AICPA applauds additional clarity in Treasury FAQs on Paycheck Protection Program
The AICPA and its small business funding coalition have been advocating for additional clarity on certain provisions of the PPP, and this FAQ is critically important to help facilitate the funding of small businesses. Please see the following article from the Journal of Accountancy for more information.
Employer tax credits form, employee retention credit guidance posted
April 2, 2020
The Internal Revenue Service has issued a form and draft instructions for employers to use to obtain advances of three tax credits enacted in response to the coronavirus pandemic: the employee retention credit, the qualified sick leave credit, and the qualified family leave wages credit. All of them are offset against a business' payroll taxes.
CARES ACT OFFERS NEW HOPE FOR CASH-STRAPPED NONPROFITS
April 1, 2020
On March 27, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. How is this massive $2 trillion recovery package poised to help your not-for-profit organization? It depends on your group’s size, financial condition and other factors. But most nonprofits affected by the coronavirus (COVID-19) outbreak are eligible for some relief under the CARES Act. Paycheck Protection Program (PPC) This $349 billion loan program (administered by the Small Business Administration) is intended to help U.S. employers, including nonprofits, keep workers on their payrolls. To potentially qualify, you must be a 501(c)(3) or 501(c)(19) organization with less than 500 full- or part-time employees. PPC loans can be as large as $10 million. But most organizations will receive smaller amounts — usually equal to 2.5 times their average monthly payroll costs. If you receive a loan through the program, proceeds may be used only for paying certain expenses, including: Payroll, Health care benefits, Mortgage interest, Rent, Utilities, and Interest on debt incurred before February 15, 2020. You can’t use these loans to pay your mortgage principal or to prepay mortgage interest. Perhaps the most reassuring aspect of PPC loans is that they can be forgiven — so long as you follow the rules. To have your full loan amount forgiven (except for loan interest), you must retain employees and not reduce their regular salary or wages more than 25%. If you’ve already laid off staffers, rehiring them by June 30 may enable you to qualify for full loan forgiveness. Industry Stabilization Fund (ISF) Nonprofits with more than 500 employees, such as hospitals and educational institutions, may be eligible for ISF low-interest loans. When applying for one, you’ll be required to certify (among other things) that loan proceeds will be used to retain (or rehire) at least 90% of your workforce at full pay and benefits through at least September 30. Unlike PPP loans, ISF loans won’t be forgiven. However, you aren’t required to pay principal or interest for at least the first six months after receiving an ISF loan. There’s a 2% interest-rate cap on these loans. Immediate help If you’d like to apply for financial assistance under the CARES Act, talk directly to your bank. And contact us for help navigating the many provisions of recent legislation — including other lending programs, emergency grants and new payroll tax breaks.
Applications for small business Paycheck Protection Program
April 1, 2020
Small business and sole proprietorships hoping to secure a loan through the Federal Paycheck Protections Program can begin applying Friday, April 3, 2020.
THE NEW COVID-19 LAW PROVIDES BUSINESSES WITH MORE RELIEF
March 30, 2020
On March 27, President Trump signed into law another coronavirus (COVID-19) law, which provides extensive relief for businesses and employers. Here are some of the tax-related provisions in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Employee retention credit The new law provides a refundable payroll tax credit for 50% of wages paid by eligible employers to certain employees during the COVID-19 crisis. Employer eligibility. The credit is available to employers with operations that have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings. The credit is also provided to employers that have experienced a greater than 50% reduction in quarterly receipts, measured on a year-over-year basis. The credit isn’t available to employers receiving Small Business Interruption Loans under the new law. Wage eligibility. For employers with an average of 100 or fewer full-time employees in 2019, all employee wages are eligible, regardless of whether an employee is furloughed. For employers with more than 100 full-time employees last year, only the wages of furloughed employees or those with reduced hours as a result of closure or reduced gross receipts are eligible for the credit. No credit is available with respect to an employee for whom the employer claims a Work Opportunity Tax Credit. The term “wages” includes health benefits and is capped at the first $10,000 paid by an employer to an eligible employee. The credit applies to wages paid after March 12, 2020 and before January 1, 2021. The IRS has authority to advance payments to eligible employers and to waive penalties for employers who don’t deposit applicable payroll taxes in anticipation of receiving the credit. Payroll and self-employment tax payment delay Employers must withhold Social Security taxes from wages