Tramer, Shore, and Zwick sent out information in prior weeks on the CARES Act and how it can help small businesses and individuals. Information is updated daily due to the extreme rush to implement the stimulus plan to help Americans. We have new and updated information we believe could be valuable to many businesses and individuals.
Updates to the SBA Loan Information:
During the week it was clarified that Companies can apply for the Paycheck Protection Program (PPP) Loan and the $10,000 Economic Injury Disaster Loans “EIDL” and Emergency Economic Injury Grants forgivable loan, if necessary.
Loan proceeds for the PPP loans can be used for payroll, mortgage interest or rent, health-care benefits payments, utility payments, and certain other costs, and are forgivable in an amount equal to the sum of such costs incurred or payments made during the eight weeks after loan disbursement, if employers maintain employment and wage levels.
An eligible business that applies for an EIDL can also obtain an emergency advance of up to $10,000 within three days of when the SBA receives the EIDL application. To access the advance, businesses must first apply for an EIDL and then request the advance. The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs, due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments. An employer that applies for an EIDL (regardless of whether related to COVID-19) may also apply for a PPP loan, so long as both loans are not used for the same purpose or are otherwise duplicative. An employer can also refinance an existing EIDL into a PPP loan by adding the amount of an EIDL to the sum of the payroll costs. However, any advanced amount received under the EIDL Grant Program would be subtracted from the amount forgiven of the PPP loan.
The PPP loan is a two-year loan and has a 1% interest rate one eligible amount able to borrow. Payments are deferred until 6 months after receipt of the loan proceeds.
This loan is first come first serve.
When calculation payroll costs calculations do not include individual contractors (individuals who you issue 1099’s to every year); however, if you are a sole practitioner or partnership and pay self-employment tax you are eligible to receive these loans if needed.
Sole practitioners and independent contractors (who may have limited payroll) can apply for this on Friday, April 10th, 2020.
If applying for the loan you can defer the receipt of the loan until June. This can be helpful for restaurants, hair salons and other businesses where operations and hiring will not begin until the stay at home policies are lifted around America. If funds are used for the payroll costs, they will be forgivable, thus incentivizes businesses to use proceeds to help with these costs.
Citizens Bank was just added to the list of accepting loans with Huntington, Bank of America, PNC, Key Bank and Chemical Bank.
Banks are starting to take applications over the phone, so don’t be afraid to call your bank, all the major banks have information on their website that can be helpful when applying.
If applying with a new bank, ensure that your credit agreements do not have any clauses that would prevent you from doing so.
For PPP loan forgiveness a 75% of the loan proceeds must be spent on “payroll costs” including wages, commission, mortgage interest, health care costs, rent payments, utility payments, interest on other debt that occurred before 2/15/20.
Individual Stimulus Checks:
The checks should be starting to come out this week April 6th or the next April 13th. Eligibility and amounts to be received are the following:
$1,200 per adult and $500 per child to individual filers earning less than $75,000 annually; however, if you made more than this but less than $99,000 will receive a prorated amount less than $1,200.
$1,200 per adult and $500 per child to joint filers earning less than $150,000 annually; however, if you made more than this but less than $198,000 will receive a prorated amount less than $1,200.
If your income was higher than the thresholds above, the payment amount will be reduced by $5 for every $100 above the thresholds.
Based on guidance we have read that they first will look at your 2018 return if qualify will look at 2019 in case no longer qualify. Some people may qualify one year and not another, this is important for people who are close to the thresholds above to determine if should file their 2019 tax return or not. For example, if someone made $74,000 in 2018 but made $100,000 in 2019, it would be beneficial to not file 2019 until later in the year. And reversely if made less in 2019 would be beneficial to file in the current year as quickly as possible to receive your stimulus checks.
2019 tax payment due date is now 7/15/2020 you can wait until then to pay your 2019 tax due and 1st quarter estimates. Note: Second quarter estimates are not due on 6/15/20 like they normally are. It may be worth making higher 1st Quarter estimates to ensure no late penalties are assessed, the guidance changes daily!
Note you can add your direct deposit information in your tax return to ensure you receive the stimulus check timely. Per review of guidance received, eligible individuals with direct deposit will be paid first then checks will be issued and they will start issuing checks starting with the lowest income to the highest income.
If already filed your return and did not use the direct deposit method to pay tax or receive your refund, the IRS is working on a portal to add your banking information if you do not already use direct deposit for tax information. We will keep everyone up-to-date when that goes up.
Other Important Information:
Tax Provisions
Student Loans
Employers are permitted to provide student loan repayment benefits to employees up to $5,250 towards student loans. Such payments would be excluded from the employee’s income for 2020 tax year.
