The New COVID-19 Law Provides Businesses With More Relief

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.

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On March 27, 2020, the House of Representatives approved the Senate version of the CARES Act, or coronavirus stimulus bill. The bill now goes to President Trump for signing, who indicated he will do so as soon as it hits his desk.

Paycheck Protection Program

• Small businesses with 500 or fewer employees during the “covered period” – February 15 through June 30, 2020, are eligible. Some industries may qualify with more employees, depending on the Small Business Administration’s applicable industry size standards, accessible here.
• Offers a loan of up to $10 million based on a formula, which is essentially 2½ times the monthly payroll, plus certain other costs, up to $100,000 per employee.
• Employee count is calculated per location for businesses in the hospitality and restaurant industries and certain others.
• No personal guarantees are required.
• Also available for self-employed individuals.
• Loan may be used for salaries, paid sick or medical leave, insurance premiums, and mortgage, rent and utility payments.
• Loans will be made through eligible FDIC lenders.
• Loans may be forgiven if employment and wage levels are maintained. There is a cure period for reductions that occurs between February 15, 2020, and 30 days after date of enactment if released employees are rehired or salary reductions are reversed by June 30, 2020.
• Loan forgiveness is not taxable.

2020 Recovery Rebates for Individuals

• All U.S. residents with Adjusted Gross Income (AGI) up to $75,000 ($150,000 married filing joint) are eligible for a full stimulus payment of $1,200 ($2,400 for joint filers).
• If you made more than $75,000, your payment will be reduced by $5 for every $100 of income that exceeds the limits. The payment decreases to zero for an individual making $99,000 or more or a couple making $198,000 or more. If you’re a family of four, you’ll be eligible for a maximum of $3,400.
• Recipients cannot be a dependent of another taxpayer or a non-resident alien.
• Qualified taxpayers will receive an additional $500 per child.
• There is a phase-out to AGI of $198,000 for joint returns, who will receive a reduced stimulus payment.
• If you’ve gotten a tax refund in the last two years by direct deposit, the money will be deposited in your bank account directly. If not, you will receive your check in the mail.
• Will be based on 2019 return or, if not filed, 2018. Non-filers such as certain Social Security or Disability recipients are also eligible.
• Disabled vets who do not pay taxes qualify.
• Taxpayers do not need to apply. They will receive a rebate check.
• The cash payments are not taxable.
• The Treasury Secretary said the checks will be available in two to three weeks.

Enhanced Unemployment Insurance

• The bill makes benefits more generous by adding a $600/week across-the-board payment increase through the end of July. Also, for those who need it, the bill provides an additional 13 weeks of benefits beyond what states typically allow. The bill also makes sure self-employed and independent contractors, like Uber drivers and gig workers, can receive unemployment during the public health emergency.

Special Rules for the Use of Retirement Funds

The 10% early withdrawal penalty is waived for up to $100,000 of distributions from retirement plans for coronavirus-related purposes made on or after January 1, 2020. Coronavirus-related distributions are distributions made to an individual:

• Who is diagnosed with COVID-19;
• Whose spouse or dependent is diagnosed with COVID-19; or,
• Who experiences adverse financial conditions as a result of being quarantined, furloughed, or laid off; having work hours reduced; being unable to work due to lack of child care due to COVID-19; closing or reducing hours of a business owned or operated by the individual due to the virus.

The amount withdrawn may either be repaid over three years or included in taxable income with the recognition spread over three taxable years.

Temporary Waiver of Required Minimum Distribution Rules

• The required minimum distribution rules for certain defined benefit plans and IRAs are waived for the calendar year 2020.
• Applies to taxpayers who are required to take a distribution from their accounts during the economic slowdown caused by COVID-19.

Modification of Limitations on Charitable Contributions During 2020

• Individuals: The 50% AGI limitation for individuals will be suspended for 2020. This allows for an unlimited charitable contribution deduction in 2020.
• For corporations: the 10% limitation is increased to 25% of taxable income, allowing for a larger charitable contribution deduction.

Employee Retention Credit for Employers Subject to Closure Due to COVID-19

The bill provides a refundable payroll tax credit equal to 50% of wages paid by employers to employees during the COVID-19 crisis. Eligible employers are those:

• Whose operations were fully or partially suspended due to COVID-19 related shutdown orders, or
• Who had gross receipts decline by more than 50% as compared to the same quarter in the prior year.
• Qualifying based on credit amount and qualified wages criteria:
  • For employers with more than 100 employees, qualified wages are wages paid to employees not providing services due to the COVID-19 related circumstances.
  • For employers with 100 employees or less, all wages qualify for the credit.
  • The credit is provided for the first $10,000 of compensation, including health benefits.
• Credit applies to wages paid between March 13, 2020, and December 31, 2020.

Delay of Payment – Employer Payroll Tax

• Applies to employers and self-employed individuals.
• Effective for payments as of the date of enactment of the legislation. Date of enactment is when the President signs the bill.
• Defers the payment of the 6.2% employer portion of Social Security Tax for two years.
• Half will be due December 31, 2021, with the other half due December 31, 2022.

Modification of Net Operating Losses (NOL) and Excess Business Loss Limitation

• 5-year carryback period for NOLS for the 2018, 2019, and 2020 tax years.
• The provision also temporarily removes the 80% taxable limitation for net operating losses.
• The excess business loss limitation for pass-through businesses and sole proprietors is suspended.

Modification of Limitation on Business Interest

• The amount of interest expense businesses are allowed to deduct on their tax returns is increased, from 30% to 50% of taxable income (with adjustments) for 2019 and 2020.
• The 2019 Adjusted Taxable Income may be used for the 2020 calculation, if more beneficial.