paid to employees. Self-employed individuals are subject to self-employment tax. The CARES Act allows eligible taxpayers to defer paying the employer portion of Social Security taxes through December 31, 2020. Instead, employers can pay 50% of the amounts by December 31, 2021 and the remaining 50% by December 31, 2022. Self-employed people receive similar relief under the law. Temporary repeal of taxable income limit for NOLs Currently, the net operating loss (NOL) deduction is equal to the lesser of 1) the aggregate of the NOL carryovers and NOL carrybacks, or 2) 80% of taxable income computed without regard to the deduction allowed. In other words, NOLs are generally subject to a taxable-income limit and can’t fully offset income. The CARES Act temporarily removes the taxable income limit to allow an NOL to fully offset income. The new law also modifies the rules related to NOL carrybacks. Interest expense deduction temporarily increased The Tax Cuts and Jobs Act (TCJA) generally limited the amount of business interest allowed as a deduction to 30% of adjusted taxable income. The CARES Act temporarily and retroactively increases the limit on the deductibility of interest expense from 30% to 50% for tax years beginning in 2019 and 2020. There are special rules for partnerships. Bonus depreciation for qualified improvement property The TCJA amended the tax code to allow 100% additional first-year bonus depreciation deductions for certain qualified property. The TCJA eliminated definitions for 1) qualified leasehold improvement property, 2) qualified restaurant property, and 3) qualified retail improvement property. It replaced them with one category called qualified improvement property (QIP). A general 15-year recovery period was intended to have been provided for QIP. However, that period failed to be reflected in the language of the TCJA. Therefore, under the TCJA, QIP falls into the 39-year recovery period for nonresidential rental property, making it ineligible for 100% bonus depreciation. The CARES Act provides a technical correction to the TCJA, and specifically designates QIP as 15-year property for depreciation purposes. This makes QIP eligible for 100% bonus depreciation. The provision is effective for property placed in service after December 31, 2017. Careful planning required This article only explains some of the relief available to businesses. Additional relief is provided to individuals. Be aware that other rules and limits may apply to the tax breaks described here. Contact us if you have questions about your situation.
SBA Paycheck Protection Loans
March 26, 2020
The CARES Act was passed by the House on Friday March 27, 2020. There are still many unanswered questions but we wanted to share what we currently know about the Paycheck Protection Program:
- This is the largest, most generous aid package in U.S. history. It may seem too good to be true, but the intent of the U.S. government is to make up for the losses to small businesses and they seem to be committed to making that happen. In a nutshell, businesses will apply for a loan of 2.5 months of eligible expense coverage based on 2019 numbers.
- You cannot apply for these loans yet. Guidance is not expected until early April at the earliest. We understand disaster loans received in the meantime can be repaid with these new SBA loans. We also were told that the SBA will liberalize their partnership rules to use more banks to process SBA loans.
- There are approximately 30 million small businesses in the U.S. and demand will be great. If you have a relationship banker, reach out early and use them as a resource. Be ready to apply quickly and correctly under the guidelines! We recommend calculating your anticipated loan amount as soon as possible.
- Forgiveness will be based on employee retention from 2019 thru June 30, 2020. We understand there will be a window of time after loan disbursement to re-hire if there have been terminations in 2020 due to COVID-19. We do not know these details yet.
The CARES Act: SBA Loans Defined
- Covered loan period February 15, 2020 through June 30, 2020.
- Loan amount is the lesser of (a) $10 million or (b) 2.5 multiplied by the average total monthly payments by the applicant for payroll, mortgage payments, rent payments, and payments of any other debt obligations incurred during the 1-year period before the date on which the loan is made.
- NOTE: $100,000 per employee salary cap on wages.
- Allowable uses include payroll support (such as employee salaries, paid sick or medical leave, insurance premiums) and mortgage, rent and utility payments.
- Small businesses, including 501(c)(3) nonprofit, with fewer than 500 employees; except for applicants within the accommodation and food services sector that can have up to 500 employees per physical location.
- Excludes nonprofit organizations who receive Medicaid reimbursements.
- Includes sole-proprietors, independent contractors, and other self-employed individuals as eligible for loans.
- Business is operational on February 15, 2020 and had employees for whom it paid salaries and payroll taxes, or a paid independent contractor.
- Waives both borrower and lender fees for participation in the Paycheck Protection Program.
- Waives the credit elsewhere test for funds provided under this program.
- Waives collateral and personal guarantee requirements.
