May 22, 2020
Additional Relief Related to Revenue Recognition and Leases Standards
The Financial Accounting Standards Board has voted to delay the effective date of its accounting standards changes related to revenue recognition and leases. Private businesses and nonprofits will have an additional year to comply with these requirements. The change to the requirements is expected to be formalized this June. Click on the link below to access an article that summarizes the details.
FASB Defers Effective Date
May 22, 2020
Key Tax Deadlines Postponed for Individuals and Businesses in Rhode Island
Yesterday, the Rhode Island Division of Taxation announced postponement of certain key tax deadlines for individuals and businesses. Most notable among these tax deadline changes is the postponement of the 2020 Q2 Rhode Island estimated tax payment requirement, which is now July 15, 2020. Click the below link for the official breakdown from the Division.
Access the New Deadlines Now
May 19, 2020
SBA Updates and Additional Guidance on PPP Loan Forgiveness
Over the past few days, the SBA has provided additional guidance with respect to PPP loans. There has been much angst over the past few weeks for borrowers debating whether or not their circumstances would satisfy the good faith certification required by the SBA. A window of “opportunity” was offered for borrowers to repay the entire loan and avoid risking the good faith certification issue – and consequences should they be found noncompliant. Positive news came from the SBA in their answer to FAQ # 46. In their answer, the SBA deemed that any borrower who received a PPP loan with an original principal amount of $2 million or less would be deemed to have made the required certification concerning the necessity of the loan request in good faith. However, loans in excess of $2 million will still be subject to review by the SBA and the borrowers will be required to provide support for their good faith certification for the loan. For a full copy of the SBA’s Frequently Asked Questions, click HERE.
In addition, the SBA has made available the forgiveness applications click HERE. This is the required form to be submitted to your lender requesting forgiveness. The form, along with instructions, outlines the information necessary as well as the calculation of loan forgiveness.
With this, we wanted to provide some recommendations to those of you who have received your PPP loan proceeds. As you know, the eight-week clock begins on the day the funds are deposited into your account and the amount of your forgiveness will depend upon how you use those funds. While there still seem to be PPP updates and clarifications coming in, we hope these recommendations will assist you with compiling your data and, most importantly, maximize your loan forgiveness.
With respect to the forgiveness, 75% of the amount forgiven must be related to payroll costs, while the remaining forgivable 25% can be spent on rent, mortgage interest and utilities. If your loan exceeds the amount forgiven, any remaining balance can be repaid or termed out over 2 years at the low interest rate of 1%.
As far as tracking the use of those funds, you are not required to use a particular method, but you must be able to identify and support every dollar spent. Whether you decide to maintain a separate bank account or not, it may be helpful to create a separate section on your income statement to track and easily identify the items paid with PPP proceeds. You may want to contact your bank to ask if they have a preferred method or spreadsheet to follow, as they will ultimately be reviewing your forgiveness calculation.
Many payroll companies have developed PPP reporting schedules to support your payroll expenses and employee head count during this 8-week period. You may want to contact your payroll company to confirm what schedules and information they will be providing.
For other forgivable expenses, including employee health insurance, retirement plan contributions, rent, mortgage interest, utilities (such as gas, electric, water & sewer, internet, telephone, business portion of cell phones, and (subject to further clarification) fuel costs for business vehicles) – you should maintain copies of checks and electronic payment receipts to prove dollar amounts and payment dates. You should also gather copies of the actual lease, mortgage/bank loan statements and utility service contracts entered into before 2/15/20 that related to these forgivable payments.
We recognize that these continue to be difficult times and we remain committed to supporting you. If you have any questions or if we can be of any assistance, please do not hesitate to contact your Sansiveri representative.
May 1, 2020
A Message to Our Clients:
SBA and Treasury Department Review PPP Application Requirements
Over the last few days, there has been significant discussion over the PPP program, and a spotlight has been placed on the distribution of the first round of PPP funds to prominent public and private companies. As you know, the PPP was a program designed specifically to provide eligible small businesses immediate relief if they believe that “current economic uncertainty” of the COVID-19 pandemic makes such a loan for their business “necessary to support their ongoing operations,” and were willing to certify to the lender to that affect. Unfortunately, the initial guidance promulgated by the SBA did not provide any definition or specifics regarding the nature or extent of the required impact to operations or the “current economic uncertainty” that would make the loan request “necessary to support ongoing operations.” In addition, since the PPP loan has a forgiveness component if a business meets certain conditions, the program has been touted by many as “free money.” Consequently, demand for PPP loans has been unprecedented and exceeded loan availability.
