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COVID-19 Updates

IRS suspends requirement to repay excess advance payments of the 2020 Premium Tax Credit; those claiming net Premium Tax Credit must file Form 8962
 

WASHINGTON — The American Rescue Plan Act of 2021 suspends the requirement that taxpayers increase their tax liability by all or a portion of their excess advance payments of the Premium Tax Credit (excess APTC) for tax year 2020. A taxpayer’s excess APTC is the amount by which the taxpayer’s advance payments of the Premium Tax Credit (APTC) exceed his or her Premium Tax Credit (PTC).     

The Internal Revenue Service announced today that taxpayers with excess APTC for 2020 are not required to file Form 8962, Premium Tax Credit, or report an excess advance Premium Tax Credit repayment on their 2020 Form 1040 or Form 1040-SR, Schedule 2, Line 2, when they file.

Eligible taxpayers may claim a PTC for health insurance coverage in a qualified health plan purchased through a Health Insurance Marketplace. Taxpayers use Form 8962, Premium Tax Credit to figure the amount of their PTC and reconcile it with their APTC. This computation lets taxpayers know whether they must increase their tax liability by all or a portion of their excess APTC, called an excess advance Premium Tax Credit repayment, or may claim a net PTC.

Taxpayers can check with their tax professional or use tax software to figure the amount of allowable PTC and reconcile it with APTC received using the information from Form 1095-A, Health Insurance Marketplace Statement.
 
The process remains unchanged for taxpayers claiming a net PTC for 2020. They must file Form 8962 when they file their 2020 tax return. See the Instructions for Form 8962 for more information. Taxpayers claiming a net PTC should respond to an IRS notice asking for more information to finish processing their tax return.

Taxpayers who have already filed their 2020 tax return and who have excess APTC for 2020 do not need to file an amended tax return or contact the IRS. The IRS will reduce the excess APTC repayment amount to zero with no further action needed by the taxpayer. The IRS will reimburse people who have already repaid any excess advance Premium Tax Credit on their 2020 tax return. Taxpayers who received a letter about a missing Form 8962 should disregard the letter if they have excess APTC for 2020. The IRS will process tax returns without Form 8962 for tax year 2020 by reducing the excess advance premium tax credit repayment amount to zero.

Again, IRS is taking steps to reimburse people who filed Form 8962, reported, and paid an excess advance Premium Tax Credit repayment amount with their 2020 tax return before the recent legislative changes were made. Taxpayers in this situation should not file an amended return solely to get a refund of this amount. The IRS will provide more details on IRS.gov. There is no need to file an amended tax return or contact the IRS. 

As a reminder, this change applies only to reconciling tax year 2020 APTC. Taxpayers who received the benefit of APTC prior to 2020 must file Form 8962 to reconcile their APTC and PTC for the pre-2020 year when they file their federal income tax return even if they otherwise are not required to file a tax return for that year.  The IRS continues to process prior year tax returns and correspond for missing information.  If the IRS sends a letter about a 2019 Form 8962, we need more information from the taxpayer to finish processing their tax return. Taxpayers should respond to the letter so that the IRS can finish processing the tax return and, if applicable, issue any refund the taxpayer may be due.

 

IRS to recalculate taxes on unemployment benefits; refunds to start in May

WASHINGTON – To help taxpayers, the Internal Revenue Service announced today that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.

The legislation, signed on March 11, allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers. The legislation excludes only 2020 unemployment benefits from taxes.

Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.

For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.

For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.
 
There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.

For example, the IRS can adjust returns for those taxpayers who claimed the Earned Income Tax Credit (EITC) and, because the exclusion changed the income level, may now be eligible for an increase in the EITC amount which may result in a larger refund. However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income.

These taxpayers may want to review their state tax returns as well.

According to the Bureau of Labor Statistics, over 23 million U.S. workers nationwide filed for unemployment last year. For the first time, some self-employed workers qualified for unemployed benefits as well. The IRS is working to determine how many workers affected by the tax change already have filed their tax returns.

The new IRS guidance also includes details for those eligible taxpayers who have not yet filed.

The IRS has worked with the tax return preparation software industry to reflect these updates so people who choose to file electronically simply need to respond to the related questions when electronically preparing their tax returns. See New Exclusion of up to $10,200 of Unemployment Compensation for information and examples. For others, instructions and an updated worksheet about the exclusion were available in March and posted to IRS.gov/Form 1040. These instructions can assist taxpayers who have not yet filed to prepare returns correctly.

 

 

IRS extends additional tax deadlines for individuals to May 17

WASHINGTON – The Internal Revenue Service today announced that individuals have until May 17, 2021 to meet certain deadlines that would normally fall on April 15, such as making IRA contributions and filing certain claims for refund.

This follows a previous announcement from the IRS on March 17, that the federal income tax filing due date for individuals for the 2020 tax year was extended from April 15, 2021, to May 17, 2021.  Notice 2021-21 provides details on the additional tax deadlines which have been postponed until May 17.

Time to make contributions to IRAs and health savings accounts extended to May 17
In extending the deadline to file Form 1040 series returns to May 17, the IRS is automatically postponing to the same date the time for individuals to make 2020 contributions to their individual retirement arrangements (IRAs and Roth IRAs), health savings accounts (HSAs), Archer Medical Savings Accounts (Archer MSAs), and Coverdell education savings accounts (Coverdell ESAs).  This postponement also automatically postpones to May 17, 2021, the time for reporting and payment of the 10% additional tax on amounts includible in gross income from 2020 distributions from IRAs or workplace-based retirement plans.  Notice 2021-21 also postpones the due date for Form 5498 series returns related to these accounts to June 30, 2021. 

