In this newsletter: new funding is in the works for popular loan programs that have run dry, the IRS tool for inputting your direct deposit information has gone live, and new details on the various law changes and economic programs have continued to emerge. Finally, we talk a little bit about home offices.
Please remember to keep us up-to-date on your unique situation as there may be planning opportunities we can help you evaluate. We hope to address these more in future newsletters.
STIMULUS REBATES/ECONOMIC IMPACT PAYMENTS – IRS TOOL NOW AVAILABLE
Many taxpayers have already received their Economic Impact Payments (the $1200 stimulus checks) via direct deposit. If the IRS did not have your direct deposit information, you can now click on the “Get My Payment” button at https://www.irs.gov/coronavirus/get-my-payment to check the status of your payment and/or provide direct deposit information so you don’t have to wait for a paper check. Many taxpayers, however, are getting a “Status Not Available” response, which may be due to information not being fully updated yet in the IRS system. We recommend waiting a week and trying again.
Don’t fall for scams: the IRS will NOT call, email or write you to get your direct deposit information.
SMALL BUSINESSES SHOULD ACT FAST TO GET PPP FUNDING
Paycheck Protection Program (PPP) loans proved to be so popular the initial allocation of funds quickly ran dry. Congress just passed a new bill and we expect more funds to become available, but you must submit your application quickly. Funding is approved first come, first serve so we recommend you act NOW if you have not already done so.
- Independent contractors can apply for themselves. Even if your business is just you and files on a Schedule C, it is eligible for this program. Your Schedule C earnings will be treated as payroll. Be prepared to provide your lender with copies of your Schedule C, 1099s received from clients, and payroll tax filings you have made
- Partners can be treated as employees. If you work for your own partnership, many lenders will treat your share of partnership earnings as payroll. Be prepared to provide K-1s, payroll tax filings you have made, and draw information.
- The maximum payroll used in the calculations for any individual is $100,000/year.
- Do not include paid leave payments made under the Family First Coronavirus Response Act.
- Funding will be calculated as two and a half months of specified historic payroll, but the portion of the loan that can be forgiven (the loan amount your business will never have to repay) will be based on 8 weeks of current payroll and overhead expenses. No more than 25% of the forgiven amount can be attributed to non-payroll costs.
- The 8-week period for determining how much of the loan can be forgiven starts on the origination date of your loan, so plan the timing of your actual funding carefully.
- There are open questions about calculating the 8 weeks of payroll if a pay date for work within the 8-week period falls after the end of the 8-week period. Please keep in contact with us for updates and planning.
- Keep good records to document your expenses.
- Businesses are getting this money so they will keep their employees on payroll through the crisis. If you reduce your staff the amount of the loan that can be forgiven will also get reduced. You have until June 30, 2020 to restore full-time employment and salary levels for changes made between February 15, 2020 and April 26, 2020.
- You can still defer employer payroll taxes. Until you actually have a loan forgiveness decision, your business is eligible to defer paying the employer half of social security taxes: https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-2020.
SMALL BUSINESS ADMINISTRATION DISASTER LOANS
Like the PPP, funding for the Economic Injury Disaster Loan (EIDL) quickly ran dry. Additional funding is in the works. At the time of this writing, the SBA website says it is not accepting new applications but that should change once the funds become available.
The EIDL program was meant to get fast cash to businesses, providing them with a $10,000 advance.
If you are interested in applying, we recommend you monitor the SBA website and apply as soon as they begin accepting new applications:
REMINDER: EMPLOYEES OF SMALL BUSINESSES ARE ENTITLED TO PAID LEAVE
Coronavirus related paid leave rules took effect April 1st. These rules apply to certain public employers, and private employers with fewer than 500 employees. The Department of Labor has moved its fact sheet with crucial information on this program:
Employers are required to notify employees of their rights under the program. The link for a poster employers can use has moved:
Dollar for dollar federal payroll tax credits are available to offset the cost to employers (up to the stated maximums). The IRS has moved its FAQ page with information on these important credits:
REMINDER: EMPLOYEE RETENTION CREDITS
Employers impacted by COVID-19 who do not participate in the PPP loan program may be able to claim employee retention credits on their payroll tax returns:
Now that so many of us are working from home, there is an increased interest in claiming home office deductions. However, the 2017 tax act effectively wiped out federal tax home office deductions for employees. For most employees, the best thing to do is find out if your employer will reimburse all or part of your costs under an accountable plan. The employer can then deduct the reimbursements it pays you. If your home office costs are unusually high, contact us to see if there is potential for more complicated planning opportunities. Remember that to receive any home office benefit, the area must be used exclusively for the qualified business.
All our past newsletters have been uploaded to our webpage:
IRS Master Coronavirus page with updating links:
SBA master benefits summary page:
Franchise Tax Board COVID-19 page:
California Department of Tax and Fee Administration COVID-19 page:
California COVID-19 page for businesses:
Employment Development Department coronavirus page:
San Francisco website, resources for businesses and employees:
San Francisco website, general COVID-19 resources for the public:
City of San Rafael website, general COVID-19 resources for businesses:
City of San Rafael website, general COVID-19 resources for the public:
NOTE: Links to resources are evolving and often get moved or updated. While we have attempted to link to the most recent pages, we cannot guarantee how long any link will remain active.
While we hope the contents of these alerts are helpful to our clients, these alerts are not intended to be advice upon which you should rely. Tax advice contained in these alerts is not intended to be used for, and cannot be used for, the purpose of avoiding penalties under the US federal tax laws. Inclusion of topics outside the scope of our normal service areas is intended to serve solely as a general starting point and should not replace consultation with experts in the related fields.