FFCRA Payroll Tax Credit Reminder
With the significant increase in COVID cases, we wanted to remind you of the benefits available for employees impacted by the virus and the related payroll tax credits available to employers.
As we initially communicated back in March, the Families First Coronavirus Response Act (FFCRA) requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. These provisions currently remain in place through December 31, 2020.
These provisions apply to employers with fewer than 500 employees. Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or childcare unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
In summary, the benefits include:
- Two weeks of paid sick leave at the employee’s regular rate of pay (up to $511 per day) if the employee is quarantined and/or experiencing COVID-19 symptoms and seeking a medical diagnosis, or
- Two weeks of paid sick leave at 2/3 of the employee’s regular rate of pay (up to $200 per day or $2,000 in total) because the employee is unable to work because of a need to care for an individual subject to quarantine, or to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID-19, and
- Up to an additional 10 weeks of paid expanded family and medical leave at 2/3 of the employees regular rate of pay (up to $200/day or $10,000 in total per employee) where the employee is unable to work due to care for a child whose school or child care provider is closed or unavailable for reasons related to COVID -19.
Payroll Tax Credits
Payroll tax credits for qualified sick leave wages and family leave paid by an employer are allowed in the amount of benefits paid. However, it’s important that the wages be reported properly to get a timely refund of the taxes.
For the IRS FAQs on COVID-19-related tax credits, CLICK HERE.
Paycheck Protection Loan Forgiveness Applications
There’s been a lot of chatter regarding the need for borrowers to complete their Paycheck Protection Program (PPP) loan forgiveness applications. While you may be anxious to apply for forgiveness, here are a few reasons why borrowers may not want to rush the forgiveness application process:
- Application Could Be Waived for Small PPP Loans – Pending legislation may make PPP forgiveness even easier. The current bill would allow “small” PPP loans (currently estimated for loans under $150,000) to be automatically forgiven without the borrower needing to go through the entire forgiveness application process.
- Clarification and Final Guidance Still Needed – Even though lenders may have the ability to process forgiveness applications now, there are still several areas of the program that need clarification and final guidance from the U.S. Treasury and the Small Business Administration (S.B.A) that may affect the forgiveness process.
- For Most Borrowers, There’s No Rush – Borrowers who received their loans after June 5, 2020 have a 24 week covered period. Those who received loans before June 5, 2020, can choose either eight weeks or 24 weeks for their covered period. This increased flexibility in the time to use PPP funds can be important in maximizing loan forgiveness. Loan payments do not begin until 10 months after the end of your covered period. So, for most borrowers, there’s no rush.
Watch for additional updates from TDT as further guidance is issued. If you have questions on your specific situation, be sure to contact us.
Payroll Tax Deferral
Under guidance issued by the IRS last week, the 2020 payroll tax deferral (based on presidential memorandum and IRS notice 2020-65) enables employers to stop withholding Social Security payroll taxes from paychecks from September 1, 2020 through December 31, 2020.
Before diving into key details, be advised that TDT is not recommending clients defer employee taxes based on the guidance we have today.
The following provides a summary of IRS Notice 2020-65:
Payroll tax deferral:
- Any employee who makes less than $4,000 pre-tax wages in a bi-weekly pay period qualifies to have their Social Security Tax (6.2%) deferred.
- The deferral covers paychecks starting on September 1, 2020, and the deferral ends on December 31, 2020.
- This deferral enables employees to keep more of their money during the defined pay periods.
- The determination for the $4,000 wage limit is done on a bi-weekly pay period basis. This means that an employee could qualify for deferral during some pay periods and not others, depending on the pay amount during a given period.
Payroll tax repayment:
- Employers must pay deferred taxes no later than April 30, 2021. Otherwise, penalties and interest will start to accrue on taxes owed.
- Employers will need to increase the employee social security tax for current employees between January 1, 2021 and April 30, 2021 to recover the amount deferred during 2020. This means that employees can expect reduced paychecks in 2021 to repay the deferred taxes.
- For employees who are no longer with a business and had taxes deferred, the employer will be responsible for repaying these taxes to the government or making other arrangements to recover the deferral amount from the former employee.
Items awaiting clarification:
- The process to collect former employees’ deferred taxes.
- The type of recordkeeping or other items required for compliance on this deferral.
If you have any questions, be sure to contact us. We are here to help!
Paycheck Protection Program Flexibility Act
On Friday, June 5, 2020, President Trump signed the Paycheck Protection Program Flexibility Act of 2020 (H.R. 7010). The bill provides more flexibility for participants in the PPP program, including allowing those participants to defer the payment of certain payroll taxes that the CARES Act prevented them from deferring, as well as the following:
- Extends the eight-week covered period (time period for when PPP loan proceeds must be spent for loan forgiveness) to a covered period ending on the earlier of either 24 weeks after such date of origination or December 31, 2020
- In the original CARES Act, PPP loans were forgiven if a business spent 75% of the loan money on payroll. PPPFA lowers that to 60%
- Pushes back a June 30 deadline to rehire workers to December 31, 2020.
- For any PPP loan that is not forgiven, a business will have five years to repay the loan.
PPP Forgiveness Scenario Planning
If you would like TDT to help you evaluate different scenarios and strategies to maximize forgiveness, contact us today. Pricing and solutions are customized to your specific situation. Scenario planning engagements start at $595.
Additional Tax Filing Relief from the IRS
On April 9th, the IRS granted taxpayers with additional deadline relief with Notice 2020-23. The new relief applies to all taxpayers with a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020, including individuals, trusts, estates, corporations, and other nonprofit tax filers.