2017 unclaimed refunds – deadline extended to May 17
For tax year 2017 Federal income tax returns, the normal April 15 deadline to claim a refund has also been extended to May 17, 2021. The law provides a three-year window of opportunity to claim a refund.  If taxpayers do not file a return within three years, the money becomes property of the U.S. Treasury. The law requires taxpayers to properly address, mail and ensure the tax return is postmarked by the May 17, 2021, date.

Additionally, foreign trusts and estates with federal income tax filing or payment obligations, who file Form 1040-NR, now have until May 17, 2021.

Estimated tax payment due April 15
Notice 2021-21, issued today does not alter the April 15, 2021, deadline for estimated tax payments; these payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn't subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

Updates regarding tax relief as a result of the COVID-19 pandemic can be found at IRS.gov.

 

Tax Day for individuals extended to May 17: Treasury, IRS extend filing and payment deadline

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until Oct. 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn't subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

State tax returns

The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details.

Winter storm disaster relief for Louisiana, Oklahoma and Texas

Earlier this year, following the disaster declarations issued by the Federal Emergency Management Agency (FEMA),  the IRS announced relief for victims of the February winter storms in Texas, Oklahoma and Louisiana. These states have until June 15, 2021, to file various individual and business tax returns and make tax payments. This extension to May 17 does not affect the June deadline. 

For more information about this disaster relief, visit the disaster relief page on IRS.gov 

 

 

American Rescue Plan Act

The Act contains many different funding and support programs relevant for employers.

On March 11, 2021, President Biden signed into law H.R. 1319 – the American Rescue Plan Act (the "Act"), which provides approximately $1.9 trillion in further supports and stimulus to individuals, businesses and other organizations, as well as state and local governments affected by the COVID-19 pandemic. Here are selected highlights that may be relevant for employers. The Act contains many different funding and support programs beyond what is described below.

Recovery Rebates to Individuals

The Act authorizes the Internal Revenue Service (IRS) to pay $1,400 to individuals and an additional $1,400 for each dependent of the taxpayer up to specified income limits. These payments are fully phased out for single filers earning $80,000, head of household filers with $120,000 in income, and joint filers making $160,000. Nonresident aliens and those who are a dependent of another taxpayer are not eligible.

Unemployment Insurance Benefits Supplements

The federal unemployment supplement, which was scheduled to expire on March 14th, is renewed with a federal supplement of $300/week through September 6th. The first $10,200 in Unemployment Insurance benefits received in 2020 is now nontaxable for households with under $150,000 in taxable earnings. In the case of a joint return, up to $10,200 in unemployment insurance benefits received by each spouse would be nontaxable. This may affect income tax returns already filed for 2020. The IRS will need to advise taxpayers whether it will be necessary to amend 2020 income tax returns.

Increased Child Tax Credit and Earned Income Tax Credit

The Act increases the Child Tax Credit and the Earned Income Tax Credit. For 2021, the Child Tax Credit is increased from $2,000 to $3,000 per child over age six and $3,600 for each child who is under age six as of the close of the calendar year. These credits are subject to phase-out limits beginning at $75,000 in income for single filers and $150,000 for married filing jointly. The Child Tax Credit is fully refundable for 2021. Children remain eligible through age 17 rather than 16, previously.

The IRS is directed to send periodic (likely monthly) advance Child Tax Credit payments to qualifying families, beginning in July 2021. These payments would represent half of the Child Tax Credit to which a taxpayer is entitled for 2021. The remaining half will be claimed on the 2021 income tax return.

For 2021, the Act expands eligibility requirements and the maximum credit amount for the Earned Income Tax Credit (EITC) for taxpayers without dependents, reducing the minimum age from 25 years of age to 19 years of age. It also increases the upper age limit to include taxpayers over 64 years old. Special age provisions apply to students, qualified former foster youth and qualified homeless youth.

100% COBRA Health Coverage Subsidy

The Act provides a 100% COBRA Subsidy for qualified employees and dependents who lose coverage as a result of involuntary terminations or reductions in hours (qualified individuals). In addition to new qualified employees and dependents, qualified individuals who are still within their COBRA maximum period but who had not previously elected will be given the opportunity to now elect COBRA as well. Employers would pay the COBRA premium and be reimbursed, including the 2% administrative fee that health plans are permitted to charge, via a refundable payroll tax credit. This credit may also be advanced — i.e., paid by the IRS to the employer — although guidance will be necessary to implement this feature. The subsidy would be effective for coverage periods beginning in April through September 2021. The subsidy is only available for so long as the qualified individual is not eligible for other group health plan coverage, is within their COBRA maximum period (typically 18 months from the date of the qualifying event) and/or the end of the subsidy period.

As with other tax credit programs, a "double benefit" is avoided by increasing the taxable income of any organization by the amount of such credit. (The income would be offset by deductible health premium expenses.) Also, no credit is allowed based on the same wages as were used to qualify for the Employee Retention Tax credit or Families First Coronavirus Relief Act (FFCRA) paid leave tax credit.

New notices will be required to advise potential qualified individuals of the availability of COBRA premium assistance for health coverage and the option to enroll in coverage. The Department of Labor, in consultation with the Treasury and Health and Human Services Departments, will publish model notices by April 10, 2021.

Employee Retention Credit Extended Through 2021

The Employee Retention Credit (ERC), which was scheduled to expire on June 30, 2021, is extended through December 2021. The credit percentage remains 70 percent of up to $10,000 in qualified wages per employee per quarter; i.e., a $28,000 maximum credit per employee for 2021. Employers may qualify if their operation is fully or partially suspended due to orders from a governmental authority related to COVID-19, or if the organization can demonstrate that gross receipts for a calendar quarter are less than 80 percent of the gross receipts of the employer for the same calendar quarter in 2019. The credit is increased by the proportionate share of an employer's health costs related to such wages.