Subsequent to the initial launch of the PPP, new communication and guidance has come out regularly. On April 23rd, the SBA provided much-needed clarity regarding program qualifications specific to businesses with access to other sources of liquidity to support their ongoing operations. Any business that received a PPP loan prior to the issuance of this new guidance and who now believes that they do NOT demonstrate the necessity for the loan based on new SBA guidance, can repay the loan in full by May 7, 2020. Any business that does so, will be deemed by the SBA to have made the required good faith certification on their PPP loan application.
We certainly understand that there has been a justifiable rush for eligible small businesses to expedite processing of these loans and you may be primed to submit your PPP application, but we do want to caution you as to the potential risks of receiving these funds as these loans will be subject to regulatory and public scrutiny. Loan recipients will not remain anonymous as EINs will be made public. We anticipate heightened government scrutiny will be forthcoming to investigate potential fraud and abuse. Businesses who have received PPP loans and are later found to have not qualified under the eligibility rules and/or businesses who do not use the funding in accordance with the terms of the program, could be subject to significant legal or regulatory consequences. Further, businesses may experience reputational damage for having pursued these loans.
Given the revised guidance issued by the SBA and the pending May 7, 2020 deadline for returning loan proceeds, we strongly encourage you, your organization’s management, and board of directors to carefully and immediately review your company’s financial situation and reconsider the relief you may have already received with a PPP loan. Specifically, consider whether your circumstances fall within the spirit and intent of this economic relief program. If you do receive and keep PPP funding, it is critical that you maintain complete and accurate documentation to support your eligibility for such funding, the specific use of these funds, as well as your qualifications for forgiveness under the terms of the program. This documentation will be crucial if your business were to be audited and/or investigated. This defensive documentation will greatly minimize your potential exposure to fraud and abuse allegations related to your participation in this loan program.
Many of the factors influencing whether you qualify or should apply for these loans are organization specific. We encourage you to consult with legal counsel if you have questions regarding your organization’s eligibility to receive funds. The communication by no means implies that anyone who applied for and received PPP funding did so by misrepresenting facts, but rather is meant to keep you up to date with the most recent communication provided by the SBA and Treasury Department.
We recognize that these are difficult times and we remain committed to supporting you. If you have any questions or if we can be of any assistance, please do not hesitate to contact your Sansiveri representative.
-Sansiveri, Kimball & Co., LLP
May 1, 2020
The Tax Impact on Forgivable PPP Loans
According to IRS Notice 2020-32, released yesterday — no deduction is allowed under the IRS Code for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a PPP loan.
This means that forgivable PPP loans used to pay payroll costs, certain employee benefits relating to healthcare, interest on mortgage obligations, rent, utilities, and interest on any other existing debt obligations will be considered as tax-exempt income. Therefore, the IRS will deny deduction of these expenses for federal income tax purposes — up to the aggregate amount forgiven.
Please contact your Sansiveri representative, or any one of our professionals, at 401-331-0500 for further assistance and guidance.
Additionally, you can access IRS Notice 2020-32 HERE.
April 23, 2020
Paycheck Protection Program — Loan Forgiveness
The CARES Act includes loan forgiveness provisions for loans received under the Paycheck Protection Program (PPP). All of the exact details are not yet clear. However, the Small Business Administration (SBA) has promised clarification of the forgiveness provisions at a future date. This Q&A is intended to help you understand most of the basics and will be updated based on further guidance from the SBA.
1. How long do I have to spend the money?
Eight weeks. The clock starts when the loan is funded. These eight weeks are referred to as the “covered period”.
2. Can I delay receipt of the money so that the clock will start later?
The intent of the program is to help businesses make payroll now, not later.
3. Do I need a separate bank account to track PPP proceeds and their use?
There is no stated requirement to have a separate bank account. As a best practice, you may consider putting the proceeds in one checking or savings account and transfer funds into your checking and payroll accounts as you spend the funds for covered costs, noted in 4 below.
4. What do I have to spend the proceeds of the PPP loan on?
Payroll costs, rent, utilities, and interest. These are referred to as “covered costs”. At least 75% of the proceeds must be spent on payroll costs to maximize loan forgiveness.