Technical Amendment Regarding Qualified Improvement Property

• The act corrects the error in the 2017 tax reform concerning qualified improvement property.
• The depreciable life is changed from 39 years to 15 years retroactive to the beginning of 2018.
• Taxpayers will now also be able to take bonus depreciation on qualified improvement property.
• No guidance yet on whether amended returns will be required.

What Education Professionals Should Know

• Department of Education: $30.9 billion Education Stabilization Fund: Flexible funding that will go directly to states, local school districts, and institutions of higher education to help schools, students, teachers, and families with immediate needs related to coronavirus.
• Elementary and Secondary Education: $13.5 billion in formula funding directly to states, to help schools respond to coronavirus and related school closures, meet the immediate needs of students and teachers, improve the use of education technology, support distance education, and make up for lost learning time.
• Higher Education: $14.25 billion for direct grants to higher education institutions, with priority given to schools with a high number of Pell Grant recipients and that were not enrolled in distance education before the outbreak. It would allow the continuation of work-study payments even if the student is unable to work. If a student had to drop out during the current term, they don’t have to pay back Pell grants and would not count toward their federal Pell Grant limits and consideration for subsidized loans. It would suspend monthly payments on federally held student loans through September, with no interest accruing during suspension, but continue to count these months towards requirements for federal loan forgiveness program.
• State Flexibility Funding: $3 billion in flexible formula funding to be allocated by states in the form of subgrants to individual schools based on the needs of their elementary and secondary schools and their institutions of higher education.
• Project SERV: $100 million in targeted funding for elementary and secondary schools and institutions of higher education to respond to the immediate needs of coronavirus and the effect on students (clean and disinfect schools, counseling, and distance learning).

To help mitigate the financial and health crises related to the coronavirus (COVID-19), on Friday, March 27, 2020, President Trump signed into law the largest economic relief package in modern U.S. history. The $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) is intended to shore up the country on multiple fronts and includes several components aimed at individuals.

Recovery rebates

One of the aspects receiving the most attention is the CARES Act’s so-called “recovery rebates.” The federal government will generally make direct payments of up to $1,200 to those who file their federal income tax returns as single filers or heads of households; married couples filing jointly can receive up to $2,400. Additional $500 payments will generally be made per qualifying child.

The nontaxable rebates are subject to phaseouts based on adjusted gross income (AGI) as reported on taxpayers’ federal 2019 income tax returns. If 2019 returns haven’t been filed, the 2018 tax returns will be used. The phaseouts begin at $75,000 for singles, $112,500 for heads of household and $150,000 for married couples. Payments are completely phased-out for single filers with AGIs exceeding $99,000 and for joint filers with no qualifying children and AGIs exceeding $198,000. For a head of household with one child, the payment is completely phased out when AGI exceeds $146,500.

Expanded unemployment benefits

The CARES Act increases unemployment compensation benefits significantly, providing an extra $600 per week for up to four months, over and above state unemployment benefits. The expansion generally applies to those who can’t work as a direct result of COVID-19.

The law generally provides temporary full federal funding of the first week of unemployment benefits through December 31, 2020, for states that opt to pay recipients as soon as they become unemployed, rather than requiring a one-week waiting period. And it provides an additional 13 weeks of unemployment benefits through year end, generally for those who remain unemployed after state unemployment benefits are no longer available.

The law also creates a temporary Pandemic Unemployment Assistance program through the end of the year. The program generally will extend unemployment benefits to workers who traditionally don’t qualify for them — meaning self-employed individuals, independent contractors, those with limited work histories and others.

Penalty-free early retirement distributions

The CARES Act waives the 10% early distribution penalty for COVID-19-related withdrawals from IRAs, 401(k) plans and certain other retirement plans made on or after January 1, 2020, and through December 31, 2020. The waiver applies to distributions made to an individual:

• Who’s diagnosed with COVID-19,
• Whose spouse or dependent is diagnosed with COVID-19, or
• Who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, being unable to work due to lack of child care because of COVID-19, or the closing or a reduction of hours of a business owned by the individual due to COVID-19.

Eligible individuals can withdraw up to $100,000 penalty-free. They can repay withdrawn funds within three years of the day after the distribution without regard to the applicable cap on annual contributions. To the extent such early distributions aren’t repaid within this period, the related income tax will be prorated over three years.

Waived required minimum distribution rules

The CARES Act similarly waives the required minimum distribution (RMD) rules for certain defined contribution plans and IRAs for calendar year 2020. This will help individuals avoid a financially imprudent sale of retirement assets during the stock market downturn.

The waiver covers both 2019 RMDs required to be taken by April 1, 2020, and RMDs required for 2020. It applies for calendar years beginning after December 31, 2019.

Expanded charitable contribution deductions

Individual taxpayers can take advantage of a new above-the-line $300 deduction for cash contributions to qualified charities in 2020. “Above-the-line” means the deduction reduces AGI and is available to taxpayers regardless of whether they itemize deductions.

The CARES Act also loosens the limitation on charitable deductions for cash contributions made to public charities in 2020, boosting it from 60% to 100% of AGI.

Student loan relief

Under the CARES Act, employers can provide up to $5,250 annually toward employee student loan payments on a tax-free basis before January 1, 2021. The payment can be made to the employee or the lender. (The employee can’t take a student loan interest deduction for any loan payment for which the exclusion is available.)

The law also allows individuals to stop making payments on federal student loans through September 30, 2020, without incurring penalties or late fees. In addition, no interest will accrue on federal student loans during this period. And the government is temporarily suspending garnishments to collect on federal student loans.