The Employee Retention Credit is also extended to new businesses which started after February 15, 2020, with average annual receipts of under $1,000,000. For such businesses, the amount of the credit may not exceed $50,000 per quarter.

The Act relaxes restrictions on "Severely Financially Distressed Employers," defined as those that can demonstrate that gross receipts are less than 10 percent of the gross receipts of the corresponding base period (generally the same calendar quarter in 2019). These organizations may apply the ERC to all wages paid to employees (up to the applicable $10,000 per employee per quarter limit), notwithstanding that they have over 500 employees. Normally employers with more than 500 full-time employees can only take the credit for wages paid to employees for time that the employee is not providing services (i.e., paid time off).

Families First Coronavirus Response Act (FFCRA) Paid Sick and Family Leave Tax Credit Extended

The FFCRA Paid Sick and Family Leave tax credit is extended beginning April 1, 2021through September 30, 2021, and remains refundable and advanceable via IRS Form 7200. The requirement for covered employers to offer paid FFCRA leave expired in 2020, but for covered employers that offer it, such leave is funded by the federal government up to applicable limits. The original FFCRA 10-day limitation for paid sick leave applied from March 2020 through March 2021. The Act resets this limit for qualifying sick leave taken between April 1, 2021 and September 30, 2021.

The Act also adds new reasons for which employees may take paid sick or family leave for which employers are entitled to the tax credit, including leave for time awaiting the results of a test to diagnose COVID-19, to obtain immunization for it, or to recover from any adverse health impacts arising from the immunization. The Act also increases the wage limit for paid family leave payments from $10,000 per employee to $12,000 per employee.

The credit is further expanded to apply to pension contributions and apprenticeship program costs associated with qualifying FFCRA sick or family leave wages. Certain government entities are also now eligible to take FFCRA credits.

Finally, the Act provides that employers cannot "double dip" by taking credit for payroll costs that have been subject to PPP loan forgiveness.

Paycheck Protection Program (PPP) Expansion

Eligibility for Paycheck Protection Program (PPP) loans is expanded to nonprofit 501(c) entities, other than 501(c)(4) lobbying organizations. Recipients remain subject to the limit of $1,000,000 or 15 percent of receipts and activities related to lobbying. Consistent with the Consolidated Appropriations Act, P. L. 116-260, qualifying organizations generally must employ 300 or fewer employees, but affiliation rules are relaxed for nonprofits and veterans' organizations, which may be eligible if they employ 500 or fewer employees per physical location. Other nonprofit organizations are still subject to the 300-employee limit per physical location.

Because COBRA premium assistance payments (discussed above) are eligible for 100 percent reimbursement via a payroll tax credit, such costs may not be included in PPP forgivable payroll costs.

Dependent Care FSA Exclusion Increased

The Act increases the exclusion for employer-provided dependent care assistance from $5,000 to $10,500 ($5,250 for married filing separately) for 2021. Employers would need to amend their cafeteria or dependent care flexible spending account plan to implement this change; however, the Act provides that such amendments may be retroactive if adopted no later than December 31, 2021.

Increased Affordable Care Act (ACA) Premium Subsidies

Affordable Care Act (ACA) premium subsidies are increased through 2022, in effect decreasing the required individual contribution. The Act provides a 100 percent subsidy for ACA coverage for unemployed persons and people earning up to 150 percent of the federal poverty level for two years. Individuals earning below 150 percent of the poverty level must currently pay up to four percent of their income.

The Act expands ACA subsidies for people with income over 400 percent of the federal poverty level, who were previously ineligible. Premium costs are now capped at 8.5 percent of income. Individuals who receive unemployment insurance at any time in 2021 will be able to obtain ACA coverage at no cost.

Pension Provisions

The Act provides taxpayer assistance for underfunded multiemployer pension (MEP) plans. The Pension Benefit Guaranty Corporation is authorized to offer financial assistance to eligible MEP plans which meet certain criteria, such as having been approved by the Treasury Department to reduce participant benefits or being in critical and declining status in any plan year from 2020 through 2022. The bill also increases MEP premiums to $52 per participant in 2031 and then indexes the rate to inflation. The Act makes specified changes to funding for single-employer pension plans as well.

For details on the America Rescue Plan Act, see https://www.congress.gov/bill/117th-congress/house-bill/1319/text

For details on the Employee Retention Credit, visit the IRS site at https://www.irs.gov/coronavirus/employee-retention-credit

For details on the FFCRA, visit the US Department of Labor Families First Coronavirus Response Act: Questions and Answers website at https://www.dol.gov/agencies/whd/pandemic/ffcra-questions

And/or the IRS COVID-19-Related Tax Credits for Required Paid Leave site.

 

IRS warns people about a COVID-related text message scam

The IRS and its Security Summit partners are warning people to be aware of a new text message scam. The thief’s goal is to trick people into revealing bank account information under the guise of receiving the $1,200 Economic Impact Payment.

Here’s how this scam works
People get a text message saying they have “received a direct deposit of $1,200 from COVID-19 TREAS FUND. Further action is required to accept this payment… Continue here to accept this payment …" The text includes a link to a phishing web address.

This fake link appears to come from a state agency or relief organization. It takes people to a fake website that looks like the IRS.gov Get My Payment website. If people visit the fake website and enter their personal and financial account information, the scammers collect it.

