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UPDATE RELATED TO THE CORONAVIRUS TAX AND EMPLOYER RELATED ITEMS

March 19, 2020

We wanted to provide you with the most current tax related changes possible.  Please understand this is a very fluid situation.  The items below are directly from the House bill, which has now been signed.  There has one bill passed – which is detailed below.  There are also at least 2 other bills working through Congress that are related to this.  In addition, the IRS will need to issue regulations on how this will be implemented.  We will send updates out as soon as they are available.

Extension of payments due April 15, 2020 for Individuals and Corporations

On March 18, 2020, President Trump ordered the U.S. Treasury Department and the Internal Revenue Service to issue guidance allowing all individual and other non-corporate tax filers to defer up to $1,000,000 of federal income tax (including self-employment tax) payments due on April 15, 2020, until July 15, 2020, without penalties or interest.  The guidance also allows corporate taxpayers a similar deferment of up to $10,000,000 of federal income tax payments that would be due on April 15, 2020, until July 15, 2020, without penalties or interest.

What this means is that if you owe tax on April 15, 2020 for 1) your 2019 Individual Income Tax Return, 2) your first quarter estimated tax payment for 2020 due April 15, 2020, or 3) your corporation tax estimate due April 15, 2020, you can now wait until July 15, 2020 to pay these taxes.

What this does NOT mean – As of today, the declaration only extends the payment terms.  It does not extend the filing requirement for the return.  Therefore, individual tax returns are still due April 15, 2020 for the 2019 tax year.  However, our plan will be to offer to extend those individual returns that who are not able to file by April 15, 2020.  The extension is automatic and there is no penalty for not filing or paying – if the tax is paid by July 15, 2020.

We are also monitoring the related state tax situations. Most states will follow suite with the IRS extensions.

We are also uncertain about those that will have a 2nd quarter estimated tax payment due June 15.  At this point, our plan is to have the returns completed before June 15 so the 2nd quarter estimate is known and can be paid, if required.

Another area of confusion relates to those corporations who are not on a calendar year (such as January 31) or Not-For-Profit organizations  whose tax year ends December 31 and whose tax return is due May 15th.  The NFP’s will also likely require an automatic extension of time to file.

March 19, 2020

House passes coronavirus relief bill that contains employer tax credits

On March 16, 2020, the House passed, by unanimous consent, an updated version of the coronavirus relief bill that it originally passed on March 14. The bill, H.R. 6201, the Families First Coronavirus Response Act (the Act), provides: a) paid leave benefits to employees; b) tax credits for employers and self-employed taxpayers; and c) FICA tax relief for employers.  This bill was signed into law by President Trump on March 18, 2020.

Early on March 14, the House passed H.R. 6201, the “Families First Coronavirus Response Act” (the “Act”) to provide emergency supplemental appropriations and support Americans during the COVID-19 pandemic. Parts of the Act provide for emergency family and medical leave benefits, emergency paid sick leave benefits, and employer and self-employed tax credits and exclusion from employer FICA tax with respect to the payment of those benefits. The bill also provides free screening, paid leave and enhanced unemployment insurance benefits for people affected by COVID-19.  The vote was 363-40.

It is worth noting that Republican senators were concerned that the bill might hurt small businesses, and Senator Mitch McConnell, R-Ky, said lawmakers are working on another bill that would include relief for small businesses.  McConnell said he would not adjourn the Senate until the third COVID-19 economic stimulus package is passed.  We will inform you through our tax update service and Facebook as this bill is passed.

As of March 18, 2020, there is what has been passed:

Employer tax credits.  The Act provides tax credits to employers to cover wages paid to employees while they are taking time off under the bill’s sick leave and family leave programs.

Under the bill, many employers will have to provide 80 hours of paid-sick-leave benefits for several reasons, including if the employee has been ordered by the government to quarantine or isolate or has been advised by a health care provider to self-quarantine because of Covid-19.  Employees could also use paid sick leave when they have symptoms of Covid-19 and are seeking a medical diagnosis, if they are caring for a relative who is in quarantine or isolation, or their child’s school or child care service is closed because of the public health emergency.  Paid-sick-leave benefits will be immediately available when the law taxes effect and capped at $511 a day for a worker’s own care and $200 a day when the employee is caring for someone else.  The benefits expire on December 31, 2020.

The sick leave credit for each employee would be equal to his wages, limited to $511 per day while the employee is receiving paid sick leave to care for themselves, or $200 if the sick leave is to care for a family member or child whose school is closed. An additional limit applies to the number of days per employee: the excess of 10 days over the aggregate number of days taken into account for all preceding calendar quarters.

The bill will only provide such leave when employees can’t work because their minor child’s school or child care service is closed due to a public health emergency.  Workers who have been on the payroll for  at least 30 calendar days will be eligible for paid family leave benefits, which will be capped at $200 a day ($10,000 total) and expire at the end of the year.

The family leave credit for each employee is limited to $200 per day with a maximum of $10,000.

March 19, 2020

The credits are refundable to the extent they exceed the employer’s payroll tax. For those who use QuickBooks, if you have employees who qualify for the sick leave, we strongly suggest setting up a new payroll item called “Covid-19 Sick Leave”.  If you use a payroll service, please work with them to track these payments.

We assume these credits will be taken on form 941 and impact the EFTPS payments made by employers.  As of today, there has not been any clarifications issued by the Department of the Treasury.