Mortgage and foreclosure relief

Homeowners with federally backed mortgages can request forbearance, regardless of their delinquency status and without incurring penalties, fees or interest. Eligible homeowners must submit a request to their loan servicers and affirm financial hardship during the COVID-19 emergency. A servicer is required to grant forbearance for up to 180 days and to extend it for an additional period of up to 180 days at the borrower’s request.

Further, except for vacant or abandoned property, servicers of federally backed mortgages can’t initiate any foreclosure process, move for a foreclosure judgment or order of sale, or execute a foreclosure-related eviction or foreclosure sale for at least 60 days, starting March 18, 2020.

Borrowers with federally backed mortgages on multifamily properties can request a forbearance for up to 30 days if they were current on their loans on February. 1, 2020. They also can request two additional 30-day extensions.

The swiftly changing environment

No one knows when the COVID-19 public health emergency will end, or for how long the economic repercussions will linger. We’ll keep you informed on the latest developments and help you plan for a more stable financial future.

View all Yeo & Yeo’s COVID-19 Resources.

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The Families First Coronavirus Response Act (FFCRA) is set to take effect on April 1, 2020, and expire on December 31, 2020. On March 24, the U.S. Department of Labor (DOL) released an initial set of questions and answers (Q&As) concerning the FFCRA. The Q&As address the FFCRA’s provisions relating to new emergency paid sick leave and the expansions to the Family Medical Leave Act.

The DOL also released the FFCRA poster summarizing an employee’s rights under the Act and an accompanying set of Frequently Asked Questions (FAQs) addressing this required notice. The FAQs indicate that employers must display the FFCRA poster in a “conspicuous place on its premises” where it is easily visible to all employees. However, alternately, because most employees are now “teleworking,” employers may satisfy this “posting” requirement by emailing or direct mailing this notice to its employees, or by posting this notice on an employee information internal or external website.

While these Q&As and FAQs may be subject to additions and updates as the DOL continues to accept public comments before the law takes effect next week, they provide helpful guidance.

The DOL will soon release its regulations pertaining to the FFCRA, which will provide further substantial guidance regarding the emergency paid sick leave and FMLA expansion. In the meantime, the DOL has released a Fact Sheet for employers explaining the FFCRA and its provisions in greater detail. Our prior guidance on the topic, Federal Tax Relief to Alleviate COVID-19 Hardships, provides more detailed information regarding the FFCRA and its requirements.

For more information, please visit Yeo & Yeo’s COVID-19 Resources and Updates webpage.

Yeo & Yeo is committed to providing businesses and individuals with the best tax and financial information available related to the coronavirus pandemic. Visit Yeo & Yeo’s COVID-19 Resource Center at www.yeoandyeo.com for up-to-date information about tax payment and tax filing deadlines, tax credits available to businesses, how employers can help employees apply for unemployment and many more useful COVID-19 links.

Articles in the Resource Center include the following:

• How to Manage COVID-19 Related Business Risks
• Federal Tax Relief to Alleviate COVID-19 Hardships
• Federal Tax Filing Deadline Extended from April 15 to July 15
• Coronavirus Relief Act Provides Payroll Tax Credits for Employers
• How to Help Your Employees Claim Unemployment Due to COVID-19
• State of Michigan Unemployment Compensation Notice to Employee
• State Temporarily Expands Eligibility for Unemployment Benefits

Yeo & Yeo will continually add links, timely alerts and updates to its COVID-19 Resource Center as information becomes available.

Taxpayers now have more time to file their tax returns and pay any tax owed because of the coronavirus (COVID-19) pandemic. The Treasury Department and IRS announced that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020.

Taxpayers can also defer making federal income tax payments, which are due on April 15, 2020, until July 15, 2020, without penalties and interest, regardless of the amount they owe. 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. They can also defer their initial quarterly estimated federal income tax payments for the 2020 tax year (including any self-employment tax) from the normal April 15 deadline until July 15.

No forms to file

Taxpayers don’t need to file any additional forms to qualify for the automatic federal tax filing and payment relief to July 15. However, individual taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868. Businesses who need additional time must file Form 7004. Contact us if you need assistance filing these forms.

If you expect a refund

Of course, not everybody will owe the IRS when they file their 2019 tax returns. If you’re due a refund, you should file as soon as possible. The IRS has stated that despite the COVID-19 outbreak, most tax refunds are still being issued within 21 days.

New law passes, another on the way

On March 18, 2020, President Trump signed the “Families First Coronavirus Response Act,” which provides a wide variety of relief related to COVID-19. It includes free testing, waivers and modifications of Federal nutrition programs, employment-related protections and benefits, health programs and insurance coverage requirements, and related employer tax credits and tax exemptions.

If you’re an employee, you may be eligible for paid sick leave for COVID-19 related reasons. Here are the specifics, according to the IRS:

• An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or whose child care provider is unavailable, and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s pay.
• An employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional ten weeks of expanded paid family and medical leave at 2/3 the employee’s pay.

As of this writing, Congress was working on passing another bill that would provide additional relief, including checks that would be sent to Americans under certain income thresholds. We will keep you updated about any developments. In the meantime, please contact us with any questions or concerns about your tax or financial situation.

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View all Yeo & Yeo’s Covid-19 Resources.

• Due to the closure of our physical offices, we are no longer accepting drop-offs or pickup of documents. We ask that our clients share documents with us electronically through our Client Tax Portal.  
• We encourage tax returns be sent to you electronically with e-file authorizations done electronically as well. If the print and mail of returns is required, safe handling processes are in place to do so, however, there could be additional delay in the mailing of printed returns. 
• As communicated last week regarding the extension of the tax deadline extended to July 15, 2020, we are refocusing our efforts to provide those clients experiencing hardship with priority access to their advisor. We will work to meet your expectations while spreading work out to protect the health and well-being of our tax professionals. We are working tirelessly to keep clients informed of project status and probable turnaround time. 