Here’s what people should do if they receive this message 
Anyone who receives this scam text should take a screenshot and include the screenshot in an email to phishing@irs.gov with the following information:

  • Date/time/time zone that they received the text message
  • The phone number that received the text message

The IRS doesn’t send unsolicited texts or emails. The agency will never demand immediate payment using a gift card, prepaid debit card or wire transfer or threaten to have a taxpayer arrested.

 

More information:
IRS Impersonation Scam Reporting
Consumer Alerts
Phone Scams


 

 

New Pinellas CARES programs expand help for local businesses

Pinellas CARES is now offering expanded grant funding for Pinellas-based businesses most affected by the pandemic: those that were required to shut down or whose customers were required to shut down or stop doing business.

Applicants are strongly encouraged to take their time to submit a full application, including all required documentation, for the quickest response. Grant awards will be made based on complete and eligible applications, not based on how early a partial application is submitted – submitting an incomplete application will delay the review process.

Businesses that make $3 million or less in gross annual revenue may qualify for up to $10,000 in grant assistance based on a sliding scale. A detailed list of all program qualifications and the online application can be found at: https://www.pced.org/cares.

Qualifying business owners can use a single online application to be considered for one of the following grants:

  • Sliding Scale Grants provide $2,500 to $10,000 grants for businesses making between $17,000 and $3 million in gross annual revenue. 
  • Health & Safety Matching Grants allow up to $10,000 to assist Target Industry businesses in implementing COVID-19-related upgrades and safety precautions. 
  • Business Diversity and Arts Microgrants help impacted business owners with barriers to participation in other grant programs strengthen their business through direct financial assistance and professional services. This help will include post-COVID business planning, record-keeping and preparing documents needed to apply for other types of grant funding.  

CARES Funds can only be used to reimburse losses caused by COVID-19 that are not paid by insurance or by another federal grant or program.

The Pinellas County Commission has also approved Pinellas CARES programs to support individuals, families and critical nonprofit services, and to bolster the local COVID-19 public health response. For a full program overview of these programs, please visit http://cares.pinellas.gov.

Helpful links:

Pinellas County COVID-19 Information & Assistance

Pinellas County COVID-19 Dashboard

COVID-19 Funding for Businesses

COVID-19 Business Recovery Resources

What’s Open and What’s Not

Social Distancing Tips 


 

Hillsborough County Has $100 Million In COVID-19 Recovery Assistance Available for Small Businesses

 
 
Full Access application period for economically damaged businesses opens July 27
 

Hillsborough County has more than $100 million in financial assistance programs to help reopened local small businesses that were economically damaged by the COVID-19 coronavirus pandemic.

Business owners across the county (including Tampa, Temple Terrace, and Plant City) may apply for one of three programs:

  • For businesses with up to $3 million in annual revenue: Kickstart Small Business for up to $10,000 in working capital
  • For businesses with up to $20 million in annual revenue and:
  • hired or rehired workers since May 1, 2020: Back to Work for up to $2,000 per employee in payroll incentives
  • made coronavirus safety improvements since March 1, 2020: Safe at Work Matching for up to $10,000 matching reimbursement for the cost of qualifying workplace improvements directly related to mitigating the spread of COVID-19

The County used three phased application periods in order to give a head start to the smallest, most economically vulnerable businesses in the community. The Full Access period for applications opens July 27 for Hillsborough County small businesses:

  • With between $40,000 and $20 million in annual revenue
  • Forced to close by government orders OR economically damaged by the COVID-19 coronavirus pandemic
  • Located anywhere in Hillsborough County, including the cities of Tampa, Temple Terrace, and Plant City

Applications will be accepted through Dec. 1, 2020, or until funding is exhausted.

Learn more about the programs and which one may be right for your business by attending an upcoming one-hour presentation, with live question-and-answer sessions by visiting the R3 Financial Assistance for Business page.  

Presenters will cover common mistakes and ways to streamline the application process to help businesses receive faster payments. Recorded sessions are available in English and Spanish.

Some of the top mistakes made by applicants include:

  • Applying for an incorrect program for which they don't qualify
  • Selecting forced to close, but really weren't
  • Inconsistent documentation, where the business name is different on application, tax forms, W-9, and/or Sunbiz

Businesses may only receive one Economic Recovery financial assistance program, even if they may otherwise qualify for more than one program. Professional business consultants are available at no cost to assist small businesses in deciding which financial assistance program is right for their individual business needs. Contact Entrepreneur Services or call (813) 204-9267 to request a virtual or phone appointment.

Additional information on all the programs is available online or by calling the Hillsborough County Economic Recovery Financial Assistance Support Line at (888) 393-7509.


 

Get My Payment application debuts on IRS.gov


Working with the Treasury Department, the IRS unveiled the new Get My Payment application to let taxpayers check on their Economic Impact Payments. The application will answer common questions as an initial round of more than 80 million Economic Impact Payments hits recipients’ bank accounts.

Get My Payment will show the projected date when a deposit has been scheduled, similar to the “Where’s My Refund tool” many taxpayers are already familiar with. Get My Payment also allows people to provide their bank account information. People who did not use direct deposit on their last tax return can also use the application to input their bank information to receive the payment by direct deposit, expediting receipt.

IRS launches tool to help non-filers register for Economic Impact Payments


Recently, the Treasury Department and the IRS launched a web tool allowing registration for Economic Impact Payments for those who don’t normally file a tax return. The non-filer tool was designed for people who don't have a return filing obligation, including those whose income falls beneath the filing threshold.

The feature is available only on IRS.gov, and users should look for Non-filers: Enter Payment Info Here to take them directly to the tool.