- Loan partially or fully FORGIVABLE if certain guidelines met.
- Otherwise remaining loan balance will have a maturity of not more than 10 years, and the guarantee for that portion of the loan will remain intact.
- Borrower shall be eligible for loan forgiveness equal to the amount spent during an 8-week period after the origination date of the loan:
- On payroll costs (cap of $100,000 of wages), interest payment on any mortgage incurred prior to February 15, 2020.
- On payment of rent on any lease in force prior to February 15, 2020.
- On payment on any utility for which service began before February 15, 2020.
- Amounts forgiven may not exceed principal amount.
- Amount forgiven reduced proportionally by any reduction in employees retained compared to prior year.
- Canceled indebtedness resulting from this section will NOT be included in the borrower’s taxable income.
We continue to monitor the resources becoming available to assist small businesses stemming from COVID-19 Pandemic. We will be pushing information through email blasts and our Social Mediaoutlets. To keep you posted with up-to-date information, we invite you to follow us on Facebook ,Twitter , and LinkedIn .
CARES Act Tax Provisions Aim to Stabilize Pandemic-Ravaged Economy
March 25, 2020
The 2 trillion stimulus bill contains many tax provisons.
IRS Posts FAQ's About Coronavirus-Related Filing and Payment Extensions
March 25, 2020
The IRS explains in the FAQs that taxpayers who cannot file and pay their tax by July 15 should file for an extension until Oct. 15 and pay the tax they estimate is due when they file the extension request, which they have until July 15 to do.
March 24, 2020
To Our Clients and Friends:
We are continuing to closely monitor the ongoing Coronavirus outbreak. Our priority is to protect the health of our personnel, their families and their communities, while continuing to provide exceptional client service with limited disruption. We want to update you on recent changes in our office and pertinent information that can help you navigate through these tough times. We will continue to monitor new developments and communicate them to you as quickly as possible. If you have any questions, do not hesitate to call or email us.
Although considered an essential business, we are trying to honor the intent of the county, city, and local municipalities Safer at Home Orders by implementing additional changes to reduce potential exposure to the virus
- 80% of our personnel are currently working remotely.
- Currently, we are limiting client contact to pick up and drop off only at the office with curbside service when requested.
- If our office is closed, we will arrange for a secure drop box and mail or electronically deliver tax returns to you.
- We have the technology in place to receive all phone calls and emails remotely.
- We have secure portals we can email you to deliver your tax information to us.
- We continue to get all mail, which is placed into our digital document management software and routed to the appropriate party.
Here are additional resources.
Federal income tax filing and payment relief on account of Coronavirus Disease 2019 (COVID-19) emergency. The Treasury Department and IRS are providing relief to all taxpayers who have Federal income tax returns and Federal income tax payments due on April 15, 2020. The April 15, 2020 deadline is postponed to July 15, 2020. Associated interest, additions to tax, and penalties for late filing or late payment will be suspended until July 15, 2020. The $1M cap on tax deferral was removed.
The U. S. Small Business Administration (SBA) provides low-interest, long-term disaster loans to businesses of all sizes, private non-profit organizations, homeowners, and renters to repair or replace uninsured/underinsured disaster damaged property. SBA disaster loans offer an affordable way for individuals and businesses to recover from declared disasters.
The U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.
We continue to monitor the resources becoming available to assist small businesses stemming from the COVID-19 Pandemic. We will be pushing information through email blasts and our Social Media outlets. To keep you posted with up-to-date information, we invite you to follow us on LinkedIn , Facebook , and Twitter
Tax Day Now July 15
March 20, 2020
On Friday, March 20, Treasury Secretary Steven Mnuchin announced on Twitter that Tax Day, the deadline for individual returns for the 2019 tax year, would be pushed from April 15 to July 15. As official guidance and details from the IRS become available we will update.