• We encourage your employees to convert to direct deposit if they have not already done so. While we have measures in place to produce paper checks, those employees could experience delay due to factors out of our control such as postal slowdown and the quarantine recommendation of all mail. Your payroll professional will communicate any changes with you as needed.

The coronavirus (COVID-19) outbreak has had a crippling effect on the global economy. This is clearly uncharted territory. As millions around the globe do their best to minimize their exposure to the virus, business owners and managers face an uncertain and stressful future.

Faced with faltering demand, anxious employees, health safety risks and a lack of clarity regarding what the future holds, what can small and medium-sized business owners do to prepare for a global economic slowdown? Here are eight steps to consider to help your company navigate these uncertain times.

1. Develop Financial Scenarios

Create best, worst and most likely financial scenarios for your company. Consider these questions:

• How much do you estimate revenue will change over the short and long run?
• Which costs are variable vs. fixed?
• How long will it take for you to run out of cash and inventory?
• Is there extra cushion to draw from on your line of credit?

Projecting financial statements for the next few months may require some guesswork, but the exercise may uncover areas that require immediate attention. For example, you may find an opportunity to reduce your costs by canceling, say, a subscription or downgrading a service.

2. Scrutinize Your Cost Structure

It’s important to dedicate additional time to combing through every line item of your financial statements for costs to remove. As a general rule of thumb, if an expense doesn’t directly contribute to generating revenue, consider removing it. Also look for ways to lower your costs. For example, if you’ve not switched insurance companies recently, now may be the time to seek an alternative, lower-cost provider.

3. Reach Out to Lenders, Landlords and Creditors

As the effects of the economic slowdown take hold, many business owners worry that they’ll default on a loan, face an eviction or be sued for unpaid debts. The federal government and many individual states have already taken steps to stop evictions. How far such government remedies extend and for how long remain unknown.

If your business is unable to make a payment on a loan, mortgage or unsecured debt, be proactive and reach out to share your situation. You may find those you owe money to are receptive to amending the terms of your arrangement in these challenging times.

4. Reconnect with Key Customers

Reach out to major customers and learn of the challenges they face. This provides an opportunity to engender long-term customer loyalty and goodwill. Depending on your company’s financial health, you may be able to offer support, including providing discounts on future orders or extending payment terms.

These conversations also will provide information to improve the accuracy of your financial projections. And you’ll open the line of communication in case circumstances deteriorate further.

5. Communicate Regularly with Employees

It’s human nature to struggle with uncertainty. Make communicating with employees a priority — even if you have no news to share.

Employees need to know you understand their concerns. They must also believe you have their best interests at heart. If you anticipate laying off staff or cutting their hours and know of companies in a hiring mode, share that information with employees. When normal operations resume, former employees may return if they remember your willingness to help them in times of crisis.

6. Revisit Your Staffing Model

Ideally, small businesses would like to keep valued employees on the payroll as long as possible. But, for some businesses, now might be the time to engage contractors instead of full-time employees. By doing so, you’ll potentially lower your costs and increase your staffing model’s flexibility.

7. Consider Bartering

Instead of exchanging cash with supply chain partners, be open to bartering goods and services with other businesses. Bartering allows you to conserve cash. Plus, connecting with other businesses may help uncover additional tools and techniques to help your company weather the economic fallout from the COVID-19 outbreak. (Be aware that bartering does have tax implications, however.)

8. Monitor Government Responses

Federal and state governments are working on various financial relief measures to help businesses during these trying times. In addition to following local and national news, reach out to your tax, human resources and legal advisors to let them know you’re interested in gaining access to government aid when it becomes available. Also sign up for email communications from federal agencies, including the Small Business Administration (SBA) and the IRS, to make sure you learn of the programs as soon as they’re available.

9. We’re All in this Together

Now’s the time to confront the reality of COVID-19 head on. That requires a collaborative effort with your customers, suppliers, employees, creditors and professional advisors. By working together to fortify your defenses, you’ll be in a better position to protect your business and ensure its survival during these unprecedented times. 

View all Yeo & Yeo’s Covid-19 Resources.

The coronavirus (COVID-19) pandemic has already had widespread effects on the U.S. economy. Demand for many goods and services has stalled. Unemployment claims have skyrocketed. And many schools and businesses are operating online — if at all. Life has changed dramatically across the country.

The federal government has been working on various relief measures to help individuals and small businesses cope with the situation, including tax relief provisions. Here are the tax changes that have been finalized so far.

Guidance on Federal Income Tax Deadline Deferrals

On March 20, U.S. Treasury Secretary Steven Mnuchin announced on Twitter that the April 15 federal income tax filing deadlines will be extended until July 15. His tweet says, “All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.” It’s unclear at this point whether the extension will apply to the tax return filing deadlines for federal payroll taxes (Social Security and Medicare taxes) owed by employers or for federal estate and gift taxes.

In addition, on March 21, the IRS issued Notice 2020-18, which clarifies that individual taxpayers and corporations can defer until July 15 federal income tax payments that would otherwise be due on April 15. (Normally, when you file an extension, you must still make a good-faith estimate of your tax liability and, by the normal filing deadline, pay the full amount estimated to be due. This relief measure is an exception to the general rule.)

Specifics under Notice 2020-18 are as follows:

For individuals. Individual taxpayers can defer payment of federal income tax (including any self-employment tax) owed for the 2019 tax year from the normal April 15 deadline until July 15. They can also defer their initial quarterly estimated federal income tax payments for the 2020 tax year (including any self-employment tax) from the normal April 15 deadline until July 15.