Eligible taxpayers who filed tax returns for 2019 or 2018 will receive the payments automatically. Automatic payments will also go in the near future to those receiving Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) and Veterans Affairs beneficiaries.

General IRS information about the Economic Impact Payments is available at IRS.gov/EIP

 

What people really want to know about Economic Impact Payments


IRS.gov has answers to many questions people may have about their Economic Impact Payment. Here are answers to some of the top questions people are asking about these payments. 

Is this payment considered taxable income?

No, the payment is not income and taxpayers will not owe tax on it. The payment will not reduce a taxpayer’s refund or increase the amount they owe when they file their 2020 tax return next year. A payment also will not affect income for purposes of determining eligibility for federal government assistance or benefit programs.


Can people who receive a Form SSA-1099 or RRB-1099 use Get My Payment to check their payment status?

Yes, they will be able to use Get My Payment to check the status of their payment after verifying their identity by answering the required security questions.


If someone’s bank account information has changed since they filed their last tax return, can they update it using Get My Payment?

To help protect against potential fraud, the tool also does not allow people to change direct deposit bank account information already on file with the IRS.

If the IRS issues a direct deposit based on the account information that the taxpayer provided on their tax return and the bank information is now invalid or the account has been closed, the bank will reject the deposit. The agency will then mail payment as soon as possible to the address they have on file. Get My Payment will be updated to reflect the date a payment will be mailed. It will take up to 14 days to receive the payment, standard mailing time.


Where can people get more information?

Taxpayers who are required to file a tax return, can go to IRS Free File to file electronically. If they aren’t required to file, they should go to the Non-Filers: Enter Payment Info Here tool and submit their information to receive an Economic Impact Payment.

For the complete lists of FAQs, visit the Economic Impact Payment and the Get My Payment tool pages on IRS.gov. The IRS updates these FAQs regularly.

 


 

Disaster Assistance Options for Small Business


 

There are several disaster assistance options available to businesses, but you have to make choices regarding which is most suited to your situation.  You can only have an SBA loan or the 50% Employee Retention Credit.  The SBA announced during the president's address on April 2, 2020 that you could apply for both SBA loans (SBA Payroll Protection Program Loan and SBA Economic Injury Disaster Loan) as long as they are not used for the same purposes.

Unemployment - http://www.floridajobs.org/Reemployment-Assistance-Service-Center/reemployment-assistance/claimants/apply-for-benefits       Federal government is subsidizing state benefits by up to $600/week.  You can have the lesser of your payroll or the state and federal benefit ($875/week in Florida).  Applying for this indicates that the business is temporarily or permanently shut down.

SBA Disaster Loan - www.sba.gov/disaster - $10,000 forgiven, $25,000 without collateral – up to 30 year term at 3.75%  Payments suspended for 12 months.

SBA Payroll Protection Loan – contact your business bank – fully forgiven as long as the funds are used for specified expenses.  If any portion is not forgiven, .5% interest for 2 years. Payments deferred for 6 months.

Florida Bridge Loan - https://deosera.force.com/RebuildFloridaBusinessLoanFund - zero interest for 12 months, then interest at 12% - supposed to apply for other funding to repay.

Payroll credit for 50% of up to $10,000 per employee of wages – refundable with quarterly returns or more immediately by filing a separate form – cannot receive unemployment or SBA loan and credit.



 

IRS: Employee Retention Credit available for many businesses financially impacted by COVID-19

WASHINGTON — The Treasury Department and the Internal Revenue Service today launched the Employee Retention Credit, designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.

Does my business qualify to receive the Employee Retention Credit?

The credit is available to all employers regardless of size, including tax-exempt organizations. There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.

Qualifying employers must fall into one of two categories:

  1. The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
  2. The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.

These measures are calculated each calendar quarter.

How is the credit calculated?

The amount of the credit is 50% of qualifying wages paid up to $10,000 in total. Wages paid after March 12, 2020, and before Jan. 1, 2021, are eligible for the credit. Wages taken into account are not limited to cash payments, but also include a portion of the cost of employer provided health care.

How do I know which wages qualify?

Qualifying wages are based on the average number of a business’s employees in 2019.

Employers with less than 100 employees: If the employer had 100 or fewer employees on average in 2019, the credit is based on wages paid to all employees, regardless if they worked or not. If the employees worked full time and were paid for full time work, the employer still receives the credit.

Employers with more than 100 employees:  If the employer had more than 100 employees on average in 2019, then the credit is allowed only for wages paid to employees who did not work during the calendar quarter.

I am an eligible employer. How do I receive my credit?

Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly employment tax returns or Form 941 beginning with the second quarter. If the employer’s employment tax deposits are not sufficient to cover the credit, the employer may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

Eligible employers can also request an advance of the Employee Retention Credit by submitting Form 7200.

Where can I find more information on the Employer Retention Credit and other COVID-19 economic relief efforts?

Updates on the implementation of this credit,  Frequently Asked Questions on Tax Credits for Required Paid Leave and other information can be found on the Coronavirus page of IRS.gov.



Summary of the Coronavirus Aid, Relief and Economic Security (CARES) Act

This post summarizes the developments of the most massive stimulus bill in American history, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act will provide billions of dollars of relief to individuals, businesses, state and ...