- Federal tax returns with a due date on or after April 1, 2020, and before July 15, 2020, now have a due date of July 15, 2020 (for filing and payment).
- Estimated tax payments previously due on June 15, 2020 are now due July 15, 2020. As a result, both first and second quarter estimates for 2020 are now due on July 15, 2020.
- This relief does NOT appear to change the due date of payroll tax returns.
Affected taxpayers do not have to file extensions or send documents to the IRS to obtain relief.
On Friday, March 27, 2020, the President signed into law, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act (H.R. 748), also referred to as the Stimulus Package. The CARES Act contains several provisions that could provide relief and support for both individuals and businesses.
The provisions for INDIVIDUALS can be found HERE, and covers:
- Recovery Checks
- Retirement Plans
- Charitable Contributions
The provisions for BUSINESSES can be found HERE, and covers:
- Paycheck Protection Program
- Employee Retention Payroll Tax Credit
- Deferral of Employer Social Security Taxes
- Bonus Depreciation
- Net Operating Loss Modifications
Targeted Small Business Sole Operator Fund
A fund has been created to support Targeted Small Businesses (TSB) with zero employees that have been economically impacted by the COVID-19 pandemic. The program offers eligible small businesses grants ranging from $5,000-$10,000 to businesses that are sole proprietors or single-member LLCs that are also TSB certified, or have an application submitted to the Iowa Economic Development Authority (IEDA) by April 10, 2020 to become TSB certified.
This program will continue to process applications on an ongoing basis until all funds are exhausted. Applications are processed in both order of receipt of application and submission of all required documents and Targeted Small Business certification approval.
Check out our fully-detailed post on the Targeted Small Business Operator Fund HERE.
Iowa Small Business Relief Fund
On Monday, March 23, Governor Reynolds announced a new Iowa Small Business Relief Program that will provide financial assistance to small businesses and tax deferrals to any Iowa businesses that have been economically impacted by the COVID-19 pandemic.
Application deadline is Tuesday, March 31, at 12 p.m.
Details are available at the Iowa Economic Development website HERE.
Unemployment Insurance Tax Payment Deadline Extension for Iowa Small Businesses
First quarter unemployment tax payments that are normally due April 30th will be delayed until the end of second quarter, July 31st this year. Employers of 50 or fewer employees and in good standing with no delinquencies in quarterly payments are eligible for this deadline extension. Employers must file their first quarter report and notify Iowa Workforce Development of intent to delay payment by Friday, April 24th at 4:30 pm. Check out the full announcement from Governor Reynolds HERE.
Families First Coronavirus Response Act
On March 18, 2020, President Trump signed the Families First Coronavirus Response Act (FFCRA) which provides paid sick leave and free coronavirus testing, expanded food assistance and unemployment benefits, and requires employers to provide additional protections for health care workers. The FFCRA becomes law on April 1, 2020 and employers must be compliant with the FFCRA provisions by this date. Wages eligible for the refundable credit are wages paid for the period from April 1, 2020 to December 31, 2020. Please note this isn’t wages paid during this period, but rather for the period that runs from 4/1 – 12/31 irrespective on what the actual pay date is.
For more information on the tax credits available to employers, CLICK HERE.
The FMLA has been expanded to provide relief to those affected by COVID-19. Check out our full article on the expansion HERE.
All employers covered by the paid sick leave and expanded family and medical leave provisions of the FFCRA (i.e., certain public sector employers and private sector employers with fewer than 500 employees) are required to post this notice by 3.26.2020.
Tax Day Extended Until July 15th
The IRS extended the tax deadline to July 15th and Iowa and many other states have extended their deadlines, as well. First quarter federal estimates and all gift tax returns and GST tax (Form 709) have been extended to July 15th, as well. Second quarter federal estimates are still due June 15th.
These extended deadlines provide welcome relief for our clients and our team. We are focusing on the following priorities:
- Small business clients are dealing with a lot of change and uncertainty. We are focusing on helping them navigate these uncertain times. Please reach out if there’s anything you need.
- Many individual clients have tax refunds coming. We have specific team members focused on getting those returns completed and filed so clients can receive their refunds.
- Our offices closed to the public last week. Our team members are continuing to work; most of them remotely. We are all focused on adapting to our remote work setups and working as efficiently as possible under the circumstances.
TDT Offices Closed to Public 3.16.2020
As a firm, we have been closely monitoring the news regarding the spread of COVID-19. Our goal is to take appropriate, measured and proactive steps based on reliable information from trusted sources to protect our team, our clients and our communities. We are already set up to work remotely and to share information electronically, so we will be closing our offices to the public to help limit the potential community spread. Our team members will continue to work; most of them remotely.
As of today, the tax filing deadlines have not changed, though we anticipate there will likely be an announcement from the IRS this week regarding extending the April 15th deadline. In the meantime, we will continue to prepare and file returns. Our team members will be available by phone, email, or video conference. If you have an in-person meeting scheduled, we will contact you regarding shifting the meeting to a virtual format.
If you have individual tax return documents to provide, please send them electronically through TaxCaddy. If you haven’t already signed up for this free tool, we are sending another TaxCaddy invite to your email address today and you should receive it within the next 24 hours. If you have any questions on using this tool, or you don’t receive your TaxCaddy invitation, please contact our office.
As returns are completed, you will be able to review and sign documents electronically. We will give you a call to let you know when your return is ready and answer any questions you may have regarding the electronic review and/or signature process.
We appreciate your understanding during this uncertain time. It’s hard to know if we are overreacting or doing too much, but for the sake of our team, our clients, and our communities, we’d rather be safe than sorry. Please reach out to your engagement team members if you have any questions.
Courtney De Ronde, CPA