Individuals who have non-salary income — such as self-employed people, investors and rental property owners — must normally make quarterly estimated tax payments to avoid an IRS interest charge penalty.

Individuals can defer their tax payments until July 15, with no interest or penalties, “regardless of the amount owed.” (Earlier IRS guidance imposed a $1 million limit, but that limit was eliminated by Notice 2020-18.)  

For corporations. Corporations that use the calendar year for tax purposes can defer until July 15 any amount of federal income tax payments that would otherwise be due on April 15 with no interest or penalties. This relief covers the amount owed for the 2019 tax year and the amount due for the first quarterly estimated tax payment for the 2020 tax year. Both of those amounts would otherwise be due on April 15. (Earlier IRS guidance imposed a $10 million limit, but that limit was eliminated by Notice 2020-18.)

For trusts and estates. Trusts and estates pay federal income taxes, too. Federal income tax payments for the 2019 tax year of trusts and estates that use the calendar year for tax purposes are due on April 15. The initial quarterly estimated federal income tax payments for the 2020 tax year of trusts and estates that use the calendar year for tax purposes are also due on April 15.

Notice 2020-18 clarifies that trusts and estates can defer any amount of the aforementioned tax payments from April 15 to July 15 with no interest or penalties.

Important: Notice 2020-18 offers no relief for paying federal payroll taxes (Social Security and Medicare taxes) owed by employers — or federal estate and gift taxes. But additional relief measures may be under construction in Congress.

Tax Provisions in the Families First Coronavirus Response Act

On March 18, President Trump signed into law a COVID-19 relief bill. It’s called the Families First Coronavirus Response Act. The new law mandates paid leave benefits for small business employees affected by the COVID-19 emergency and establishes related tax credits and Social Security and Medicare (FICA) tax relief for their employers.

Tax credits for emergency leave payments to employees. The new law grants tax credits to small employers to cover payments to eligible employees while they take time off under the mandatory emergency COVID-19 paid sick leave and paid family leave provisions. These provisions apply to employers with less than 500 employees.

Emergency paid sick leave under the new law is limited to $511 per day for up to 10 days (up to $5,110 in total) for an employee who’s in COVID-19 quarantine or seeking a COVID-19 diagnosis. An employee can also receive emergency COVID-19 paid sick leave of up to $200 per day for up to 10 days (up to $2,000 in total) to care for a child whose school or childcare location has been closed or whose childcare is unavailable due to COVID-19. 

In addition, the law gives an employee the right to take up to 12 weeks of job-protected family leave if the employee or a family member is in COVID-19 quarantine or if the school or childcare location of the employee’s child is closed due to the outbreak. The employer must pay at least two-thirds of the employee’s usual pay, up to a maximum of $200 per day, subject to an overall maximum of $10,000 in total family leave payments.

To help employers cover these now-mandatory emergency leave payments, the law allows a refundable tax credit equal to 100% of qualified sick leave wages and family and medical leave wages paid by the employer.

The credit applies only to eligible leave payments made during the period beginning on a date specified by Treasury Secretary Mnuchin and ending on December 31, 2020. The beginning date will be within 15 days of March 18, 2020.

The new law increases the credit to cover a portion of an employer’s qualified health plan expenses that are allocable to emergency sick leave wages and emergency family leave wages.

The credit is first used to offset the Social Security tax component of the employer’s FICA tax bill. Any excess credit is refundable, meaning the government will issue a check to the employer for the excess. 

Important: The credit isn’t available to employers that are already receiving the pre-existing credit for paid family and medical leave under Internal Revenue Code Section 45S.

Employer FICA tax relief. Qualified sick leave and family leave payments mandated by the new law are exempt from the 6.2% Social Security tax component of the employer FICA tax on wages. Employers must pay the 1.45% Medicare tax component of the FICA tax on qualified sick leave and family leave payments, but they can claim a credit for that outlay. 

Credits for self-employed people. For a self-employed individual who’s affected by the COVID-19 emergency, the new law allows a comparable refundable credit against the individual’s federal income tax bill. If the credit exceeds the individual’s federal income tax bill (including the self-employment tax), the excess will be refunded via a check from the government. The credit equals:

• 100% of the self-employed person’s sick-leave equivalent amount, or

• 67% of the person’s sick-leave equivalent amount for taking care of a sick family member or taking care of the individual’s child following the closing of the child’s school or childcare location.

The sick-leave equivalent amount equals the lesser of:

• The individual’s average daily self-employment (SE) income, or

• $511 per day for up to 10 days (up to $5,110 in total) to care for the individual or $200 per day for up to 10 days (up to $2,000 in total) to care for a sick family member or a child following the closing of the child’s school or childcare location.

In addition, a self-employed individual could receive a family leave credit for up to 50 days. The credit amount would equal the number of leave days multiplied by the lesser of:

• $200, or

• The individual’s average daily SE income.

The maximum total family leave credit would be $10,000 (50 days x $200 per day).

Credits for self-employed individuals are only allowed for days during the period beginning on a date specified by Treasury Secretary Mnuchin and ending on December 31, 2020. The beginning date will be within 15 days of March 18, 2020.

Important: To properly claim the credit, self-employed individuals must maintain whatever documentation the IRS requires in future guidance. Contact your tax professional for details.   

Moving Target

This article only covers some of the COVID-19-related tax changes that have already been finalized. Other types of non-tax federal relief have also been made available and many states have announced their own COVID-19 relief. More federal measures and additional guidance are expected soon. Contact your tax professional to discuss financial relief measures that apply in your specific situation.  

View all Yeo & Yeo’s Covid-19 Resources.