 

The following is a summary of the Coronavirus Aid, Relief, and Economic Security (CARES) Act:

This post summarizes the developments of the most massive stimulus bill in American history, the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The CARES Act will provide billions of dollars of relief to individuals, businesses, state and local governments, and the health care system suffering the impact of the COVID-19 coronavirus in the United States. Reuters has a summary posted here. Even though the program passed as a $2.2 trillion program, the impact is closer to $7 trillion based on direct relief, grants, and government-supported loans. Some of the key provisions include:

Tax Cuts for business and individuals – approximately $300 billion

·        A refundable 50 percent payroll tax credit for businesses affected by the coronavirus, to encourage employee retention. Employers would also be able to defer payment of those taxes if necessary. This retention tax credit is for eligible employers that continue to pay employee wages while their operations remain fully or partially suspended as a result of specific COVID-19-related government orders

  • Loosened tax deductions for interest and operating losses
  • Suspension of penalties for people who tap their retirement funds early
  • Tax write-offs to encourage charitable deductions and encourage employers to help pay off student loans

Businesses and other employers’ programs

  • Over $400 billion in grants for industry sectors include airlines and travel, hospitals, and education
  • Nearly $400 billion to support American small businesses for essentials like salaries, occupancy costs, and utilities
  • Provisions that impact small business most
    • Employee Retention Payroll Tax Credit
      • Employers who are at risk for closure due to COVID-19 can receive a payroll tax credit against eligible payroll taxes for each calendar quarter equal to 50% of the qualified wages paid to each employee. The credit is available for an employer whose operations were fully or partially suspended due to a COVID-19 related shut-down order from an appropriate governmental authority, or if gross receipts declined by more than 50% when compared to the same quarter in the prior year
      • The eligible wages for an employee are up to $10,000 for all calendar quarters. Qualified wages include wages and health benefits paid to an eligible employee
      • This credit is also available to nonprofit organizations
      • Employers taking advantage of other credits or taking a small business interruption loan are not eligible for this credit
    • Delay of Employment Tax Payments
      • Deferral of the employer portion of payments of certain payroll taxes
      • The Act allows employers and self-employed individuals to defer payment of the employer share (6.2%) of the Social Security tax on wages through the end of 2020. Fifty percent of the deferred tax payments will be due by December 31, 2021, and the remaining portion due by December 31, 2022. Businesses who have debt forgiven from Payroll Protection Program loans (covered below) are not allowed to delay their payments
    • Net Operating Loss/Excess Business Loss Changes
      • Modification of net operating loss (NOL) and limitation on losses rules and deduction limitation on business interest
      • The Tax Cuts and Jobs Act limited net operating loss deductions. The CARES Act has amended those provisions to allow net operating losses incurred in 2018, 2019, and 2020 to be fully deductible, without the 80% limitation. The net operating losses from 2018, 2019, and 2020 are also allowed to now be carried back five years to allow businesses to claim refunds of taxes paid in prior years
      • Owners of pass-through entities are no longer subject to excess business loss provisions for 2018, 2019, and 2020. They will be able to take full advantage of pass-through losses, as available
    • Business Interest Deduction
      • The Tax Cuts and Jobs Act had limited the deductibility of business interest to 30% of taxable income. The allowable deduction under the CARES act has been increased to 50%
    • Qualified Improvement Property
      • Businesses will be able to write off all of the costs of certain interior renovations as 15-year property and eligible for expensing in nonresidential real property instead of using straight-line depreciation over a 39-year period
      • Qualified improvement property technical correction, allowing qualifying interior improvements of buildings to be immediately expensed rather than depreciated over 15 years
  • Available SBA programs covered in our earlier post Help Businesses and Families Now
    • Economic Injury Disaster Loans (EIDL), some information below
    • SBA Payroll Protection Program (PPP) under the CARES Act, covered next
    • SBA Express Bridge Loan (EBL)
    • SBA Regular 7(a) Loan Program
  • The Paycheck Protection Program will provide nearly $350 billion in loans and loan guarantees for the covered period of February 15, 2020, through June 30, 2020. Note that the use of PPP eliminates the use of SBA Economic Injury Disaster Loan (EIDL) below.
    • It will cover payroll costs (up to annual amounts of $100,000); continuation of group health care benefits; employee salaries, commissions, or similar compensation; mortgage payments; rent; utilities; and interest on any other debt obligations incurred before the covered period
    • It will extend eligibility to companies of 500 employees or less and 501(c)(3) nonprofits, veterans’ organizations, and tribal small business concerns
    • Sole-proprietors, independent contractors, and other self-employed individuals may also participate
    • Loan forgiveness is available up to the principal amount of the financing
    • Loan forgiveness would be reduced for employers who lay-off workers or reduce employee compensation except where employers rehire workers or pay additional wages to tipped workers
    • Loan forgiveness is available for payroll costs, mortgage interest rent, and utility payments
    • Forgiven loan amounts will not be included as gross income
  • The general formula is the lesser of the average total monthly payments for payroll costs during the one year before the date the loan is made, multiplied by 2.5; or $10 million
  • The CARES Act includes a “Marshall Plan” for the health care system to help provide needed treatment during the pandemic and financial assistance to state, local, tribal and territorial governments, as well as to private nonprofits providing critical and essential services
    • $150 billion for state, local and Native American tribal governments
    • $100 billion for hospitals and other elements of the healthcare system
    • $16 billion for ventilators, masks, and other medical supplies
    • $11 billion for vaccines and other medical preparedness
    • $4.3 billion for the U.S. Centers for Disease Control and Prevention
    • $45 billion in disaster relief
    • $30 billion for education
    • $25 billion for mass-transit systems
    • $10 billion in borrowing authority for the U.S. Postal Service
    • $1 billion for the Amtrak passenger rail service
    • $10 billion for airports