5. What gets included for payroll costs?
The definition is exactly the same as it was for the computation of the original loan amount. Payroll costs includes gross wages, cash tips, vacation, parental, family, medical or sick leave, allowance for separation or dismissal, group health insurance, retirement, and state and local taxes assessed on wages. Payroll costs do NOT include the employer’s portion of payroll taxes or workers’ compensation premiums.
6. What if I have already laid off my employees?
The intent of the program is for you to be able to keep paying all employees their regular pay, whether they are working or not. Consult with a labor law attorney as you consider the details surrounding rehiring any employees to restore your FTE count.
7. How is the $100,000 wage limit applied in the 8-week period?
The limit is pro-rated to your pay period.
For example: For a company that pays weekly, wages over $1,923 to any one person in one pay period would be excluded ($100,000/52 weeks). For a company that pays bi-weekly, wages over $3,846 to any one person in one pay period would be excluded (100,000/26).
Practical tip… If you are on anything other than a weekly pay period, consider switching to weekly so that you maximize the payroll costs incurred within the 8-week covered period.
8. What is rent and does related party rent count?
The CARES Act does not specify rent for real or personal property, so we assume it means both, subject to additional guidance from the SBA. However, you can only include rent paid under a leasing agreement in force (signed) before February 15, 2020. There is no reference to related parties in CARES, so we assume that rent paid to related parties is included. Capital leases are most likely excluded because they are a financing agreement and not a leasing agreement.
9. What utilities are included?
Payment for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020. A “transportation utility” has been interpreted to mean fuel costs for business vehicles.
10. What interest expense is included?
Interest on loans secured by real or personal property that were in effect before February 15, 2020. If your line of credit is secured by real or personal property, then the interest paid on the line would be included.
11. How much of the PPP loan can be forgiven?
Up to 100%.
12. How will my forgiveness be reduced?
There are a few factors that are to be considered as noted below:
a. If all the proceeds are not spent. If you do not have enough payroll, rent, utility, and interest costs incurred during the 8-week period to spend all the proceeds.
b. If your FTE count drops. FTE (full-time equivalent) is not defined, but we assume it has the following meaning: An FTE is the hours worked by one employee on a full-time basis. The concept is used to convert the hours worked by several part-time employees into the hours worked by full-time employees. A person who works 40 hours per week is counted as 1.0, while a person who works 24 hours per week is counted as 0.6. FTEs are measured and averaged using each pay period during the 8-week period. (Note – in some cases FTEs can be 35 – 37.5 hours/week for certain administrative staff and others). The average number of FTEs is then compared to a base period. The employer gets to choose the base period that is most beneficial (a) February 15, 2019 – June 30, 2019, or (b) January 1, 2020 – February 29, 2020.
Example: A business receives a $100,000 PPP loan.
Average FTEs during the 8-week period was 21.
Average FTEs between February 15 – June 30, 2019 was 35.
Average FTEs between January 1 – February 29, 2020 was 30.
This business would choose the 2020 period as the base period because the average is lower. The calculation for maximum loan forgiveness would be: 21/30 * $100,000 = $70,000. This means that $30,000 of the loan will have to be repaid.
c. If employee salaries/wages are cut more than 25%.This step is very math-intensive because you must look at every employee (who made less than $100,000 in 2019) individually, especially if compensation is reduced across the board. The CARES Act includes an “apples to oranges” comparison by utilizing a base period of 12-weeks and comparing those wages to our 8-week period. We don’t believe that was their intent and have included examples based on our interpretation of what was intended. The same concept of wage reduction would apply to individuals who are on salary or paid hourly.
Example: Mike normally makes $1,000 per week for 40 hours, but you cut his salary to $650 per week. If Mike was receiving the reduced salary for all eight weeks, you would reduce the maximum loan forgiveness by $800 for Mike. $1,000 * 25% = $250 is the allowed reduction; Mike’s reduction is $1,000 – $650 = $350. Penalty is computed as: ($350 – $250) * 8 weeks = $800.
Example: Sue makes $20/hour, but you cut her rate to $13/hour. Sue normally works 30 hours per week. Assume Sue’s hours are constant all 8 weeks; you would reduce the maximum loan forgiveness by an additional $480 for Sue. $20 * 25% = $5 is the allowed reduction per hour. Sue’s reduction was $20 – $13 = $7. Penalty is computed as ($7 – $5) * 30 hours * 8 weeks = $480.
