The Long Check List of Finance and Tax Help

Written by Kristelle

April 1, 2020

Thanks to our friends at Atkinson & Co. here’s a giant checklist to help you find out where to go and what paperwork to fill out:

As information continues to flow in, and as professionals everywhere are being bombarded with questions about the various programs being employed to help stem the decline of our economy, the question remains as to what are the next steps.  Most of us are facing similar challenges to remaining productive enough to keep the doors open, and some have been forced to close their doors altogether with the hopes of being able to open again in the future.  But how we bridge getting from where we’re currently at to where we need to go, and how long we need to span that bridge, can be an overwhelming problem to face without first taking a look at what opportunities are available and prioritizing the ones that will make the biggest difference in these difficult times.

So what federal FINANCING and TAX opportunities are available and how do business owners go about participating?

Please note that some of the information has been hidden for now, as some of the information is being verified.

payroll

Advanced Refunds of Payroll Tax Credits

Families First Coronavirus Response Act

Emergency Paid Sick Leave – Employers with less than 500 employees are required to provide up to 2 weeks (80 hours) of paid sick leave at 100% of wages for eligible full-time employees who self-quarantine, seek a diagnosis or preventive care, or receive treatment for COVID-19.

  • Eligible full-time employees are entitled to 2/3 of wages to care for a family member or to care for a child whose school has closed, or if their child care provider is unavailable due to COVID-19.
  • Part-time employees may also be eligible for benefits based on the typical number of hours worked in a typical two-week period.
  • Employers are fully reimbursed by the IRS through a refundable tax credit for wages paid and the employer’s contribution to employee health insurance premiums during the period of leave.
  • Eligible expenses will be reported with quarterly payroll tax payments, and if expenses exceed payroll liabilities due with that report, the IRS will issue refunds.
  • Refundable tax credits for employers apply to qualified expenses paid between April 1, 2020 and December 31, 2020.

Emergency Paid Family Leave – Employers with less than 500 employees are required to provide up to 12 weeks of job-protected leave to eligible full and part-time employees to take care of their children in the event of a school closure or their child care provider is unavailable due to COVID-19.

  • The 12 weeks allows for the first 2 weeks of unpaid leave (to which other paid leave may be applied), followed by 10 weeks of paid leave at no less than 2/3 of the employee’s usual pay.
  • Employers are fully reimbursed by the IRS through a refundable tax credit for wages paid and the employer’s contribution to employee health insurance premiums during the period of leave.
  • Eligible expenses will be reported with quarterly payroll tax payments, and if expenses exceed payroll liabilities due with that report, the IRS will issue refunds.
  • Refundable tax credits for employers apply to qualified expenses paid between April 1, 2020 and December 31, 2020.

The CARES Act

The Cares Act provides that refunds under the above programs can be refunded in advance using forms to be provided by the IRS.  The IRS is further instructed to waive penalties for failure to deposit payroll taxes if the failure was due to an anticipated payroll tax credit.

Speak to your Payroll Company

Speak with your payroll processing company about taking advantage of these credits if you find yourself subject to the Emergency Paid Leave laws.

 

Payroll Tax Delay
  1. Allows taxpayers to defer paying the employer portion of certain payroll taxes incurred through December 31, 2020.
  2. 50% of the deferred balance is due December 31, 2021 and the other 50% will be due December 31, 2022.
  3. Half of self-employment taxes are also deferred in the same manner for sole-proprietors, partners, and other self-employed individuals.
  4. Guidance on the method for reporting this payroll tax deferral is forthcoming, but I suspect we will see some modifications to the quarterly Forms 941 to account for this deferred amount, and likely to the Schedule SE that is filed with the individual income tax returns of self-employed individuals.

Employee Retention Credits
  1. Eligible employers receive a credit against employment taxes equal to 50% of qualified wages (including health benefits) for each employee ($5,000 for each employee paid $10,000 or more).
  2. Eligible to employers whose operations have been fully or partially suspended as a result of a government order, or to those who have experience a greater than 50% reduction in quarterly gross receipts, measured on a year over year basis.
  3. Employers with an average number of full-time employees in 2019 of 100 or fewer consider all employee wages as eligible for the credit, regardless of whether the employee is furloughed.
  4. For employers with a larger number of full-time employees in 2019 than 100, only furloughed employees or those facing reduced hours due to the employer’s closure or reduced gross receipts are eligible for the credit.
  5. Wages do not include amounts taken into account for the Payroll Tax Credits related to the Emergency Paid Leave provisions of the Families First Coronavirus Act.
  6. No credit is available for employee wages for employees whom the Work Opportunities Tax Credit has been taken (in any period).
  7. Applies to wages paid after March 12, 2020 and before January 1, 2021.
  8. As of the writing of this email, I’ve not seen how this credit will be applied or if it will be refundable.  I suspect that it will be accessible in the same manner as the Emergency Paid Leave credits.  You will want to speak with your payroll processing company about taking advantage of these credits.

Financing

Income Tax

Changes to Net Operating Losses for 2019
  1. Under the new tax law of 2018, NOL’s generated in 2018 or subsequent years were limited to offsetting only 80% of taxable income in the year applied.  This has been repealed temporarily for the 2019 and 2020 tax years allowing for full offset of taxable income with NOLs from 2018 and 2019.
  2. In addition, the new tax law of 2018 eliminated the ability to carry back NOLs.  The new law allows for a five year carry back of NOL’s arising in the 2019 or 2020 tax years.
Excess Loss Limitations Repealed

The 2018 tax law limited trade or business losses on individual tax payers to $250,000 with any excess being suspend until it could be used in a subsequent period.  The new CARES Act repeals this to allow for excess business losses arising in 2018, 2019, or 2020 to be fully deductible.

 

Interest Limitations

The 2018 tax law limited deductible interest to 30% of adjusted taxable income.  The new CARES Act temporarily increase that to 50% for 2019 and 2020 tax years.

 

Qualified Improvement Property Technical corrections

The 2018 tax law had an error in it in which Qualified Improvement Property (QIP) was treated as 27.5 or 39 year property, making it ineligible for bonus depreciation.  The new CARES Act corrects this error making QIP 15 year property eligible for bonus depreciation (100% in 2019 and 2020).

Conclusion

There are additional benefits in the newest legislation to come out of Washington, and states are also working vigorously to stem the negative effects of COVID-19.  If you hear of anything, or have questions about the things you’re hearing, reach out to your banking and accounting advisors.  We’re all doing our best to get the information out there so our communities can come out of this with as little disruption as possible.  All of us are challenged in the current environment, so the better we can pull together to get through this, the stronger we’ll be on the other end.

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