Employers don’t receive the credit if they’re also receiving the credit for paid family and medical leave in Code Sec. 45S.

These rules apply only to wages paid with respect to the period beginning on a date selected by the Secretary of the Treasury which is during the 15-day period beginning on the date of the enactment of the Act, and ending on December 31, 2020. (Act Sec. 7001; Act Sec. 7003)

Comparable credits for self-employeds. The Act also provides for similar refundable credits against the self-employment tax. It covers 100% of a self-employed individual’s sick-leave equivalent amount, or 67% of the individual’s sick-leave equivalent amount if they are taking care of a sick family member, or taking care of a child following the child’s school closing. The sick-leave equivalent amount is the lesser of average daily self-employment income, or $511/day to care for the self-employed individual, or $200/day to care for a sick family member or child following a school closing. (Act Sec. 7002)

Self-employed individuals could receive a family leave credit for as many as 50 days multiplied by the lesser of $200 or their average self-employment income. (Act Sec. 7004)

These rules apply only to days occurring during the period beginning on a date selected by the Secretary of the Treasury, which is during the 15-day period beginning on the date of the enactment of this Act, and ending on December 31, 2020. (Act Sec. 7002 and Act Sec. 7004)

Employer FICA exclusionUnder the Act, sick leave and family and medical leave paid under the Act will not be considered wages under Code Sec. 3111(a)

Code Sec. 3111(a)
 (employer tax – old age, survivors and disability insurance portion of FICA; 6.2%). (Act Sec. 7005)

The tax changes in the updated version include:

…The original bill provided that sick leave and family and medical leave paid under the Act are not considered wages under Code Sec. 3111(a) (employer tax – old age, survivors and disability insurance portion of FICA; 6.2%). (Act Sec. 7005(a)) The updated version includes that provision and also provides an employer credit for the 1.45% hospital insurance portion of FICA with respect to sick leave and family and medical leave paid under the Act. (Act Sec. 7005(b)).  This means that the salary paid to employees who qualify for the sick-leave above are not considered wages and not subject to Social Security Tax withholding or matching (6.2% each) or Medicare Tax withholding or matching (1.45% each). We are not certain how this will be reported, but should be kept track of separate from the employee’s normal wages.

March 19, 2020

…The amount of the sick leave credit and the amount of the family and medical leave credit are increased by the portion of the employer’s “qualified health plan expenses” that are properly allocable to qualified sick leave wages. Qualified health plan expenses means amounts paid or incurred by the employer to provide and maintain a group health plan, but only to the extent that such amounts are excluded from the gross income of employees by reason of Code Sec. 106(a). (Act Sec. 7001(d); Act Sec. 7003(d)).  This means that if an employer continues to provide health insurance coverage to an employee during periods of sick leave, the employer will receive a tax credit for these payments.  Employers should keep track of these payments separately to ensure they receive the applicable credit.

Indiana Unemployment Insurance –

Some employers may find it necessary to temporarily lay employees off due to Covid-19.  The following is the most current information available from the Indiana Department of Workforce Development.

Q1: If an employer temporarily lays off employees due to the loss of production, lack of demand for their products/services or out of precaution caused by COVID-19, will the employees be eligible for unemployment insurance benefits?

A1: Indiana unemployment benefits are available to any individual who is unemployed through no fault of his/her own. If an employer must lay off employees due to the loss of production caused by the coronavirus, individuals may be eligible for unemployment benefits if they meet the monetary criteria and the weekly eligibility criteria. Employees must stay in contact with their employer and be available to work when called back.

Q2. How much is an individual entitled to receive in unemployment benefits?

A2: To determine an individual’s weekly payment, divide the total wages earned in the four quarters (12 months) prior to the last quarter the individual worked by 52. Then multiply the sum by 0.47. For example, if the individual earned a total of $30,000 in the four quarters prior to the last quarter worked: $30,000 ÷ 52 = $576.92 x 0.47 = $271 (weekly benefit amount). The weekly benefit amount should be rounded down to the next whole dollar amount and will not exceed $390.

Q3: When will an individual receive his/her first unemployment insurance payment?

A3: An individual should receive his/her first payment within three weeks if there are no issues on the claim for benefits. There is a one week waiting period for payment of unemployment insurance. This means that benefits are not paid for the first week of eligibility. Individuals must still file a voucher for that week.

Employees can apply for unemployment benefits at https://www.in.gov/dwd/

Note to employers: it is likely if you have claims on your unemployment account that your experience rate will increase for 2021 and several following years.

Small Business Administration (SBA) assistance

The SBA offers SBA Economic Injury Disaster Loans (EIDL).

What’s an EIDL?

  • The SBA EIDL program can provide low-interest loans of up to $2M to businesses and private non-profits.
  • EIDLs may be used to pay fixed debts, payroll, accounts payable and other bills.
  • The interest rate is 3.75% for small businesses without credit available elsewhere. The interest rate for non-profits is 2.75%.
  • EIDLs have long-term repayment options, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based on borrower’s ability to repay.

How do I apply or get additional help:

  • Still need help?  Call the SBA’s Disaster Customer Service Center at 800-659-2955 or email disastercustomerservice@sba.gov.  Individuals who are deaf or hard-of-hearing can call 800-877-8339.

This is the most current information we have available.  Please contact us with specific questions to your taxes and watch other social media outlets for news as well.

Best Wishes – and Stay Healthy!

Scott R. Frick CPA, P.C.

-Courtesy of Bollenbacher & Associates, LLC