13. Can I avoid forgiveness reduction?
Yes, if you eliminate the reduction in FTEs and eliminate the reduction in wages by June 30, 2020. The exact details of what this means needs to be clarified by the SBA.
14. What documentation will I have to provide to support my forgiveness calculation?
We expect that documentation will include calculations for FTEs, payroll tax filings (Form 941 and payroll registers), verification of payment (canceled checks, bank statements), account statements, invoices, copies of lease agreements, etc. We recommend keeping a spreadsheet of all eligible expenses as they are incurred and filing copies of the supporting documentation in a separate folder or on-line file. A copy of the bank statement with eligible expenditures highlighted would also be helpful to support any EFT payments.
15. What if I pay my some eligible expenses with my business credit card?
Keep track of what you have charged to the credit card that is a covered cost and make sure you apply a cash payment from the proceeds to the credit card bill before the end of the 8-week period.
16. Do I account for my covered costs during the 8-week period on a cash or accrual basis?
There is no guidance yet on whether the covered costs are to be included on a cash or accrual basis. We will distribute guidance on this question when it is received from the SBA. We believe the cash basis will be easier to support on your forgiveness application.
17. What if my payroll costs during the 8-week period use up 100% of my loan proceeds? Is this ok or do I have to spend some of the money on rent, utilities, and interest?
It is acceptable to spend 100% of the proceeds on payroll costs. The only SBA restriction is that a minimum of 75% of the proceeds have to be spent on payroll costs.
18. What if I do not spend 100% of the loan proceeds on covered costs?
There is no clear guidance on what you are required to do with the excess. Based on existing guidance from the SBA, you have two options: (a) repay the excess immediately and reduce the loan amount or (b) keep the excess and repay it within the two-year loan period.
19. What happens if I don’t follow the rules for use of proceeds?
The SBA can charge you with fraud in addition to making you repay the misused amounts.
20. Is the forgiven amount considered taxable income?
No, the forgiven amount is not considered taxable income. However, there is still some ambiguity as to the tax deductibility of expenses paid with PPP loan forgiveness proceeds. Also, it is still unclear if certain states may tax the PPP loan forgiveness amount.
21. How do I apply for forgiveness?
We are waiting on details for the process. Just like the application process, we anticipate that each lender will have their own process and requirements for applying for forgiveness.
22. When will I know if my forgiveness application has been approved?
The lender has 60 days to review and either approve or deny the application.
23. What are the terms of the loan (the portion that is not forgiven)?
1% and the term is two years. No collateral, no personal guarantee required, and no prepayment penalties.
24. How does the remaining loan get repaid?
No payments are due for six months; however, interest accrues during this deferral period. The actual loan amortization (how principal will be repaid) is not defined.
April 23, 2020
COVID-19 Layoffs Can Cause Partial Plan Termination of Retirement Plan
As employers continue to manage potential reductions in their workforce due to the unprecedented impact of COVID-19, it is very possible these workforce reductions could trigger a “partial plan termination.” Businesses need to be aware of the qualified retirement plan partial termination rules, which require immediate 100% vesting of participant accounts if a partial plan termination is deemed to have occurred.
Determining when a partial termination occurs is a facts-and-circumstances test; however, the IRS has provided guidance to help identify when a partial termination is triggered. A partial termination is presumed to occur when more than 20% of plan participants are terminated in a particular year. Participants who leave due to death, disability or truly voluntary termination are not counted, but anyone who voluntarily terminates under a reduction in force program would be counted toward the 20% threshold. In addition, if there are a series of reductions in force, all of the reductions in the series would be counted together, even if they span multiple plan years. The presumption can be rebutted with evidence of extenuating facts and circumstances (i.e. showing that the rate of turnover is routine for the employer).
Note that terminations of employment should be distinguished from short-term temporary layoffs or furloughs, in which the affected individuals are considered employees during what, in effect, is considered an unpaid leave of absence. As long as the employees on layoff and furlough are reasonably considered employees, they will not be counted as terminated for purposes of the 20%. However, if employees remain on furlough for an extended period of time, plan sponsors should evaluate at what point the employees should be considered as terminated for purposes of applying the partial termination rules.
Please contact your third-party plan administrator if you have any questions.
