From the Pinnacle CPA Advisory Group — 

CORONAVIRUS ASSISTANCE CHECKLIST by Dave Krebs, CPA (Jan. 4, 2021)

This checklist was prepared for our clients and friends as a quick way to identify eligible, qualified programs. Please contact us for the details.  Many of the details are not available yet from the government. This is not meant to be an all-inclusive summary of the extensive programs.

Delays in Filing and Paying

  • Federal tax payments and returns due 4/15/20 are delayed until 7/15/20
  • For individuals, trusts, estates, partnerships, associations, companies and corporations
  • Automatically postpones all 4/15/20 filings without a limit on amount
  • Includes 1st and 2nd quarter 2020 federal estimates
  • Penalties and interest are waived for this 90 day period
  • Includes individual, trust, gift tax, and C corporation returns that were due 4/15/20 – 7/15/20
  • Payments for IRA’s, HSA’s, MSA’s are also delayed until 7/15/20
  • 2016 claim for refund (statute of limitation issues) is not delayed
  • Most states will follow suit for a delay in payment and filing

Direct Stimulus Payments to Individuals (sometimes called Recovery Rebates or Economic Impact Payments)

  • Individuals with adjusted gross income (AGI) ≤ $75,000 receive $1,200
  • Married couples with AGI ≤ $150,000 receive $2,400
  • Head of households with AGI ≤ $112,500 receive $1,200
  • Parents with children under age 17 receive $500 / child
  • Phase-outs occur for individuals from $75,001 – $99,000 (head of household from $112,501 – $136,500)
  • Phase-outs occur for married couples from $150,001 – $198,000
  • Rebate is reduced by $5 for each $100 that exceeds the above AGI
  • Income is based on 2018 return unless 2019 return is filed
  • Money is now being sent (up to 12/31/19) by direct deposit if that info is available or by check otherwise
  • National Economic Impact Day is 11/10/20.  You must register by 11/21/20.  See address below.
  • Rebate is not subject to tax
  • Receive even if you don’t file a return as long as you have a SSN and are not claimed by someone else
  • Get My Payment – IRS website tool for payment status information and entering direct deposit information
  • Reconciliation on 2020 return (Keep if you got too much and claim a credit if you got too little based on 2020 income)
  • Second set of payments $600 per taxpayer and $600 per qualifying child

Expanded Unemployment Benefits

  • Extra $600 / week through 7/31/2020 (in addition to state benefit).  A presidential executive order lowered and extended to $300 /week from 8/1/2020–12/27/20.  It is now extended through 4/5/21.
  • Maximum of 50 weeks for combined federal and state assistance
  • Self-employed and independent contractors would be eligible

Retirement Account Withdrawals

  • Required minimum distributions (RMD) for 2020 can be waived (even inherited IRA’s)
  • 10% penalty is waived on up to $100,000 in qualified distributions (must be used for Corona related purposes)
  • Started 1/1/20
  • It can be repaid within 3 years from the date received; or
  • It is taxed over 3 years (2020 – 2022) or you can elect out and pay all the tax on the 2020 tax return

Student Loans Held by the Dept. of Education

  • All payments can be suspended through 9/30/20. Extended to 12/31/20.
  • 0% interest will accrue

Federally Backed Mortgage Loans such as FNMA and FHLMC

  • 180 day forbearance can be requested by the borrower. An additional 180 days was added.
  • No fees, penalties or interest beyond contractual amounts will be added

Above-the-Line Charitable Deduction

  • Maximum $300 ($600 Married Filing Joint Filers) during 2020
  • Permitted if you don’t itemize
  • Donations to a donor advised fund don’t count

Qualified Family Leave

  • Employees unable to work or telework who leave for care of a child under age 18 are qualified (school or childcare is closed)
  • Wages paid 4/1/20 to 3/31/21
  • Employed at least 30 days
  • First 10 days may be unpaid but the employee can use vacation, personal, medical or sick leave benefits
  • After 10 days, paid leave is required (2/3 of normal gross pay not to exceed $200 / day)
  • The aggregate maximum is 10 weeks and $10,000
  • Self-employed qualify up to 50 days at $200 / day ($10,000 maximum)