Businesses across the country are being affected by the coronavirus. Fortunately, Congress recently passed a law that provides COVID-19 tax relief. In a separate development, the IRS has issued guidance allowing taxpayers to defer any amount of federal income tax payments due on April 15, 2020, until July 15, 2020, without penalties or interest. 

New law
On March 18, the Senate passed the House’s coronavirus bill, the Families First Coronavirus Response Act. President Trump signed the bill that day. It includes:

• Paid leave benefits to employees,
• Tax credits for employers and self-employed taxpayers, and
• FICA tax relief for employers.

Tax filing and payment extension

In Notice 2020-18, the IRS provides relief for taxpayers with a federal income tax payment due April 15, 2020. The due date for making federal income tax payments usually due April 15, 2020 is postponed to July 15, 2020.

Important: The IRS announced that the 2019 income tax filing deadline will be moved to July 15, 2020 from April 15, 2020, because of COVID-19.

Treasury Department Secretary Steven Mnuchin announced on Twitter, “we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”

Previously, the U.S. Treasury Department and the IRS had announced that taxpayers could defer making income tax payments for 2019 and estimated income tax payments for 2020 due April 15 (up to certain amounts) until July 15, 2020. Later, the federal government stated that you also don’t have to file a return by April 15.

Of course, if you’re due a tax refund, you probably want to file as soon as possible so you can receive the refund money. And you can still get an automatic filing extension, to October 15, by filing IRS Form 4868. Contact us with any questions you have about filing your return.

Any amount can be deferred

In Notice 2020-18, the IRS stated: “There is no limitation on the amount of the payment that may be postponed.” (Previously, the IRS had announced dollar limits on the tax deferrals but then made a new announcement on March 21 that taxpayers can postpone payments “regardless of the amount owed.”)

In Notice 2020-18, the due date is postponed only for federal income tax payments for 2019 normally due on April 15, 2020 and federal estimated income tax payments (including estimated payments on self-employment income) due on April 15, 2020 for the 2020 tax year.

As of this writing, the IRS hasn’t provided a payment extension for the payment or deposit of other types of federal tax (including payroll taxes and excise taxes).

Contact us

This only outlines the basics of the federal tax relief available at the time this was written. New details are coming out daily. Be aware that many states have also announced tax relief related to COVID-19. And Congress is working on more legislation that will provide additional relief, including sending checks to people under a certain income threshold and providing relief to various industries and small businesses.

We’ll keep you updated. In the meantime, contact us with any questions you have about your situation.

© 2020

On March 18, 2020, President Trump signed the Families First Coronavirus Response Act. The new law contains expanded benefits under FMLA, expansion of required paid sick days and expanded unemployment benefits.  Additionally, several tax credit provisions will assist employers who provide paid leave for their employees who miss work for various coronavirus related reasons. The Act will take effect on April 2, 2020.

 Expansion of FMLA and related payroll tax credits

The Act expands the Family and Medical Leave Act (FMLA) to cover public health emergencies related to the coronavirus.  FMLA is expanded to include employees unable to work or telework due to a need to care for a child under age 18 because of a school or day care closure or childcare is unavailable due to the current public health emergency.

The Act applies to employers with fewer than 500 employees and public agencies, although exemptions may be provided for employers with less than 50 employees. Regulations will be issued regarding the exemption of companies with fewer than 50 employees, and we will share those details when they are made known. 

• Shortens the eligibility requirement from 12 months to 30 days; and
• Permits eligible employees to take up to 12 weeks of job-protected leave under the FMLA if the employee is not able to work due to the need to care for a dependent under age 18 due to school or day care closure.
• Employees may elect to take the first 10 days of leave as unpaid or use accrued vacation, personal, medical or sick leave.
• After 10 days, employees must be paid a benefit in the amount of not less than two-thirds of the regular pay. The benefit is capped at $200 per day and a maximum of $10,000 per employee.

Employer tax credits for providing FMLA benefits

• An employer that pays qualified family leave wages will get a payroll tax credit of 100% of the eligible wages paid during the period beginning April 2, 2020, through December 31, 2020.
• Applied against the employer portion of the payroll taxes.
• Credit available for up to $200 in wages per day up to a maximum of $10,000 in wages per employee.
• No tax deduction will be allowed for payroll taxes offset by this credit.
• Self-employed individuals would be eligible for a refundable income tax credit for equivalent leave amounts.

Expansion of paid sick leave

The Act requires employers with fewer than 500 employees to provide up to 80 hours of paid sick time through the end of 2020 if the employee is unable to work due to being quarantined, self-quarantined, has contracted the coronavirus, or is caring for a person that is quarantined or has the coronavirus, or caring for a child whose school or daycare is closed. This is regardless of how long the employee has been employed by the employer.

• There may be an exemption for employers with fewer than 50 employees. Regulations will be issued regarding the exemption of companies with fewer than 50 employees, and we will share those details when they are made known. 
• Employers paying benefits under this provision will be allowed a payroll tax credit as follows:

• • Up to $511 per day in wages for a worker that is quarantined or self-quarantined or has contracted the coronavirus;
  • Up to $200 per day in wages for an employee caring for a child or another individual that is quarantined or contracted the virus;
  • The credit is available for up to 10 days per calendar quarter.

Self-employed individuals: The bill also provides eligible self-employed taxpayers with a refundable credit against income tax for qualified sick leave equivalent amounts.

Notices

Employers must post a notice of the requirements described in this Act in conspicuous places where notices to employees are customarily posted. The Department of Labor is to publish a model notice within seven days of enactment.

If you have questions, please contact your Yeo & Yeo professional.

The coronavirus (COVID-19) outbreak — officially a pandemic as of March 11 — has rightly become the focus of massive public attention in recent weeks. Vice President Mike Pence has been charged with leading the U.S. government’s response to the outbreak.