April 6, 2020
Massachusetts Finally Issues their Official Tax Deadline Guidance
March 30, 2020
Coronavirus Aid, Relief and Economic Security (CARES) Act
The Coronavirus Aid, Relief and Economic Security (CARES) Act was recently passed into law and includes several important tax provisions to help businesses and individuals cope with the COVID-19 pandemic. Specifically for businesses, the CARES Act includes the Paycheck Protection Program, which offers businesses immediate access to liquidity through a new loan program tied to the company’s payroll costs and certain other operating expenses.
Highlights of the CARES Act
Provides a $500 billion lending program for loans, loan guarantees and investments.
Temporarily reverses or limits the revenue raising provisions of the Tax Cuts and Jobs Act (the TCJA) and makes several technical corrections to the TCJA.
Offers direct cash payments for qualifying individuals.
Increases unemployment benefits, including self-employed individuals and “Gig” workers.
Provides funding to support those on the front-line battling COVID-19, including public health programs, hospitals, medical providers and suppliers.
Affords protections against certain foreclosures and eviction.
PROVISIONS FOR BUSINESSES
Paycheck Protection Program
The Paycheck Protection Program (PPP) provision of the CARES Act is an extension of the Small Business Administration (SBA) 7(a) loan program and offers businesses immediate access to liquidity to help cover payroll and other overhead expenses through a new loan program tied to prior year payroll. Loans made under the Paycheck Protection Program are backed by the federal government. Lending requirements under this program are expected to be significantly less onerous than provisions found in the SBA’s Disaster Loan program. You can apply for the PPP at any lending institution that is approved to participate in the program through the SBA. Applicants are eligible to apply for the PPP loan until June 30, 2020.
Businesses in operation on February 15, 2020 with 500 or fewer employees, that had employees or paid independent contractors on that date. Special rules exist for businesses with common ownership. The SBA has also relaxed certain constraints tied to revenue and employment levels, which made obtaining SBA loans a challenge for some businesses in the past.
The maximum loan amount for an eligible business is the lesser of $10 million or 250% of the borrower’s average monthly payroll costs. Payroll costs generally include employee salaries and tips, healthcare benefits, retirement benefits, severance payments, and state and local taxes on employee compensation.
For example, if over the last 12 months your average monthly payroll was $100,000, your business could borrow $250,000 ($100,000 x 250%). The CARES Act does not require collateral or personal guarantees for the loan. The loan term is a maximum of 10 years at a maximum interest rate of 4%. Loan payments will be deferred for the first 6-12 months.
The borrower may apply for loan forgiveness in an amount equal to the cumulative amount of payroll costs (as defined), rent, utilities, and interest paid on mortgages during the 8 weeks after the loan is made. The amount forgiven is limited to the extent compensation and headcount are reduced relative to a base period, and any amount forgiven will not be taxable to the borrower. The reduction in the amount forgiven is dependent on the number of full-time equivalent employees during the covered period compared to prior periods, and amount of salary and wages paid during the covered period compared to the employee wages during the most recent full quarter that each employee was employed. For the portion of the loan not forgiven, the maximum term is ten years with interest capped at 4%. There are no fees associated with the loan, and collateral requirements and personal guarantees are waived. For tax purposes, there will not be cancellation of indebtedness income recognized upon forgiveness of the loan.
Economic Injury Disaster Loan Program
This program currently allows for emergency loans of up to $2M to assist companies affected by COVID-19. The Act would waive the requirement for personal guarantees on loans under $200K. It would also waive the requirement that the borrower not be able to obtain credit elsewhere; and it would provide emergency grants of up to $10K within 3 days of the borrower filing an application – though the amount of an emergency grant would reduce any loan forgiveness under the PPP. The Act also would streamline the loan application process.
Additional information on the COVID-19 Small Business Loan Resources can be found at sba.gov — found HERE.
Employee Retention Credit
Provision provides eligible employers a credit against employment taxes equal to 50 percent of qualified wages paid to employees who are not working due to the employer’s full or partial suspension of business or a significant decline in gross receipts. The credit is available to be claimed on a quarterly basis, but the amount of qualified wages to be taken into account for purposes of calculating the credit is limited to $10,000 in aggregate per employee for all quarters. This would result in a maximum credit of $5,000 per applicable employee. The provision contains several requirements defining qualified wages, qualified employees, and qualified employers. The credit applies to wages paid after March 12, 2020, and before January 1, 2021.
Deferral of Employer Payroll Tax Payments
The provision allows employers to defer the employer’s portion of certain payroll taxes. The provision requires that the employer taxes being deferred must be paid over the following two years, 50% due by December 31, 2021 and the remaining 50% due by December 31, 2022.
