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.
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 email@example.com 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.
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.
Hillsborough County Has $100 Million In COVID-19 Recovery Assistance Available for Small Businesses
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.
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.
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:
- The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
- 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?
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
- Employee Retention Payroll Tax Credit
- 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
- 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
Paid Sick Leave Credit
Child Care Leave Credit
Prompt Payment for the Cost of Providing Leave
Small Business Exemption
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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.
- 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.