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COVID 19 Economic & Tax Relief

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tax releifAs COVID-19 continues to impact indivuals and businesses our government has continued to respond with relief in the way of credits, appropriatations, tax filing deadline relief and payment relief.

COVID-19 Relief Package 1:Coronavirus Preparedness & Responses Supplement Appropriations Act (H.R. 6074)

Signed:March 6, 2020

Purpose:Primary purpose was to provide emergency health funding for the Department of Health and Human Services, the State Department and the Small Business Administration.

Specifics: $8.3 billion in emergency funding for federal agencies to fight the COVID-19 Outbreak. This funding includes support for the development, manufacturing and procurement of vaccines and other medical supplies. This act also provided support for community health centers and clinics. Over a quarter of this bill, $2.2 billion, was allocated to the Center for Disease Control and Prevention (CDC), including response efforts, state and local preparedness resources and global disease detection and response incentives. This Act also provided for appropriations to the Small Business Administration for the Disaster Loans Program Account.

COVID-19 Emergency Disaster Declaration

Signed:March 13,2020

Purpose:To provide relief for Americans who have been adversely affected by the COVID-19 pandemic from tax deadlines.

Specifics:On March 13, 2020 President Trump issued an emergency declaration under the Robert T. StaffordDisasterRelief and Emergency Assistance Act which instructed the Secretary of the Treasury “to provide relief from tax deadlines to Americans who have been adversely affected by the COVID-19 emergency, as appropriate, pursuant to 26 U.S.C. 7508A(a).” Under this declaration the Secretary of the Treasury has the authority to disregard certain requirements used to determine timely performance under the Internal Revenue Code up to one year. Following President Trump’s emergency declaration due to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic, the U.S. Treasury Department and Internal Revenue Service (IRS) issued federal income tax payment guidance for individuals, other non-corporate and corporate tax filers.

The guidance allows all individual and other non-corporate tax filers to defer up to $1 million of federal income tax (including self-employment tax) payments due on April 15, 2020, until July 15, 2020, without penalties or interest. The guidance also allows corporate taxpayers a similar deferment of up to $10 million of federal income tax payments that would be due on April 15, 2020, until July 15, 2020, without penalties or interest.

COVID-19 Relief Package 2:Families First Coronavirus Response Act (H.R. 6201)

Signed:March 18, 2020

Purpose: To provide relief for individuals.

Specifics:The Families First Coronavirus Response Act focused on individual relief as a part of providing economic relief and rehabilitation. This package provided for plans to implement Coronavirus Paid Leave and Tax Credits through:

  1. Emergency Paid Leave Sick Act; and
  2. Emergency Family and Medical Leave Expansion Act.

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 (Coronavirus Response Act), signed by President Trumpon March 18, 2020.

The Coronavirus Response Act provides paid sick leave and expands family and medical leave for COVID-19 related reasons and creates the refundable paid sick leave credit and the paid childcare leave credit for eligible employers. For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave and expanded paid childcare leave when employees’ children’s schools are closed, or childcare providers are unavailable.

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. 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 childcare is unavailable in caseswhere the viability of the business is threatened.

The Coronavirus Response Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees the funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members. The new law enables 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.

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.

COVID-19 Relief Package 3:The Coronavirus Aid, Relief and Economic Security Act (CARES Act)(H.R. 748)

Signed: March 27, 2020

Purpose: To provide additional business and individual tax relief.

Specifics: The Coronavirus Aid, Relief and Economic Security Act (CARES Act) represented a $2.2 trillion package and the most expensive piece of legislature ever passed. This Act is thus far themost significant and anticipated of the relief packages as it provides for loan forgiveness, supports small businesses, expands unemployment insurance benefits and provides financial support in the way of loans to industries that have been severely impacted by the COVID-19 pandemic. The CARES Act also provided economic relief for businesses by relaxing restrictions on business deductions and tax deferrals. This Act also provides Individual Tax Relief in the way of recovery rebates.

Tax Relief for Individuals

The much anticipated Recovery Rebates were also provided for under the CARES Act. The rebate amounts are advance refundable credits against 2020 income taxes and are equal to $1,200 for individuals, $2,400 for joint files and $500 per child. The advance refundable credits phase out by $5 for every $100 in excess of the threshold amounts which begin at $75,000 for single filers, $112,500 for heads of households and $150,000 for joint filers. Rebates are completely phased out for single filers with adjusted gross income in excess of $99,000, heads of households with $136,500, depending upon status established by children, and joint filers with adjusted gross income over $198,000. Adjusted Gross Income will be based on the 2018 returns filed, unless a 2019 return has already been filed for the current tax filing season

Tax Relief for Businesses

Employee Retention Credit

The CARES Act provides for credit against the employer’s portion of payroll taxes for an eligible employer who is forced to suspend or close operations, suffers a significant decrease in revenue and yet continues to pay its employees while not currently working. For each quarter that they qualify, eligible businesses will receive a refundable credit against their 6.2 percent (Social Security and Railroad Retirement) employer portion of payroll taxes equal to 50 percent of “qualified wages” paid. Qualified wages per employee for all quarters cannot exceed$10,000. This credit is only available for wages paid after March 12, 2020 and before January 1, 2021and is refundable to the extent the credit exceeds the payroll tax liability of the business.

Payroll Tax Deferral

Another means of immediate economic relief provided is the deferral of payroll taxes. In addition to relieving the stress on business cash flows this provision allows employers to retain its employees. Employers and self-employed individuals can defer the employer’s share of the Social Security tax. This deferral applies to taxes that otherwise would be required to be paid form March 27, 2020 to December 31, 2020. Half of the deferred amount is payable by December 31, 2021 and the remaining half is payable by December 31, 2022.

Small Business Administration Loans

Emergency Injury Disaster Loan (EIDL)

This SBA loan program provides relief to enable businesses to maintain necessary working capital. This loan can be used to service fixed debt payments, accounts payable and employee sick leave. As an expansion of this program, a provision that will allow for a $10,000 Economic Injury Disaster Loan Advance, also known as an Emergency Grant, has also been made available to qualifying applicants. This Emergency Grant can be funded within three business days of an approved loan application and will not have to be repaid.

Paycheck Protection Program

This is an expansion of the EIDL Program that would provide funds, up to $10 million, for small businesses to maintain their workforce and cover payroll-related costs. As long as you keep your employees for the covered period, February 15, 2020 through June 30, 2020, a portion of this loan could be completely forgiven as long as the loan proceeds are used for eligible costs (i.e., employee salaries, paid sick, medical or family leave, group healthcare benefit costs, rent or mortgage payments, certain utility payments and other debt obligations). This loan forgiveness would not be includable in taxable income.

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Melinda Korczynski, CPA, joined our firm in 2012 and earned her CPA certificate in 2010. Read her full bio here. E-mail her at MelindaK@colemanhortoncpa.com.

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