Qualified Sick Leave

  • Unable to work or telework for specific virus-related reasons
  • Subject to quarantine, isolation order, advised by health provider to self-quarantine, and experiencing symptoms
  • 80 hours of paid sick time to full-time employees
  • Part-time employees based on average hours worked over a 2 week period
  • No limit for length of service
  • Regular rate up to a maximum of 10 days at $511 / day not to exceed $5,110 / employee to take care of self
  • Regular rate up to a maximum of 10 days at $200 / day not to exceed $2,000 to take care of someone else
  • Self-employed qualify up to 10 days at $200 / day ($2,000 maximum)

Qualified Family or Sick Leave General Rules

  • Administered by the Department of Labor
  • Small business (< 50 employees) exemptions are coming
  • Increased by portion of qualified health plan expenses
  • Increased by 1.45% Medicare tax
  • Not subject to 6.2% SS tax
  • Refundable tax credit if it exceeds the credit on employer’s payroll tax
  • Comparable credits are offered to self-employed individuals (prior year net earnings divided by 260 days)
  • This can be claimed even if you received a PPP loan

Small Business (generally < 500 employees) Loans (Paycheck Protection Program)

  • Covers employee and owner payroll costs
  • Administered by banks who are certified SBA Lenders (guaranteed 100% by SBA)
  • Eligible if in operation on 2/15/20
  • Sole proprietors and independent contractors (self-employed) are eligible and use net Income from self-employment
  • Qualified expenditures include payroll, group health care, mortgage interest, rent, utilities, interest on existing debt
  • Payroll costs include salary, commission, tips, health care insurance, and state unemployment
  • Employees have qualifying costs up to $100K with an 8 week max of $15,385 and a 24 week max of $46,154
  • Owners have qualifying costs up to $100K with an 8 week of $15,385 and a 24 week max of $20,833
  • Those having a principal residence outside the US do not qualify
  • Utilities include electric, gas, water, transportation, phone, and internet
  • 8/8/20 is last day to apply or receive a loan but it is first come first serve…move quick!!!
  • Loan is 2.5 * monthly payroll costs (2019) (special seasonal and industry rules) up to $10 million
  • Interest at 1% loan
  • Loans issued before 6/5/20 have a 2 year maturity and loans issued starting 6/5/20 have a 5 year maturity
  • Payments will be deferred for a minimum of 6 months from date of loan disbursement
  • No collateral, personal guarantees or recourse to owners
  • Funds should be used during the covered period in the 8 or 24 weeks after loan origination (loan can be forgiven in whole or part)
  • Loan principal is forgiven for proceeds used over an 8 or 24 week period for qualified costs listed above
  • The 8 or 24 week period begins on the date of the loan origination
  • Expected forgiveness is the amount lender expects borrower to expend
  • At least 60% of the loan must be used for payroll costs to have full forgiveness
  • Amount forgiven is reduced if FTE headcount or salaries decrease (↓ >25% during covered period compared to 1/1/20 – 3/31/20)
  • Start gathering monthly payroll (W-2’s and 941’s) and self-employed information (Sch. C and bank statements) for 2019
  • Applicant must submit SBA Form 2483 to the bank and whatever forms the bank requires (varies by bank)
  • Applicant may be able to use shortened SBA Form 3508 EZ (check this first!)
  • Applicants with less than $150K of PPP loan proceeds can use SBA Form 3508S…easiest…changing the form again soon
  • Expenses related to tax exempt PPP loans are not deductible (per IRS notice) (Congress is talking about making this exempt)
  • There is a really good calculator at the website below
  • It is confirmed that you can deduct the expenses related to the PPP loan that is forgiven
  • A second PPP loan program (PPP 2.0) has been approved
  • PPP 2.0 will be based on a 25% decrease in quarterly gross receipts in 2020 as compared to 2019
  • PPP 2.0 uses the same 2.5 times 2019 monthly payroll costs will be used except for restaurant industry that can use 3.5 times
  • PPP 2.0 lowers qualifying employers to ≤ 300 employees

SBA Economic Injury Disaster Loans (EIDL) (< 500 employees)