Net operating losses
This provision allows for a five-year carryback of net operating losses (NOLs) arising in 2018, 2019, or 2020 by a business. Businesses will be able to amend or modify tax returns for tax years dating back to 2013 in order to take advantage of the carryback.
The Act also eliminates the 80% loss limitation rule for losses incurred in years beginning before January 1, 2021. Thus, these NOL’s can utilized in full to offset income.
The Act also eliminates $500,000 net operating loss limitation rule applicable to individuals, to allow them to take advantage of both the five-year NOL carryback and the NOL carryforward.
Business Interest Expense Limitation
This provision also reduces the negative impact of the 30% business interest expense limitation previously imposed on certain taxpayers under the 2017 Tax Cuts and Jobs Act. For tax years beginning in 2019 and 2020, the business interest expense limitation is increased to 50% of taxable income, resulting in a potentially larger interest expense deduction for affected taxpayers.
Qualified improvement property
The CARES Act corrects Congressional oversight from the 2017 tax Cuts and Jobs Act by defining qualified improvement property as 15-year property, thus allowing a 100 percent bonus depreciation to be taken in the year incurred. This provision is applicable retroactively back to the 2018 tax year.
INDIVIDUAL TAX PROVISIONS
One-time payment of $1,200 for individuals and $2,400 for joint filers, with a $500 credit for each qualifying child. The amount of the payment begins to be phased out as follows:
Individuals with adjusted gross income (AGI) of $75,000, fully phased out if AGI is $99,000.
Head of household with AGI of $112,500, fully phased out if AGI is $136,500.
Married filers with AGI of $150,000, fully phased out if AGI is $198,000.
These thresholds are based upon 2018 AGI, unless a 2019 return has already been filed, in which case it will be based on 2019 AGI.
The Act also waives the 10-percent penalty on early withdrawals taken during the 2020 calendar year up to $100,000 from qualified retirement plans for coronavirus-related distributions. An election to spread the associated income from such withdrawals over a three-year period is available.
As an alternative, taxpayers may also choose to recontribute the withdrawn amounts to a qualified retirement plan within three years, and consequently avoid recognition of the income
Suspends the required minimum distribution rules for certain defined contribution plans and IRAs for calendar year 2020.
There is a new provision that provides an above-the-line deduction for charitable contributions up to $300; additionally, the limits on charitable contributions are changed for 2020.
The provisions of the CARES Act provide an unprecedented amount of relief for businesses and individuals during these uncertain times. We want to assist you by providing guidance that ensures that you are able to take advantage of any available resources that will help you navigate through this challenging time period. If you have any questions on what opportunities are available for you and your business, please contact your Sansiveri professional.
March 27, 2020
MA Extends Deadline to July 15
March 26, 2020
The Families First Coronavirus Response Act (FFCRA)
To Our Clients and Friends,
On March 18, 2020, the Families First Coronavirus Response Act (the FFCRA) was signed into law to respond to COVID-19 coronavirus outbreak. The FFCRA applies to employers with fewer than 500 employees and seeks to assist employees impacted by novel coronavirus (“COVID-19”). The FFCRA’s paid leave provisions are effective on April 1, 2020, and apply to leave taken between April 1, 2020, and December 31, 2020.
Employers with fewer than 500 employees will be affected by the following provisions of FFCRA:
EMERGENCY FAMILY AND MEDICAL LEAVE ACT EXPANSION (FMLA+)
EMERGENCY PAID SICK LEAVE ACT (EPSL)
EMPLOYER TAX CREDITS FOR PAID SICK AND PAID FAMILY AND MEDICAL LEAVE
Also Note: HEALTH INSURANCE PLAN CHANGES DUE TO COVID-19
What follows is the best information we have as of March 25, 2020. There are still many questions and there are likely to be modifications to follow.
EMERGENCY FAMILY AND MEDICAL LEAVE ACT EXPANSION (FMLA+) *
Covered Employers: Private employers with fewer than 500 employees. [This act changes from the original 50 employee threshold for FMLA and in doing so, employees working for smaller business, fewer than 50 employees, gain protection and relief under FMLA.]
Eligible Employees: Any employee who has been employed for at least 30 days and is unable to work (or telework) due to a need to care for children under 18 years of age, if the child’s school or place of care is closed or if the childcare provider is closed due to a public health emergency (including coronavirus).