On March 10, the White House met with executives of major private health insurance companies. Pence said that the companies had agreed to cover telemedicine for patients for any reason for the next few months — no matter the reason for seeking medical treatment. The insurance representatives attending the meeting also agreed to cover COVID-19 treatment and waive copayment fees for COVID-19 testing.

On March 17 at a White House press conference, it was announced that Medicare would now be offering a wide range of services via telemedicine.

These measures are intended to keep sick and at-risk patients at home, encourage testing for COVID-19, make treatment more affordable, and potentially reduce the severity and duration of the outbreak. Pence said the companies gathered represent almost 240 million Americans.

Contact your insurance provider for the details of your plan’s coverage. In the case of Medicare, contact your doctor for information. And visit the CDC website for the latest developments on the COVID-19 outbreak.

Many years ago, telemedicine essentially consisted of interaction between doctors in large hospitals and patients in remote rural clinics via closed-circuit TV. Since then, it has exploded into a far more sophisticated, venture capital-fueled industry. Multiple technologies now equip health care providers with immediate clinical data that can assist them with rapid diagnoses and patient monitoring. Also, patients can communicate directly and promptly with physicians, nurses and other health care professionals, using an expanding array of mobile apps.

A survey by national telemedicine service providers projects that in 2020 around 90% of midsized and larger employers will make telemedicine available to employees. These services may be available through health plans that serve smaller employers, as well as from vendors that operate on a standalone basis as a supplement to a standard health plan. 

4 Categories

There are four categories of telemedicine services: 

1. Synchronous.This category consists of live interactive visits between patients and health care providers, and consultations between primary care physicians and specialists with efficient data sharing.
2. Asynchronous.Also known as “store and forward,” this category involves the collection of health data, such as lab results accompanied by patient demographic data and medical history. Data from the patient is subsequently reviewed by the provider and addressed. Also, patients can leave voice or video-based messages for providers directly in an asynchronous system.
3. Remote patient monitoring.Personal health data is collected as needed, often by devices patients can operate themselves. Then the data can be transmitted to health care professionals using the patient’s phone.
4. mHealth.This is telemedicine via smartphones. In addition to virtual visits with health care providers, mHealth includes care delivery using mobile apps without the direct presence of a provider. 

Avoided ER Visits

It’s common for patients to turn to virtual care services instead of making an expensive dash to the emergency room. In 2018, four emergency room physicians, whose Philadelphia hospital offers an on-demand telemedicine service, conducted a study that was published in the American Journal of Emergency Medicine, May 2019. The research concluded: “The majority of health concerns could be resolved in a single consultation and new utilization [that is, follow-up calls from patients] was infrequent. Synchronous audio-video telemedicine consults resulted in short-term cost savings by diverting patients from more expensive care settings.”

According to the health plan at the University of Pittsburgh Medical Center, a typical acute care telemedicine “visit” costs less than $50, compared to an average $77 for a retail clinic, $112 for a doctor’s office, $156 for an urgent care clinic and $1,454 for an emergency room visit. 

Also, telemedicine services have been shown to help patients with chronic conditions like diabetes and pre-diabetes. Specifically, telemedicine is helping change patients’ behaviors through virtual support groups and among other remote interactions.

Utilization Tips

Telemedicine shows promise in generating better patient outcomes and less expensive care. But the trick for employers is to overcome employees’ reluctance about using it. The keys are effectively communicating the benefits and not putting unnecessary financial obstacles in their path.

A large provider of virtual healthcare services recommends the following do’s and don’ts to maximize utilization: 

• Do customize your communication to employees about their telemedicine benefits and send messages on a regular basis.

• Don’t charge employees out-of-pocket fees for virtual visits. You’ll come out ahead financially by maximizing employee utilization of the service.

• Don’t rule out the telephone as an option for patients to receive telemedicine services. Many people still prefer using a telephone to mobile apps.

• Do use “trained patient experience agents” to contact employees to obtain their background medical information prior to employees’ initial use of the service. Employees might balk having to supply their health data when they’re not yet seeking medical services, but it’s essential for health care providers to have this information ready when an employee calls in.

Questions to Ask Vendors

The market for telemedicine services is highly competitive. So, it’s important to know the right questions to ask when talking to vendors and to put their claims into context. 

For example, the average utilization rate of telemedicine services typically falls below 10%. Yet you probably won’t get a lot of bang for your buck with a virtual care provider unless utilization rates are in the 25% range. Utilization rates reflect on the quality of the vendor’s platform and your employees’ health. 

When comparing vendors’ prices, look at the whole picture. A vendor might set one fee low but offset the low fee by charging more.

When costs are primarily based on the PEPM fee, you’ll have a better handle on what to expect than when there are hidden or variable costs. Equally important, a vendor who bases charges on the PEPM fee has an incentive to address your employees’ health needs with fewer virtual visits.

Right for Your Business?

There are no silver bullets available to slay the beast of ever-rising health benefit costs. But as it evolves and improves, telemedicine is equipped to do it some damage. Contact your HR or financial advisor to help evaluate your options to fortify your defenses.

As we continue to monitor reports of the impact of the Coronavirus (COVID-19), we want to assure you that Yeo & Yeo remains committed to delivering outstanding business solutions.

During this evolving health situation, the safety and well-being of our team members, clients, and families is our main priority. We greatly care about our communities and want to do our part to keep you healthy, keep our employees healthy and help minimize the spread of the virus. In that spirit, we are implementing more aggressive components of our Business Continuity Plan to assist in the containment of the coronavirus and help protect us all.