Economic Injury Disaster Loan

  • $4.5 trillion in loans to businesses, states and cities that can’t get financing through other means
  • The SBA Disaster program has been authorized and the SBA is actively taking applications at www.sba.gov/disaster
  • Expansion of the ways the Small Business Administration (SBA) can help small businesses, including allowing qualified SBA lenders to loan money directly to eligible customers, but there will be limited funding. Now is the time to call your qualified SBA lender and begin the process of gathering financial and tax records
  • The loans are available to small businesses, small agricultural cooperatives, small aquaculture businesses, and most private nonprofits. The loans come directly through the SBA, not through banks.
  • The loans offer working capital loans for payroll, accounts payable, and other bills that could have been paid had the disaster not occurred; could be used to pay fixed debts
  • Applicants need to show they have suffered working capital losses due to the coronavirus disaster
  • The SBA will do an internal test to determine eligibility, so applicants do not need to produce any bank documentation for their application
  • 95% of the loans previously issued have been for $500,000 or less but can go up to $2 million. The SBA will determine the loan amount
    • Loans up to $2 million are to be repaid over 30 years at 3.75% fixed rate; payments deferred over the first 12 months
    • Must be small business per SBA size standards
    • Loans > $25,000 require collateral
  • How to apply: https://disasterloan.sba.gov/ela/Information/EIDLLoans or sba.gov/disaster. We have also covered the SBA loan program in our post Help Businesses And Families Now – COVID-19 Responses
  • Below are the high points on the Stimulus Loans/Grants only (Who, What, When, Where and How). As facts become clear, this page will be updated. Always trust an authoritative source, not this post that summarizes the facts.
    • WHO is eligible: Businesses with less than 500 employees. Multi-location restaurants with more than 500 employees, but no single location with more than 500 employees will be eligible
    • WHAT Loan Amount: 2.5 times your average monthly payroll costs limited to $10 million. 2-year loan with an interest rate of .5%. No prepayment penalties. (Further definition of payroll costs will be defined, but 1099 contractors are included in this calculation). Loan Forgiveness is included: the amount of the loan used to pay for payroll, rent, utilities, and mortgage interest from February 15, 2020, through June 30, 2020, will be forgiven. The debt forgiven will not be considered taxable income.
    • WHEN: Mnuchin said in a press conference that these loans should be available Friday, April 3, 2020
    • WHERE: Any FDIC insurance bank or federally insured credit union will be able to provide these loans. These loans will be SBA loans, but you do not need to go through an SBA bank or the SBA website to access these loans. We do know which banks will be participating at this time
    • HOW: We don’t know what documentation will be required precisely but be prepared to have payroll tax returns and payroll reports from 2019 and YTD 2020 available to calculate your eligibility and the amount of the loan. We recommend that you start getting your payroll records together so you can get in front of the line once this program starts
    • Additionally, there is no personal guarantee required on any of the loans. They are 100% insured by the Federal Government

Individuals

  • Recovery rebates of up to $1,200 for singles, $1,200 for heads of households, and $2,400 for married couples filing jointly — families with children under 17 will also receive an additional $500 per qualifying child. Payments would be phased out for those earning more than $75,000 a year. Those earning more than $99,000 would not be eligible. These phase-out numbers double for married couples. The only people excluded are those who are behind on child support payments
  • Expansion of unemployment benefits, including for self-employed and gig-economy workers
  • Jobless workers receive an extra weekly boost from the federal government of $600/week in addition to state aid. Self-employed workers, independent contractors and those who typically don’t qualify for unemployment benefits would be eligible
  • Unemployment benefits, which run out after six months in most states, will be extended for an additional 13 weeks
  • Waiver of the 10% penalty on COVID-19-related early distributions from IRAs, 401(k)s and specific other retirement plans
  • Expansion of charitable contribution tax deductions
  • Exclusion for certain employer payments of student loans                                                                                                      

 

 

Families First Coroanvirus Response Act

 

IR-2020-57, March 20, 2020

WASHINGTON — Today 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.

The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee's own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.

Key Takeaways

  • Paid Sick Leave for Workers

    For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid child care leave when employees' children's schools are closed or child care providers are unavailable.

  • Complete Coverage

    Employers receive 100% reimbursement for paid leave pursuant to the Act.

    • Health insurance costs are also included in the credit.
    • Employers face no payroll tax liability.
    • Self-employed individuals receive an equivalent credit.
  • Fast Funds

    Reimbursement will be quick and easy to obtain.

    • An immediate dollar-for-dollar tax offset against payroll taxes will be provided
    • Where a refund is owed, the IRS will send the refund as quickly as possible.
  • Small Business Protection

Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave to care for a child whose school is closed, or child care is unavailable in cases where the viability of the business is threatened.

  • Easing Compliance

    • Requirements subject to 30-day non-enforcement period for good faith compliance efforts.

To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.

Background

The Act provided paid sick leave and expanded family and medical leave for COVID-19 related reasons and created the refundable paid sick leave credit and the paid child care leave credit for eligible employers. Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Act. Eligible employers will be able to claim these credits based on qualifying leave they provide between the effective date and December 31, 2020. Equivalent credits are available to self-employed individuals based on similar circumstances.

Paid Leave

The Act provides that employees of eligible employers can receive two weeks (up to 80 hours) of paid sick leave at 100% of the employee's pay where the employee is unable to work because the employee is quarantined, and/or experiencing COVID-19 symptoms, and seeking a medical diagnosis. 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 child care provider is unavailable for reasons related to COVID-19, 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.

Paid Sick Leave Credit

For an employee who is unable to work because of Coronavirus quarantine or self-quarantine or has Coronavirus symptoms and is seeking a medical diagnosis, eligible employers may receive a refundable sick leave credit for sick leave at the employee's regular rate of pay, up to $511 per day and $5,110 in the aggregate, for a total of 10 days.

