In order to help meet the needs of U.S. citizens in this difficult time, the U.S. government has passed a relief package and put in place certain rules and regulations that guide how businesses should or can react to the COVID-19 crisis. Changes in bureaucracy and red-tape can be confusing, but your virtual CFOs in McAllen at Murray & Kirchner CPA, LLC, can help your business seek economic assistance during such uncertain times.
1. New Regulations for Businesses
Based on provisions put in place by the Internal Revenue Service (IRS), there are requirements businesses must follow regarding providing sick pay for COVID-19 related issues:
- Businesses must give sick pay to employees who can’t work because they are quarantined or must care for someone who is quarantined. This payment must be provided for up to 80 hours, up to $500/day for 10 days— this will be reimbursed on your payroll tax report, dollar for dollar.
- Businesses must give sick pay to employees who are unable to work because they need to care for a child whose school or child-care facility is closed due to the Coronavirus. This payment must be provided for up to 80 hours, up to $200/day for 10 days. This will also be reimbursed on your payroll tax report, dollar for dollar.
- Taxpayers with installment agreements, Offers in Compromise, and Audits from the IRS are on hold.
The CARES Act provides the following payroll tax credit:
- Certain affected employers who retain their employees will receive a credit against payroll taxes for 50% of eligible employee wages paid from March 13,2020 through the end of the year. This credit is capped at $10,000 per employee and eligible employers may defer remitting employer payroll taxes that remain due for 2020.
2. Small Business Association (SBA) Loans
New provisions of the CARES Act provide small businesses (fewer than 500 employees) the following loan options through the SBA:
- Paycheck Protection Program
Allows for small business loans of up to two and a half times the average monthly payroll cost, $10 million maximum, to cover business costs including payroll, employee benefits, mortgage interest, rent and utilities. Interest will be no more than 4% and payments are deferred for minimum of 6 months (but up to a year). Typical requirement of a personal guaranty is waived. There is a key “Loan Forgiveness” provision for the amount of the loan you can document was paid for payroll costs, mortgage interest, rent and utilities for up to eight weeks following the issuance of the loan. You can apply for these loans through your local financial institution.
- Economic Injury Disaster Loans (EIDL)
Sec. 7(b) of the Small Business Act has been modified and allows small businesses to apply for an EIDL of up to $2 million at 3.75% interest with no payments due for a year and then quarterly payments for a max of 30 years backed by the government for the purposes of working capital. Its deadline was extended until September 30th, 2020, and there is a provision for a $10,000 emergency advance (within three days of submitting an application) while an applicant’s loan application is pending, which SBA will not require to be repaid. There is an expedited application process for these loans at the following SBA link: https://covid19relief.sba.gov/#/
- SBA Debt Relief Program
The SBA Debt Relief program will provide a reprieve to small businesses as they overcome the challenges created by this health crisis. Under this program the SBA will pay the principal and interest of current 7(a) loans for a period of six months.
3. New Regulations for Individuals
The following assistance is offered as a part of the Coronavirus Aid, Relief, and Economic Security Act (CARES) passed by the federal government on March 27th:
- A one time individual tax credit of $1,200 will be available for single individuals who make $75,000 a year or less and $2,400 for married couples filing joint with income of $150,000 or less. Plus $500 per qualifying child. These payments will be made automatically to individuals and according to Treasury Secretary Steven Mnuchin, these checks should come in the next two to three weeks.
- Additional federal unemployment benefits of $600 per week are available through July 31, 2020.
There are also provisions in the CARES Act regarding retirement distributions:
- Distributions of up to $100,000 can be taken without the early withdrawal penalty with income inclusion spread over 3 years or up to 3 years to pay it back.
- The loan limit from Qualified Retirement plans increased from $50,000 to $100,000.
4. Tax Deadline Extended
Perhaps the most straightforward form of assistance provided is the extension of the tax deadline. Tax deadlines are automatically extended from April 15th to July 15, 2020. Taxpayers can also defer federal income tax payments due on April 15th to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations, and other non-corporate tax filers as well as those who pay self-employment tax.
5. Shared Work Plan at Texas Workforce
To help combat the economic hardships created by this crisis, you can create a shared work plan through the Texas Workforce Commission (TWC). If your workforce is cut
from 10-40%, TWC will supplement the wages by employee class.
A. Employer Eligibility
To be eligible, your business must be reducing hours by 10-40% each week. This can vary between office, shop, sales, fabrication, etc. Employees must be notified and it must be offered as an alternative to layoffs, and benefits must continue, if offered.
To apply, you will need to gather some specific information. You can find a list of what you need below:
- Your company’s name, address, telephone number, and fax number.
- The contact information for an authorized representative with signature authority.
- Your TWC Tax Account Number.
- The union name, local union number, and the union official’s name for any unions affected by the plan.
- The names and social security numbers of all participating employees you want to enroll in the plan.
Once approved, you will need to submit weekly or bi-weekly payment requests on behalf of employees participating in the program and also establish a claim for benefits. You will also need to certify the number of hours worked by each participating employee.
If you cannot access the Employer Benefits Services site, you will need to complete the appropriate forms and email them to firstname.lastname@example.org or fax them to 512-936-3250.
B. Employee Eligibility
While workers may choose not participate, shared work unemployment benefits are payable to all employees who qualify and participate in an approved Shared Work Plan. Those who qualify may receive both wages and unemployment benefits.
Employees who work 40 hours a week normally and have seen those hours reduced can be paid for those wages via the Shared Work Plan. An employee who regularly works overtime may not be eligible for shared work benefits for a reduction in their hours.
If the employer’s Shared Work application is approved, shared work employees must then meet the following requirements:
- Submit their unemployment claims on Unemployment Benefits Services.
- Be eligible for regular unemployment benefits.
- Accept all work offered by the participating employer.
- Be able and available for work with the employer.
Some employees may qualify for Shared Work pay while others may not for similar work. Eligibility depends on how many hours an employee normally works. Those who apply for Shared Work unemployment benefits don’t need to search for other work to qualify.