For our Yeo & Yeo CPA and Medical Billing Clients:

All Yeo & Yeo offices are closed to outside visitors through April 17. We encourage clients to use other means available to communicate and send information at this time.

• Our professionals are available via email, phone, online meetings and video conferencing to continue to serve you.
• We highly encourage you to use our client-friendly portals for the safe and secure transfer of information. Note, there is a setup period for new users that can take up to one business day at this time.
• You may mail documents to our offices but, again, consider using our portals.
• If the above methods are not an option for you, the drop-off of documents is allowable currently as a last resort. Please use the dropbox or slot where available/possible; otherwise, a drop-off area is established in each office to minimize contact for you and our professionals.
• There will be no signing of documents on-site. Your Yeo & Yeo professional will electronically send documents for signature or mail required documents.
• At this time, the government has not issued an extended tax deadline and, while our tax professionals will continue to be as timely as possible, please understand the circumstances we are all faced with may slightly delay the turnaround on tax returns while meeting the current tax deadline. We are monitoring and watching for further details and will communicate any changes that are announced regarding notice of a tax-filing extension.

All nonessential client visits are suspended through April 17. We feel that for you, your team’s and our professionals’ safety, it is best that we delay on-site visits/work at this time. 

• Your Yeo & Yeo professional will help coordinate the handling of the needed documentation to maintain workflow as best as possible. For the transfer of documents, again, we highly encourage you to utilize our client portals.

 For our Yeo & Yeo Technology Clients:

YYTECH’s office is closed to outside visitors through April 17, except for equipment drop-off/pickup.

• Our professionals are available via email, phone, online meetings and video conferencing to continue to serve you.
• The drop-off and pickup of equipment are accepted at this time with safety measures in place to sanitize all incoming and outgoing equipment.

Nonessential on-site client visits are minimized through April 17. We feel that for you, your team’s and our professionals’ safety, it is best that we reduce on-site visits/work at this time.

• Our IT professionals will make every attempt to perform service remotely when possible as a first resort.
• We will continue to perform on-site support and maintenance provided the client and technician are comfortable with in-person contact, though again, let’s work to minimize where possible.
• Our IT professionals will follow safety measures when on-site that will include the use of sanitizing equipment and wearing protective gloves with disposal of the gloves on-site.
• Our professionals have been given the right to leave an off-site location if they feel their health is being compromised and, likewise, you may ask them to leave if you or your employees feel uncomfortable in any way.

 Other Steps Being Implemented Firmwide

Other steps we are taking to help prevent the spread of the virus include minimizing the number of team members in our offices. Several of our professionals will primarily work remotely from home during this time, while others are working alternate hours, creating social distancing for those in the office. This is not new to us; Yeo & Yeo has embraced remote and flexible schedules for years. Our information security systems ensure that our clients’ information will remain secure, even when we are working remotely. All team members are directed to stay home if they or a family member are sick. Further measures are in place should a team or family member be exposed or contract the virus.

These steps are necessary to preserve the health of our team and help curtail the spread of the virus while upholding our commitment to you, our clients. As we continue to monitor the impact of the coronavirus, we will keep you informed of further changes, including possible date changes of the above measures.

For ongoing reference, Yeo & Yeo has created a dedicated COVID-19 Resource Page on our website with information and resources to help navigate this situation. We will update it regularly as new information develops.

On behalf of all of us at Yeo & Yeo, thank you for your understanding and support during this challenging time. Remember, we are all in this public health situation together. We wish you, your families and your teams much good health.

Gov. Gretchen Whitmer has signed Executive Order 2020-10 temporarily expanding eligibility for unemployment benefits effective immediately, and until Tuesday, April 14, at 11:59 p.m. 

Under the order, unemployment benefits would be extended to the following:

• Workers who have an unanticipated family care responsibility, including those who have childcare responsibilities due to school closures, or those who are forced to care for loved ones who become ill.
• Workers who are sick, quarantined, or immunocompromised and who do not have access to paid family and medical leave or are laid off.
• First responders in the public health community who become ill or are quarantined due to exposure to COVID-19.

The State is also seeking solutions for self-employed workers and independent contractors who traditionally do not have access to unemployment insurance. 

Access to benefits for unemployed workers will also be extended: 

• Benefits will be increased from 20 to 26 weeks. 
• The application eligibility period will be increased from 14 to 28 days.  
• The normal in-person registration and work search requirements will be suspended.  

Eligible employees should apply for unemployment benefits online at www.michigan.gov/UIA or 1-866-500-0017. A factsheet on how to apply for benefits can be found here.  

This response came following the Governor signing an order earlier today suspending the operations of all restaurants and bars, theaters, casinos, and other public spaces in the state of Michigan to help mitigate the novel coronavirus pandemic. The order will go into effect at 3 p.m. on Monday, March 16, and is in effect through March 30.

The order states that it applies to:

• Restaurants, cafes, coffee houses, bars, taverns, brewpubs, distilleries and clubs
  • Restaurants may allow five customers inside at a time to pick up orders, so long as they stay six feet apart from each other, according to the order.
• Movie theaters, indoor and outdoor performance venues
• Gymnasiums, fitness centers, recreation centers, indoor sports facilities, indoor exercise facilities, exercise studios and spas
• Casinos

The order states that it does not apply to:

• Office buildings
• Grocery stores, markets and food pantries
• Pharmacies, drug stores, providers of medical equipment and supplies, health care facilities and residential care facilities
• Juvenile justice facilities
• Warehouse and distribution centers, and industrial and manufacturing facilities

To stay informed of the most recent Executive Orders and for other business and individual resources available from the State, please refer to the State of Michigan’s dedicated Coronavirus site at www.michigan.gov/coronavirus.