patients

Agriculture

• Agriculture Department can increase the bailout program to $50 billion

SBA Disaster Loan Assistance

Paycheck Protection Program

• New 7(a) Program
• Up to 250% Monthly Payroll Costs
• Through approved lenders
• Loan forgiveness if properly used

Economic Injury Disaster Loan

• Low Interest, Fixed rate loan
• Up to $2mm
• Through the SBA
• Loan Advance of $10k
• Term based on your ability to repay

SBA Paycheck Protection Program

• New Loan Program fully guaranteed by SBA. Extension of the 7(a) program
• Apply through the SBA Lender Match Portal
• Eligibility
  • 500 employees or less
  • Must have been in operation of February 15, 2020
  • Sole proprietors, Independent Contractors, Self-employed individuals
• Amount
  • Approximately equivalent to 10 weeks of payroll costs including healthcare costs such as insurance premiums
  • Determined based on 250% of average monthly payroll costs taking into consideration average wages paid during a 1-year period preceding the loan, up to a limit of $10mm
• Uses
  • Payroll costs, Health care benefits, Mortgage interest, Rent, Utilities, Interest on debt obligated prior to February 15, 202
• Loan Forgiveness
  • Up to 100% is forgivable if you maintain specified employment and wage levels
    • The average number of FT Equivalent employees per month will be compared to either the prior-year period or Jan-Feb of 2020
    • Repayment of a proportionate part of the loan may be required if earnings of any employee is reduced by 25% or more compared to the most recent full quarter of employment before the covered period. However, this rule may not apply to employees who received, for any single pay period in 2019, annualized earnings over $100,000 (over $8,333 per month or $4,167 for a semimonthly pay period, in 2019). Special relief provisions apply for employers who rehire employees or eliminate wage reductions by June 30, 2020.
  • AND the loan amounts forgiven are EXCLUDED from taxable income for federal income tax purposes

SBA Paycheck Protection Program Continued

Restrictions

• Not for wages exceeding $100k per employee
• Not for Federal employment taxes
• Not for Employees who live outside of the US
• Not for FFCRA paid sick or family leaves wages that were credited
• If you get PPP, you are not permitted to defer employer SS tax
• If you get PPP, you cannot receive the Employee Retention Credit for Closures

Take Away

• Assess all available assistance programs to determine the best option for your circumstances

SBA Economic Injury Disaster Loan (EIDL)

• Low interest, fixed-rate loan.  Click HERE to apply
  • 3.75% for Small Businesses, 2.75% for Non-Profits
• Eligibility
  • 500 employees or less
  • Must have been in operation of February 15, 2020
  • Sole proprietors, Independent Contractors, Self-employed individuals, & Private Nonprofits
• Amount
  • May request up to $10k to be immediately disbursed.  The amount need not be repaid, regardless of the loan decision
  • Borrowers may apply for the PPP, but when determining loan forgiveness, the advance EIDL grant is taken into consideration

SBA Economic Injury Disaster Loan (EIDL) Continued

• The legislation requires the SBA to disburse the funds within 3 days of receiving the application

Loan uses

• Provide paid sick leave, Maintain payroll, Meet increased costs, Rent, Mortgage payments, Repaying unmet obligations

Texas Specific Updates

Texas Comptroller

• Offering Short-Term Payment Agreements
• Waivers of Interest and Penalties in most cases

Texas Workforce Commission

• At present, the U.S. government and Texas legislature have not changed any laws or rules concerning unemployment benefits during the pandemic. However, the Department of Labor guidance provides that federal law permits significant flexibility for states to provide Unemployment Insurance (UI) services related to COVID-19. Based on this, TWC will be waiving work search requirements for all claimants and the waiting week for those claimants affected by COVID-19. Also, Extended Benefits (EB) and Disaster Unemployment Assistance (DUA) are NOT available at this time.
• The Texas Unemployment Insurance (UI) program pays benefits to those individuals who lost their jobs through no fault of their own. TWC determines benefit eligibility based on past wages, why someone lost their job and ongoing eligibility requirements.

Texas Workforce Commission

• 1Q2020 Reports are not due until May 15, 2020 and they ask that you not file your return before April 15, 2020
• Unemployment Claim Hearings are following their normal schedules
• Shared Work Programs are available

Tax Deadlines

• Federal income tax filing due date is automatically extended from April 15, 2020 to July 15, 2020
• Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed.
• This deferment applies to all taxpayers
  • Individuals
  • Trusts and estates
  • Corporations
  • Other non-corporate tax filers as well as those who pay self-employment tax
• Taxpayers do not need to file any additional forms or call the IRS to qualify for this automatic federal tax filing and payment extension. Individual taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.
• You should still as soon as a possible file if you think you are due a refund!

Defined Contribution Plan Changes

Distributions

• Impacted individuals are eligible for a distribution from retirement plans or IRA’s up to $100,000 and not subject to the 10% early-withdrawal penalty.
• Maybe taxed over 3 years rather than all in 2020
• Standard 20 percent federal tax withholding is not required
• Distribution can be repaid at any time during the 3 years after taking

Loans

• For impacted individuals, an increased loan amount of $100k is available for the 180-day period beginning April 1, 2020
• Required Minimum Distribution is not required for 2020

Other Items

Qualified Improvement Property

• Businesses will be able to write off all of the costs of certain interior renovations as 15-year property and eligible for expensing in nonresidential real property instead of using straight-line depreciation over a 39-year period

Charity

• The new provision provides an above-the-line deduction for charitable contributions

Net Operating Losses

• TCJA net operating loss rule is modified.  The 80% is lifted, and losses can now be carried back 5 years

Coronavirus testing

• All testing and potential vaccines for COVID-19 will be covered at no cost to patients

Agriculture

• Agriculture Department can increase the bailout program to $50 billion