For an employee who is caring for someone with Coronavirus, or is caring for a child because the child's school or child care facility is closed, or the child care provider is unavailable due to the Coronavirus, eligible employers may claim a credit for two-thirds of the employee's regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 10 days. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

Child Care Leave Credit

In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child whose school or child care facility is closed or whose child care provider is unavailable due to the Coronavirus, eligible employers may receive a refundable child care leave credit. This credit is equal to two-thirds of the employee's regular pay, capped at $200 per day or $10,000 in the aggregate. Up to 10 weeks of qualifying leave can be counted towards the child care leave credit. Eligible employers are entitled to an additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.

Prompt Payment for the Cost of Providing Leave

When employers pay their employees, they are required to withhold from their employees' paychecks federal income taxes and the employees' share of Social Security and Medicare taxes. The employers then are required to deposit these federal taxes, along with their share of Social Security and Medicare taxes, with the IRS and file quarterly payroll tax returns (Form 941 series) with the IRS.

Under guidance that will be released next week, eligible employers who pay qualifying sick or child care leave will be able to retain an amount of the payroll taxes equal to the amount of qualifying sick and child care leave that they paid, rather than deposit them with the IRS.

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS. The IRS expects to process these requests in two weeks or less. The details of this new, expedited procedure will be announced next week.

Examples

If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date.

If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.

Equivalent child care leave and sick leave credit amounts are available to self-employed individuals under similar circumstances. These credits will be claimed on their income tax return and will reduce estimated tax payments.

Small Business Exemption

Small businesses with fewer than 50 employees will be eligible for an exemption from the leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue. The exemption will be available on the basis of simple and clear criteria that make it available in circumstances involving jeopardy to the viability of an employer's business as a going concern. Labor will provide emergency guidance and rulemaking to clearly articulate this standard.

Non-Enforcement Period

Labor will be issuing a temporary non-enforcement policy that provides a period of time for employers to come into compliance with the Act. Under this policy, Labor will not bring an enforcement action against any employer for violations of the Act so long as the employer has acted reasonably and in good faith to comply with the Act. Labor will instead focus on compliance assistance during the 30-day period.

For More Information

For more information about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov. Information regarding the process to receive an advance payment of the credit will be posted next week.        

 

 


 

Paycheck Protection Program Flexibility Act of 2020

 

 

What is the PPP Flexibility Act of 2020?

The Paycheck Protection Program Flexibility Act of 2020, signed into law by President Trump June 5, 2020, amends the Paycheck Protection Program (PPP) to give borrowers more freedom in how and when loan funds are spent while retaining the possibility of full forgiveness.

 

Key Takeaways

  • The PPP Flexibility Act amends the Paycheck Protection Program to give borrowers more time to spend loan funds and still obtain forgiveness.
  • Borrowers now have 24 weeks to spend loan proceeds, up from 8 weeks.
  • The Act also reduces mandatory payroll spending from 75% to 60%.
  • Two new exceptions let borrowers obtain full forgiveness even without fully restoring their workforce.
  • Changes made by the PPPFA have been incorporated in new forgiveness applications released by the SBA.
  • Time to pay off the loan has been extended to five years from the original two.
  • The Act now lets businesses delay paying payroll taxes even if they took a PPP loan.

 

Understanding the PPP Flexibility Act of 2020

Under previous PPP loan guidance, borrowers had eight weeks from the time they received the first loan installment to spend the funds. The PPP Flexibility Act of 2020 lets them extend that period to 24 weeks (but not beyond Dec. 31, 2020). They also have the option to keep the original eight-week spending period if they already had their loan before enactment of the Act. Under the new timeline, full forgiveness is still possible.1

 

The original PPP loan guidelines mandated that 75% of any forgiven amount had to be spent on payroll costs. The Flexibility Act reduces required payroll expenditures to 60% of the loan amount with up to 40% of the loan amount used for mortgage interest, rent, or utility payments to obtain full loan forgiveness of that amount. Or, part of the loan can be forgiven provided the borrower maintains the same 60/40 ratio for the amount forgiven. This change reflects complaints from many businesses that their payroll costs went down as employees were laid off but fixed costs like rent did not.

 

Borrowers can now use the new 24-week period to restore their workforce to pre-COVID-19 levels in order to obtain full forgiveness. The new deadline to achieve this is Dec. 31 vs. the previous deadline of June 30.

 

The June 30, 2020 application deadline for a PPP loan remains in effect and was not changed under the new law.

Two new exceptions let borrowers achieve full forgiveness even if they don't fully restore their workforce. These are in addition to previous guidance that let companies exclude workers who turned down good-faith offers of re-employment. Borrowers can now also reduce workforce requirements based on the inability to find qualified employees or if they were unable to restore operations to Feb. 15, 2020, levels due to COVID-19 restrictions.

 

Changes made by the PPPFA have been fully incorporated in new loan forgiveness applications posted on the SBA website.

The PPP loan repayment period has been extended to five years from the original two while retaining the original 1% interest rate. This gives borrowers more time to pay off the unforgiven portion of their loan.

 

The payment deferment period (principal, interest, fees) is now extended from six months after the end of the covered period to the date the SBA sends the borrower's loan forgiveness amount to the lender. If the borrower does not apply for forgiveness, the deferral period lasts until 10 months after the end of the covered period according to guidance issued by the SBA June 8, 2020.2

 

Finally, the PPP Flexibility Act of 2020 lets businesses that took a PPP loan also delay paying their payroll taxes. This was not allowed under the original CARES Act.