Possible Exemptions: The Secretary of Labor has the authority to exclude certain health care providers or emergency responders from the definition of eligible employees and to exempt small businesses with fewer than 50 employees if compliance with the requirements would jeopardize the viability of the business.
Amount of Leave: Eligible employees may qualify for up to 12 work weeks of leave.
Salary Continuation: The first 10 days of leave may consist of unpaid leave; however, the employee may elect to substitute accrued paid time off for unpaid leave. After the initial 10 days the employer must pay eligible employees at least two-thirds of the employees’ regular rate of pay (as defined under the Fair Labor Standards Act) based on the number of hours the employees would otherwise have been scheduled to work. Paid leave shall not exceed $200 per day or $10,000 in aggregate.
*REMINDER: This FMLA+ expansion is temporary with these components ending on December 31, 2020
EMERGENCY PAID SICK LEAVE ACT (EPSL)
Covered Employers: Private employers with less than 500 employees and certain public agencies.
Eligible Employees: Any employee working for an employer, regardless of how long they have been employed by the employer.
Reasons to Take Sick Leave: Employer shall provide each employee with paid sick time if they are unable to work (or telework) due to the following circumstances:
Being subject to federal, state or local quarantine or isolation order related to COVID-19
Being advised by a health care provider to self-quarantine due to concerns related to COVID-19
Experiencing symptoms of COVID-19 and seeking a medical diagnosis
Caring for an individual who is subject to a federal, state or local quarantine or isolation
Caring for a child if the child’s school, place of care or childcare provider is closed due to a public health emergency, such as COVID-19
Experiencing any other substantially similar condition as may be specified by the Dept. of Health and Human Services (HHS)
Amount of Paid Sick Leave: Full-time employees may use up to 80 hours this year. Part-time employees may use the number of hours equal to the number of hours the employee works, on average, over a two-week period, which must be used before the end of the year.
Amount of Pay: Paid sick time shall not exceed:
$511/day and $5,110 in the aggregate for Reasons 1, 2, and 3 above. The pay must be provided at the employee’s regular rate of pay or the minimum wage, whichever is greater.
$200/day and $2,000 in the aggregate for Reasons 4, 5, and 6 above. The pay must be provided at two-thirds the employee’s regular rate of pay or minimum wage, whichever is greater.
The employee may use this paid sick time prior to using other paid time off provided by the employer.
Employers must post a notice regarding employee’s rights under the law. The Dept. of Labor will create a model notice no later than 7 days after the enactment of the Act.
EMPLOYER TAX CREDITS FOR PAID SICK, FAMILY AND MEDICAL LEAVE
While further guidance is still forthcoming with respect to implementation, the following tax credits will be available under the FFCRA:
Paid Sick Leave Credit
A) 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.
B) 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 childcare facility is closed or whose childcare provider is unavailable due to the Coronavirus, eligible employers may receive a refundable childcare 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 childcare 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.
Also Note: HEALTH INSURANCE PLAN CHANGES DUE TO COVID-19
A group health plan must provide coverage without any cost-sharing requirements, such as deductibles, co-payments and co-insurance, or prior authorization or other medical management requirements, for:
The costs of a test to detect or diagnose the virus that causes COVID-19; or
Health care provider visits, including telehealth visits, urgent care and emergency room visits, that result in an order for or administration of a test to detect or diagnose the virus that causes COVID-19.
We hope you find this information helpful. Please contact a Sansiveri team member if you have any questions.
March 21, 2020
THE LATEST ON TAX DAY:
NOW OFFICIALLY JULY 15
Please see below an announcement released today from the IRS. We are carefully monitoring this situation, particularly with respect to our neighboring states, and at this time, the following locations have either formally announced (or are expected to announce) similar deadline relief:
We will continue to provide updates as more definitive guidance becomes available. As always, if you have any questions, please do not hesitate to contact us.
Tax Day now July 15: Treasury, IRS extend filing deadline and federal tax payments regardless of amount owed
IR-2020-58, March 21, 2020
WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020.
Taxpayers can also defer federal income tax payments due on April 15, 2020, to July 15, 2020, without penalties and interest, regardless of the amount owed. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.
Taxpayers do not need to file any additional 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 July 15 deadline, can request a filing extension by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Businesses who need additional time must file Form 7004.
The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds are still being issued within 21 days.