  • Emergency advance (grant) up to $10,000 within 3 days of applying (have not seen any of these after weeks)
  • Up to $2M in loans (amounts over $10,000 are loans at 3.75% for up to 30 years) (Non-profits get 2.75%)
  • Must have been in business as of 1/31/20
  • Loans available from 1/31/20 – 12/31/20
  • Includes sole proprietors with and without employees
  • Can still do the paycheck protection program above but the $10,000 will be applied against the loan

Employee Retention Credit

  • For employers whose operations were fully or partially suspended as a result of a government order; or
  • For employers who had a significant decline in gross receipts (declined by > 50% from same quarter in prior year)
  • Employers with ≤ 100 employees, all wages are eligible (limits if >100)
  • Refundable payroll tax credit of 50% of wages (new IRS Form 7200)
  • Up to $10,000 / employee / quarter
  • Cannot use this credit and the PPP loan above for the same expenses
  • Relates to wages paid 3/13/20 – 12/31/20
  • Extended to 6/30/21 with credit increased to 75% of qualified wages, ≤ 500 employees, and a > 20% gross receipts decline

Payroll Tax Payment Delay

  • Employers and self-employed
  • 6.2% employer’s matching money
  • 3/27/20 – 6/31/21
  • 50% of qualified wages through 12/31/20 up to $10,000 / year
  • Increased to 75% from 1/1/21 – 6/30/21 up to $10,000 / quarter
  • Pay ½ by 12/31/21 and ½ by 12/31/22

Employer Payments of Student Loans

  • Tax free to the employee with a maximum of $5,250
  • Paid by employer for employee
  • 3/27/20 – 12/31/25

Net Operating Loss Expansion

  • NOL’s generated in 2018, 2019 or 2020 can be carried back 5 years
  • The 80% limit on NOL’s is suspended to fully offset income
  • Farmers can elect to retain the 2-year carryback, claim 5-year carry back, or waive the carryback

Business Interest Deduction

  • Business interest deduction was increased from 30% of taxable income to 50% of taxable income

Qualified Improvement Property Technical Correction

  • 100% bonus depreciation is permitted on interior improvements for non-residential property
  • Retroactive for improvements after 9/27/17 filed on Form 3115 Change in Accounting

Loans to Certain Industries (the Big Winners)

  • Air and cargo carriers
  • Businesses critical to national security
  • Hospitals & COVID care providers
  • Many government branches
  • Education

Disaster Relief

  • Qualified disaster areas declared 1/1/20 – 2/25/21 with incidence period 12/27/19 – 12/27/20
  • Waives 10% penalty on retirement withdrawals up to $100,000
  • Borrow up to $100,000 from a retirement plan

Ohio Considerations

  • Ohio and most Ohio cities have delayed filing and payment date to 7/15/20
  • Ohio Dept. of Insurance – employees with reduced hours still can have group coverage, health insurance payments can be delayed for 60 days, COBRA and continuation rules are loosened for now
  • Ohio unemployment pays 50% of average weekly wage with a $118 minimum / week and a $424 maximum / week for 26 weeks

Other Considerations

  • Business meals can be 100% deducted for 2021 and 2022
  • Business interruption insurance – hard to prove claim
  • Business liability insurance – are you exposing employees or clients to the virus
  • Workers compensation – probably not but health care workers maybe
  • Off premise insurance – have you thought about property being kept offsite now
  • Employee rights must be posted by 4/1/20
  • Proactively call lenders and work out payment arrangements
  • Teachers can use their $250 educator deduction on PPE and other COVID related supplies
  • 7.5% medical expense limit has been made permanent
  • Child tax and earned income credits can be based on 2019 earned income rather than 2020 if more beneficial
  • Can deduct cash charitable contributions up to 100% of income in 2020 and 2021 (does not apply to 20% / 30% property)
  • Stay safe!!!

SOME HELPFUL REFERENCES

If you have questions about available Coronavirus Assistance Programs or any other business accounting or tax issue, contact the tax experts at Pinnacle CPA Advisory Group for help. Call our local office at (614) 942-1990, send an email to info@cpaagi.com, or fill out the Contact Form at cpaagi.com/contact.

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