Firstly and most importantly, we hope this communication finds everyone in good health and spirits. We have many clients and friends that are going through rapid swings in income and lifestyle, and we thank you all for your patience and help as we work through our own challenges!
Below are summaries of the most relevant tax & business-related legislation that has been passed so far. Obviously this list is subject to change on an hourly basis, particularly as the 1-2 TRILLION dollar stimulus package will likely be passed later today or tomorrow by the Senate and will almost be certainly signed by the President very soon after that. Within 24 hours of passing, I will read that bill’s final form and get a similar summary posted for your reference.
April 15th – The deadlines to file and pay for tax returns and estimated payments (i.e. Q1 2020 ES payment) have both been automatically extended until July 15th.
Tax-Specific Changes & Legislation
April 15th – The deadlines to file and pay for personal tax returns and estimated payments (i.e. Q1 2020 ES payment) have both been extended until July 15th. Nothing is required on your end or ours to make use of this extension.
Families First Coronavirus Response Act (FFCRA) (H.R. 6201)
The primary takeaways for individuals and businesses (as opposed to the government-oriented changes in the bill, which don’t apply to us) from the FFCRA are changes to filing for unemployment (individuals) and Paid Time Off as it relates to COVID-19 (businesses). There are also a few smaller, but important additions also listed below.
- Unemployment, which is primarily a state-managed program, was “super-funded” with an extra $1 Billion to make sure states can meet the upcoming demand.
- For employers with fewer than 500 employees, the FFCRA requires you (us) to pay employees’ emergency leave due to “qualifying need related to [COVID-19]”. These 6 situations, including being ill from COVID-19 and caring for someone who is under quarantine, can be read in Section 5102 of the bill. There is currently no 50-employee floor like the FMLA has, so this applies to anyone with at least a single employee!
To offset the cost, there is a credit that is equal to up to $5,110 (max $511 per day for 10 days) of wages per employee for reasons 1-3 of Section 5102 or $2,000 (max $200 per day for 10 days) for reasons 4-6 of Section 5102, to be taken against the employer’s portion of Social Security Tax. Any paid time off above the required amounts of $511/$200 per day are not subject to the credit.
This paid leave equates to 2 weeks’ work per employee, so 80 hours for full-time employees and an average pay for any part-time employees. Due to short-term cash flow issues, you will likely see layoffs from small companies who are unable to meet this requirement, even after the credit and even if they want to retain the employees.
Finally, self-employed individuals will receive the same credits for the same maximum rates of pay ($511/$200 per day based on applicability of items 1-3 or 4-6 of Section 5102) and based on their “average daily self-employment income” calculated by dividing their net earnings for the year and dividing by 260.
- Employer-sponsored group health plans are now required to provide COVID-19 testing with no copay or any other cost to the participant, including high-deductible health plans. Contrary to the President’s recent claim, cost for treatment is not required to be covered.
Other Business-Related Legislation & Notes
- The Small Business Administration has announced several plans, including low-interest loans to help through the COVID-19 recovery period. The SBA has been supplied with billions in federal funding and has a much more lenient lending approach at the moment, so apply soon if you need!
- Many states and cities also have COVID-19 related programs to help small businesses, like Texas, California, and New York City. See the National Governors Association’s website for a full list of Governors’ websites to locate programs that are available in your state.
Lastly, if you have any questions, comments, or useful additions for the information above, please do not hesitate to reach out! Thanks for reading and stay healthy!