“Even with the filing deadline extended, we urge taxpayers who are owed refunds to file as soon as possible and file electronically,” said IRS Commissioner Chuck Rettig. “Filing electronically with direct deposit is the quickest way to get refunds. Although we are curtailing some operations during this period, the IRS is continuing with mission-critical operations to support the nation, and that includes accepting tax returns and sending refunds. As a federal agency vital to the overall operations of our country, we ask for your personal support, your understanding – and your patience. I’m incredibly proud of our employees as we navigate through numerous different challenges in this very rapidly changing environment.”
The IRS will continue to monitor issues related to the COVID-19 virus, and updated information will be posted on a special coronavirus page on IRS.gov.
This announcement comes following the President’s emergency declaration last week pursuant to the Stafford Act. The Stafford Act is a federal law designed to bring an orderly and systematic means of federal natural disaster and emergency assistance for state and local governments in carrying out their responsibilities to aid citizens. It was enacted in 1988.
Treasury and IRS will issue additional guidance as needed and continue working with Congress, on a bipartisan basis, on legislation to provide further relief to the American people.
March 19, 2020
APRIL 15 DEADLINE
APRIL 15 DEADLINE: WHERE WE STAND AS OF NOW
A Message from David H. Lichtenstein, Partner
By now, many of you have undoubtedly heard the announcement by Steve Mnuchin (Treasury Secretary) that the April 15 tax deadline has been extended to July 15. There is still lot of controversy and confusion surrounding this announcement. As it stands now, it appears that the new July 15 deadline only applies to tax payments that are normally due April 15.
This means that the deadline for actually filing a tax return is still April 15. In addition, most states have yet to provide guidance with respect to their own deadlines.
With the help of our National and State CPA societies, our industry is working hard to advocate for consistent and equitable relief for all taxpayers. Until we have definitive guidance from our Federal and State government agencies, we are operating under existing guidelines that the April 15 deadline is still our tax return filing deadline. We will continue to monitor the situation and we will keep you updated as definitive information becomes available.
For now, it is business as “usual” for all of us here at Sansiveri, Kimball & Co., LLP. With that in mind, we continue to ask for your assistance and encourage you to make every effort to send us any of your tax documents electronically to help protect you from any health risk. Mailing or dropping them by our offices may delay the completion of your work. Please click on the link at the top right corner of our homepage to upload your files.
As always, if you have any questions or concerns, please do not hesitate to contact us.
David H. Lichtenstein
To reach Dave, email firstname.lastname@example.org or call 401-331-0500.
March 16, 2020
TO OUR CLIENTS + COLLEAGUES
A Message from Jason M. DaPonte, Managing Partner
As we continue to monitor the Coronavirus (COVID-19) Pandemic, and navigate through this uncertain and rapidly changing time, I want to assure you that, on behalf of Sansiveri’s partners and our entire leadership team, we are committed to ensuring that the health and safety of our employees, our valued clients and all of our families is our top priority.
We have been working tirelessly to proactively develop plans and implement systems that protect the health and safety of our employees and their families and ensure that we continue to effectively service our clients. Our plans are aimed at addressing the rapidly changing nature of this virus and the effect it is having on the work that we do. Our goal is to follow all advice from local and national health authorities and the CDC to reduce face to face communications when possible and limit group interactions, so that we can do our part to limit and slow the spread of this virus. With that in mind:
We are following the CDC recommendations to avoid crowds, so effective, Monday, March 16th most all of our employees will be working remotely. Therefore, if anyone from Sansiveri is scheduled to work with you or your organization in a way that requires face-to-face interaction, we will be in touch with you to discuss options to safeguard both the health of your team and ours. Although under normal circumstances we prefer in person meetings, during this period of national emergency, and for the safety of all of us, we must utilize all available alternatives to face to face meetings. We have excellent technology that allows us to accomplish most of our work via phone, through electronic file sharing, or through the use of technologies such as Skype, which allows for security-protected video conferencing from a remote location.
Also, we ask for your assistance and encourage you to make every effort to send us any of your tax documents electronically to help protect you from any health risk. Mailing or dropping them by our offices may delay the completion of your work. In order to access our secure file upload, please visit our website at sansiveri.com. Please click on the link at the top right corner of our homepage to upload your files.
For your protection, if you plan to drop off documents in person, we will be accepting tax information at our Providence office Monday – Friday from 9:00 – 1:00 (our North Kingstown office will be closed).