515 Blair Street, Hollidaysburg PA
(814) 299-5505
tjohnson@terrijohnsoncpa.com
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Below is information that I've been gathering over the past few days. Hopefully, it is helpful to others in sifting through the quickly changing laws. These regulations are complex and the right path varies for each business and individual.
Please use this for informational purposes only. It should not be taken as tax or legal advice.
Make sure you coordinate decisions with a CPA and lender. I will be following up with current clients in the next day or two to discuss specifics in those situations and to assist in the loan application process as needed. If you would like us to add you to our list of businesses needing assistance, please feel free to contact me at tjohnson@terrijohnsoncpa.com, or (814) 299-5505. My office is still preparing tax returns and handling Nonprofit applications, but we appreciate your patience and understanding as we prioritize tasks that will result in quicker refunds for individuals and assistance to businesses trying to keep workers on payroll.
Stay safe, healthy, and sane everyone. It takes a village, but we live in an amazing community and will get through this together!
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Before I get into the nitty gritty...I'd like to share this story, in case it helps those dealing with the feelings of worry and anxiety.
Me: Okay, God, here's the thing. I'm scared. I'm trying not to be, but I am.
God: I know. Want to talk about it?
Me: Do we need to? I mean, you already know.
God: Let's talk about it anyway... We've done this before.
Me: I know, I just feel like I should be bigger or stronger or something by now.
God: *waiting patiently, unhurried, undistracted, never annoyed.
Me: Okay. So, I'm afraid I'll do everything I can to protect my family and it won't be enough. I'm afraid of someone I love dying. I'm afraid the world won't go back to what it was before. I'm afraid my life is always going to feel a little bit unsettled.
God: Anything else?
Me: EVERYTHING ELSE.
God: Remember how your son woke up the other night and came running down the hall to your bedroom?
Me: Yes.
God: You were still awake, so when you heard him running, you started calling out to him before he even got to you... remember? Do you remember what you called out to him?
Me: I said, "You're okay! You're okay! You're okay! I'm here."
God: Why did you call to him? Why didn't you just wait for him to get to your room?
Me: Because I wanted him to know that I was awake, and I heard him, and he didn't have to be afraid until he reached the end of the dark hallway.
God: Exactly. I hear you, my child. I hear your thoughts racing like feet down the dark hallway. There's another side to all of this. I'm there already. I've seen the end of it. And I want you to know right here as you walk through it all, you're okay. I haven't gone to sleep, and I won't.
Me: *crying. Can we sit together awhile? Can we just sit here a minute before I go back to facing it all?
God: There's nothing I'd love more.
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Individual Economic Recovery Checks
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Individual checks have been approved and will be processed as quickly as possible. Please understand that this will take time. The IRS does not have information on specific checks yet. Many of their phone systems have been shut down, due to lack of available staff. Lawmakers have said they want the payments out within 2-3 weeks, but the IRS has warned that it could take months to get to taxpayers because of a lack of a centralized database with the necessary details. The last stimulus payment took over 2 months to get to taxpayers. The IRS will mail taxpayers letters prior to releasing the funds, detailing the amount you will receive and when to expect it. Here are some basics regarding the calculation and deposits:
- The IRS will review your most recently filed tax return (2018 or 2019) to determine AGI thresholds and the number of dependents.
- The bank account shown on your tax return will be used for the direct deposit.
- If there was no bank account listed, a paper check will be issued.
- Dependents eligible for calculating the $500 stimulus amount are those under 17 on your most recently filed tax return (they would have been eligible for the full $2,000 child tax credit).
- Individuals who did not need to file as they only had social security income will still receive a stimulus check. There is no need to file a return in order to receive the stimulus payment.
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Applying for Unemployment
Pennsylvania has updated their unemployment benefit regulations in the wake of the forced closing of all nonessential businesses.
CARES Act Updates:
Coverage is being extended an additional 13 weeks (for 39 weeks in total through December 31, 2020) and recipients will receive an additional $600 per week on top of their normal state calculated benefit.
They have suspended the usual one week waiting period for unemployment and they have waived the work search and work registration requirements.
Employees may be eligible for benefits if:
- The employer temporarily closes or goes out of business because of COVID-19
- The employer reduces their hours because of COVID-19
- The employee has been told not to work because the employer feels the employee might get or spread COVID-19
- The employee has children without school or childcare and this makes it impossible for the employee to work
- The employee has tested positive for the virus, has shown symptoms, or is being tested for the virus
- The employee has been told to quarantine or self-isolate, or lives/works in a county under government-recommended mitigation efforts
- Employees are not eligible if they are able to telework, or are receiving other benefits simultaneously, such as Emergency Paid Sick Leave or Emergency FMLA leave
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Self-Employed Unemployment
The self-employed finally got some relief via the CARES Act. They are now eligible to apply for unemployment if they meet the eligibility criteria in the opposite column. This will be funded by the Federal government and applications will be separate from employees filing through the state unemployment system. The CARES Act provides for:
- Benefits for self-employed, independent contractors, and those with limited work history
- Up to 39 weeks of compensation through the end of 2020
- Compensation paid at state allowed levels, plus $600
- Workers would submit a self-certification that they're unable to work because of the Coronavirus outbreak
This system has not yet been set up, but I will forward a link once it is available.