The Stimulus plan included all involuntary collections of student loan debt suspended, which automatically suspends payments on direct loans and Federal Family Education Loans held by the government through September 30, 2020, with no interest accruing with the delay in payments. These suspended payments will not affect credit score. If have Student loans and are still employed, may be beneficial to make payments as it will go straight to principal saving potentially thousands in interest over the loan re-payment period.
If you qualify for assistance, the suspension of payments is automatic, so you don't have to worry about contacting your student loan servicer. But while you don't need to make payments until at least the end of September, the federal government isn't making those payments for you. As a result, your repayment term will be extended by the duration of the suspension period.
Employee Retention Credit
Private-sector employers are allowed a refundable tax credit against employer social security tax equal to 50% of wages paid by employers to employees during the COVID-19 crisis, up to $10,000 per employee available whose operations were fully or partially suspended due to orders from the governmental authority limiting commerce due to COVID-19, or experienced 50% decline in gross receipts when compared to same quarter of the prior year. Employers may 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.
You CANNOT take this credit and receive the PPP loan, it is one or the other.
IRA
The IRS is allowing early withdrawals from retirement plans or IRAs to impacted individuals of up to $100,000 not subject to the 10% early withdrawal penalty from Jan 1, 2020 to end of 2020.
This will be taxed over 3 years and can be repaid anytime during a 3-year period after distribution.
Max loan amount from IRA increased from $50,000 to $100,000.
There is a temporary waiver of required minimum distribution rules for certain retirement plans and accounts – they are not required for 403b, 401k and IRAs for calendar year 2020.
Unemployment Benefits
Self-employed workers, part-time workers and those with limited work histories are eligible for temporary unemployment for 39 weeks.
Unemployment is making regular payments plus $600.
Benefits for employees and Employers Impacts – Expansion of the Family and Medical Leave Act of 1993 (Employers under 500 Employees)
Paid Emergency Family and Medical Leave for Employees:
Qualifying employees would be a need to leave employment unable to work or telework due to a need to leave for care of son or daughter under 18 years of age of such employee if the school or place of care has been closed, or if the child care provider of such son or daughter is unavailable due to public emergency.
For the 12 weeks, the first two weeks can be unpaid, then 10 weeks must be paid, employer must pay at least 2/4 of employee’s regular pay minimum (being federal minimum wage), this family leave is not subject to the 6.2% employer social security tax.
Paid Sick Leave for Employees (Any Employee is Eligible No Required Employment Date) – Eligible Employers are the Same as Paid Family Leave:
Eligible employees are entitled to up to 80 hours of paid sick leave if subject to a federal or state or local social distancing quarantine.
Advised by a health care provider to self-quarantine.
Caring for an individual who is subject to quarantine.
Caring for son or daughter if the school or place of care for them has been closed.
Total Pay capped at $511/day or $5,110 in aggregate or $200/day or $2,000 in aggregate depending on reasons for the sick leave.
Paid sick leave is not subject to the 6.2% employer social security tax.
Tax Credits for Employers Providing Paid Family and Sick Leave:
Employers who pay for family or sick leave will get a separate credit based off each payment that will reduce the employer’s share of the Social Security tax. Self-employed taxpayers are eligible for a credit against 50% of self-employment tax.
The credit is increased by the employer’s 1.45% Medicare Tax that is imposed on qualified family leave or sick pay wages and by employer’s share of allocable health care costs. Any excess credit is refundable.
Family leave credit is equal to 100% of qualified family medical leave wages that are paid out.
These credits should be taken when file Form 941 claiming the credit.
Example. X Co. paid $5,000 in qualified sick leave during Q1 2020. X Co. has $8,000 of total payment due on Form 941, including income and payroll taxes withheld from employees. X Co. is required to remit only $3,000. The other $5,000 can be used to pay the sick leave wages.
Miscellaneous
Charitable Contributions made during 2020 - $300 will be an above the line deduction meaning you will not have to itemize to get the deduction.
Loss limitations used to be limited to $250,000 and $500,000 if filing joint, now there is no limit.
Interest limitations increased for 2019 and 2020
Ohio
Governor Mike DeWine and Lt. Governor Jon Husted announced on April 8th, 2020, the creation of the Office of Small Business Relied within the Ohio Development Services Agency. The Office will coordinate state efforts to identify and provide direct support for small businesses.
It will serve as the state’s designated agency for administrating federal recovery funds awarded to Ohio for small business support.
It will work with federal, state, and local partners to evaluate and determine possible regulatory reforms to encourage employment and job creation.
The Ohio Business Help website has a lot of information that can potentially help your business, from ideas for managing cash flow to how to apply for SBA loans to help your business keep people employed. The website to visit for more information is below:
Governor Dewine posts numerous summary Ohio updates at the twitter handle @governor.ohio.gov.
Stay Safe and please contact Tramer, Shore & Zwick should you have any questions (216) 765-8110.