From the Pinnacle CPA Advisory Group —
This checklist was prepared for our clients and friends as a quick way to identify eligible 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 were due 5/17/21 at this time
___ For individuals, trusts, estates, associations, and C corporations
___ Calendar year S corporations and partnerships were due 3/15/21
Direct Stimulus Payments to Individuals (sometimes called Recovery Rebates or Economic Impact Payments)
Round 1
___ 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 was reduced by $5 for each $100 that exceeds the above AGI
___ Income was based on 2018 return unless 2019 return is filed
___ 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
___ Reconciled on 2020 return (Keep if you got too much and claim a credit if you got too little based on 2020 income)
___ Rebate was not subject to offset or reduction by amounts owed
Round 2
___ Same rules as Round 1
___ Second set of payments $600 per taxpayer and $600 per qualifying child
Round 3
___ $1,400 per eligible individual and dependent
___ Quicker phase-outs: Individuals $75,001 – $80,000 (head of household from $112,501 – $120,000)
___ Phase outs for married couples from $150,001 – $160,000
___ Parents with children under age 17 receive $600 / child
___ 2019 return will be used for eligibility unless the 2020 returns have been filed at time of payment
___ Taxpayers deceased before 1/1/21 are not eligible
___ Reconciled on the 2021 return (Keep if you got too much and claim a credit if you got too little based on 2021 income)
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 9/6/21.
___ Maximum of 50 weeks for combined federal and state assistance
___ Self-employed and independent contractors would be eligible
___ Up to $10,200 of unemployment benefits (applies to both spouses) are considered tax free if AGI is < $150K (for all filing statuses)
___ Tax free begins in 2020. It is retroactive. The IRS will send refunds
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 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.
___ Certain student loans forgiven are excluded from income from 1/1/21 to 12/31/25.
___ 0% interest will accrue
Health Insurance Premium Assistance
___ Premium assistance (subsidies) have been expanded
___ Larger subsidies are available to all and some subsidy to some higher income levels now
___ Employers who provide coverage and pay premiums may claim a credit for their share of medicare tax.
___ Cobra qualified beneficiaries are eligible for a 100% subsidy from 4/1/21 to 9/30/21
Child Tax Credit (for 2021 only)
___ 17 year-olds are able to receive credit
___ Credit is increased from $2,000 to $3,000 ($3,600 if under age 6)
___ Increased credit amounts are phased-out at $50 / $1,000 income
___ Phase-out starts at $75,000 single, $112,500 head of household and $150,000 married filing joint
___ IRS will develop a program to pay 50% in advance between 7/1/21 – 12/31/21 using 2020 returns if filed (otherwise 2019)
___ You can opt out of advance payments
___ Credit will be reconciled on the 2021 return
Earned Income Credit (starting in 2021)
___ Qualifying minimum age for individuals with no qualifying children is reduced from 25 to 19 with some exceptions
___ Being in school at least 5 months is the main exception
___ Earned income used can be 2019 instead of 2021 if 2019 is greater than 2021
___ Disqualifying investment income was raised to $10,000 starting in 2021
Child & Dependent Care Benefits (starting in 2021)
___ Dependent care assistance is increased from $5,000 to $10,500 ($5,250 for married filing separate) starting in 2021.
___ Dependent care dollar limit is increased from $3,000 to $8,000 for 1 child and from $6,000 to $16,000 for 2 or more children
___ Credit % is increase to 50% reduced by 1% in excess of $125,000 AGI
___ Maximum credits are $4,000 for 1 child and $8,000 for 2 or more children
___ Old 20% is used once the higher percentage phases-out at $185,000 AGI
___ Credit phases-out from $400,000 to $440,000 AGI and is completely gone when AGI exceeds $440,000
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 for 2021)
___ Permitted if you don’t itemize
___ Donations to a donor advised fund don’t count
Qualified Family Leave (Extended to 9/30/21)
___ Employees unable to work or telework who leave for care of a child under age 18 (school or childcare is closed)
___ Employed at least 30 days
___ First 10 days may be unpaid but the employee can use vacation, personal, medical or sick leave benefits
___ The 10 days can reset.between 4/1/21 to 9/30/21
___ 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
___ Increased from $10,000 to $12,000 for 4/1/21 – 9/30/21
___ Self-employed qualify up to 50 days at $200 / day ($10,000 maximum)
___ Self-employed individuals qualify for up to 60 days for 4/1/21 to 9/30/21
Qualified Sick Leave (Extended to 9/30/21)
___ 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
___ Increased by portion of qualified health plan expenses
___ Increased by 6.2% Social Security and 1.45% Medicare 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)
Round 1
___ 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
___ PPP proceeds are tax exempt and related expenses are deductible if the loan is forgiven
___ There is a really good calculator at the website below
Round 2:
___ 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
___ Targeted EIDL advances are considered tax free income
Employee Retention Credit (Extended to 12/31/21):
___ 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 – 12/31/21
___ Extended to 6/30/21 with credit increased to 75% of qualified wages, ≤ 500 employees, and a > 20% gross receipts decline
___ Extended to 12/31/21 with credit decreased to 70% of qualified wages, claimed against medicare tax only
___ Severely financially distressed companies (90% decrease in a quarter between 2019 and 2020) treat all wages as qualified
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
___ Restaurants have a revitalization grant program based on decline of gross revenue
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 when bought at a retail restaurant even if taken offsite
___ 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
___ 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:
___ Coronavirus Aid Relief and Economic Security Act (CARES Act) (3/27/20) https://assets.documentcloud.org/documents/20059055/final-final-cares-act.pdf
___ Families First Coronavirus Response Act (3/18/20) https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave
___ IRS People First Initiative https://www.irs.gov/newsroom/irs-unveils-new-people-first-initiative-covid-19-effort-temporarily-adjusts-suspends-key-compliance-program
___ Loan Forgiveness Details https://www.congress.gov/bill/116th-congress/house-bill/748/text#toc-HB37C431F57484034A3D8B58B1EC16623
___ SBA emergency $10K advance for EIDL https://www.sba.gov/disaster/apply-for-disaster-loan/index.html
___ IRS Interim Final Rule https://www.sba.gov/sites/default/files/2020-04/PPP–IFRN%20FINAL_0.pdf
___ DOL Q & A https://www.dol.gov/agencies/whd/pandemic/ffcra-questions
___ SBA EIDL Loans: https://covid19relief.sba.gov/#/
___ SBA Paycheck Protection Program https://www.sba.gov/funding-programs/loans/paycheck-protection-program-ppp
___ IRS information https://www.irs.gov/coronavirus
___ IRS Notice 2020-32 – Deductibility of PPP expenses https://www.irs.gov/pub/irs-drop/n-20-32.pdf
___ SBA Interim Final Rules Filed 6/16/20 https://s3.amazonaws.com/public-inspection.federalregister.gov/2020- 13293.pdf
___ Non-filers for stimulus payment must register at https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here
___ Great PPP loan calculator at https://www.pppforgivenesstool.com/
___ Consolidated Appropriations Act, 2021 (12/27/20) https://www.congress.gov/bill/116th-congress/house-bill/133/text
___ American Rescue Plan Act of 2021 (3/11/21) https://www.congress.gov/117/bills/hr1319/BILLS-117hr1319enr.pdf
Contact the Pinnacle CPA Advisory Group
If you need help with pandemic assistance, or any other personal or business tax issue, contact the Pinnacle CPA Advisory Group for expert advice. Call us at (614) 942-1990, reach us by email sent to [email protected], or fill out our Contact form at cpaagi.com/contact.