CDC Foundation has COVID-19 Guidelines for Nonprofits
March 18, 2020
While global health and governmental agencies grapple with how best to fight the new coronavirus (COVID-19), nonprofit organizations worldwide are scrambling to figure out what steps they should take and how they can be helpful in this time of uncertainty. The U.S. Centers for Disease Control and Prevention (CDC) is taking aggressive public health measures to help protect the health of Americans and assist international partners. Leaders at nonprofit organizations can also play a pivotal role at this critical time. COVID-19 is very dangerous, and we must take comprehensive and coordinated action to address it. Today, we must be diligent in our response as the outbreak continues to spread worldwide, including in the United States, and the economic consequences that follow. What can nonprofit leaders do in this time of uncertainty and concern? I’d like to offer five steps or initiatives that leaders of all nonprofits and philanthropies can take or consider. 1) Seek out the right information. The best source of up-to-date information on everything related to COVID-19 is the CDC website. It is a trusted source with information provided by CDC scientists. I know as I worked there and collaborate with them on an almost daily basis. Beyond CDC, look to your state and local public health departments. I was a state health commissioner for many years and coordinated a response to H1N1, and I know that state and local health departments offer accurate and timely infectious disease information. 2) Dispel myths. We are living in an anxious time, and as leaders we must ensure not to create a panic. This is even more difficult in an era where anyone with a smart phone can share an opinion or create a storyline. Myths about the coronavirus, including all the remedies, protections, etc. will continue to proliferate. Social media, while it can be a powerful tool to provide timely updates and information, can also make the problem worse. As leaders, we can dispel many of the myths about the disease and use our platforms to get out the facts. 3) Put into action good public health practices. As employers, community partners and influencers, the nonprofit sector enjoys a tremendous amount of trust and respect. Ensure your employees, volunteers and ambassadors know what they can do to protect themselves, their communities and the people they serve. Putting into practice actions from staying home when sick to cleaning and disinfecting work areas and communal areas where services are provided can make a big difference. 4) Make a financial grant. If your organization is in the position to do so, make a financial grant to strengthen public health and the response efforts. While increased funding is becoming available for public health agencies, governments cannot do it alone, particularly as the response moves from containment to mitigation. A collective response is needed to meet the rapidly evolving needs of COVID-19 — from communications campaigns to strengthening state and local health labs to providing equipment and supplies as well as supporting those in quarantine or those who are at high-risk from the dangers of COVID-19. In any crisis situation, it takes an effort on the part of all sectors to mitigate the crisis and meet the needs of our communities and vulnerable populations. 5) Collaborate with peer organizations. Nonprofit organizations and philanthropies have greater positive impact and can accomplish more collectively than individually. By aligning diverse interests and resources and leveraging the strengths of your organization with another, we can work together to fight this outbreak and support those affected. If your organization is in a position to partner with another nonprofit, please consider it. The nonprofit sector has been crucial in past emergency responses such as the Ebola and Zika outbreaks, and we can’t do it alone this time, either. From the outset of the COVID-19 outbreak, there has been confusion, concern and anxiety about the infectious disease with good reason. We should treat it as we would other past outbreaks — recognize that it has not respected borders or politics and requires a collective effort of government, individual and organizations. The resilience of our front line public health responders is amazing. The nonprofit community has the opportunity to support them and others affected by the COVID-19 outbreak by providing accurate information and working with the public health community to find innovative ways to offer support.
In response to the rapidly evolving coronavirus pandemic, our firm has been actively taking precautionary measures for the safety, health, and wellness of our employees, clients, and visitors as recommended by the Center for Disease Control and Prevention (CDC). https://www.cdc.gov/coronavirus/2019-NCOV/index.html.
Currently our office remains open, but that could change quickly depending upon many internal and external factors surrounding the spread of the virus and the reactions of federal, state, and local governmental bodies as well community responses. Fortunately, we have the capability and flexibility to allow our professionals to work remotely if necessary.
In an effort to limit exposure, we are advising our professional staff to cancel face to face meetings and conduct client meetings via telephone. Our staff that are working in client locations have been advised to diligently take the same precautionary measures utilized within our office while working in yours.
We recommend the following ways for clients to provide their tax information to the firm:
- Use a priority mail service with certified receipts or document tracking
- Transmit the information to us electronically
- Drop off at the front desk or contact the front desk (901-761-2720), and someone can come downstairs and pick it up from you.
- Utilize our courier service at Priority Courier 901-327-3121 for pickup and delivery to our office. Just inform them that you are a client of the firm. Applicable fees will be included in your tax preparation fees.
Our goal is to service you in the most efficient and safest way possible as we all navigate the unusual health concerns we are facing.
We are currently monitoring both state and federal government considerations with regard to state and federal tax filings and the potential extension of original filing deadlines. We will provide updates as information becomes available.
Thank you for your patience and support as we work together to overcome the personal and professional disruptions created by the current environment. Please visit our website at www.wucpas.com for updates.
Jeffrey L. Thomason, CPA
Watkins Uiberall, PLLC