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New Sick Pay Relief Requirements
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Families First Coronavirus Response Act (FFCRA)
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The Federal government recently enacted emergency Sick Pay regulations, and an emergency expansion on the FMLA law, both of which go into effect this coming week. Both of these were written to provide employees impacted by the virus with paid leave, outside of unemployment compensation or other paid employer sick pay already provided. These laws apply to all employers, with 1 to 500 employees, and are in effect until December 31, 2020. There are tax credits (calculated via quarterly payroll tax forms) and advances aimed at reimbursing employers for the payment of these wages.
Employers should review these regulations in detail, in order to ensure they are complying with paid leave laws. I have attached a
very unofficial comparison
of the laws that I created for myself, in addition to a link to the US DOL website, which gives more guidance.
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There are loans available now through the State of Pennsylvania and the Small Business Administration. The Working Capital Access Loans are maxed at $100,000 and can be used to meeting most business cash flow needs (although it is not meant for expansion).
Below are links to information on the these loans, which are administered through the ABCD Corp locally, as well as a summary of SBA loan options as prepared by M&T Bank. These loans will need to be repaid, and are not the forgivable loans as created by the Federal government in the CARES Act.
To summarize the Working Capital Access loan program (administered through the ABCD Corp):
- Must be a for-profit business with less than 100 employees worldwide.
- The program will reimburse working capital costs of the past three months, up to $100,000. This can be payroll, utilities, loan payments, etc - pretty much any operating cost. (Retail businesses can look back 6 months, but the program will only provide 50% of those costs.)
- Interest rate is 0%
- Term is 3 years, with a 12 year amortization. Balloon payment due at the end of three years
- No payments (neither principal or interest) due for the first 12 months
- Loans collateralized with a subordinate blanket lien on all business assets
- Any 20% or more owner needs to personally guarantee
Economic Injury Disaster Relief Loans (EIDLs) can be applied for directly through the SBA at www.disasterloan.sba.gov. These loans are capped at $2M, have relaxed collateral and guarantee rules, and offer an emergency $10,000 grant for eligible applicants. The M&T Bank Summary contains more details on this program.
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Paycheck Protection Program
(Forgivable Loan)
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The CARES Act created a loan aimed at assisting employers in covering immediate payroll, rent and utility costs. The maximum amount of these loans is 2.5x the average monthly salary of the business over the last year. Employers can then request that 8 weeks' worth of expenses related to payroll, rent/mortgage interest, and utilities be forgiven. The loans were just approved on Friday, so the application is not yet available and more details should follow in the coming days. Attached please find details on this loan program.
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Small Business Payroll Tax Provisions
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For those not eligible for, or wishing to participate in the various loan programs, the government has created two methods for utilizing payroll taxes to free up cash in the short term.
Please note that employers receiving assistance through the Paycheck Protection Program are not eligible for these programs.
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Employee Retention Credit
This provides a refundable payroll tax credit for 50% of wages paid by eligible employers to retain employees during the crisis. This is available to employers, including nonprofits, whose operations have been partially or fully suspended. It is also available to employers who have seen a greater than 50% drop in quarterly receipts.
Wages of employees who are furloughed or who's hours have decreased are eligible for this credit. (For employers with less than 100 employees, all employee wages are eligible.)
- Provided for wages and compensation, including health benefits
- Provided for first $10,000 in wages and compensation paid by the employer
- Wages do not include those taken into account for purposes of the required Paid Sick Leave, or Paid Family and Medical Leave (see above)
- Credit is provided through 12/31/20
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Delay of Payment
of Payroll Taxes
This allows employers to defer paying the employer portion of FICA taxes. All 2020 deferred amounts are due in two equal installments, one at the end of 2021, the other at the end of 2022.
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Filing and Payment Deadlines Extended
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The IRS and Pennsylvania have extended the filing and payment deadlines for personal income tax returns until July 15, 2020. The 1st quarter estimated tax payments are also extended until July 15, 2020, however, the 2nd quarter estimated tax payments are still due June 15, 2020. You may also make IRA and HSA contributions until July 15, 2020 or October 15, 2020, if you should request an additional extension of time to file your return.
All other due dates have stayed the same. Therefore 1st quarter payroll tax returns (and related payments) are still due April 30, 2020 and Forms 990 for nonprofit organizations are due May 15, 2020.
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If you are on Facebook, please consider joining one of the groups below, which are open to the public. Direct advertising of businesses is not allowed, but we encourage businesses to share tips they may have, or ask questions of each other as we all work to figure out how to navigate these uncertain times.
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