As the news of Covid-19 evolves, there are a couple of factors for the small business community to consider.
Update March 29,2020
Tristan CPA wrote up a helpful review of CARES that was signed into law by the president Friday night, March 27
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, H.R. 748 was just passed through the Senate late Wednesday's night March 26, 2020. This $2 Trillion economic aid package aims to stimulate the economy as it suffers from the effect of COVID-19 pandemic. This 880-page bill contains a plethora of provisions that are related to small businesses and individual taxpayers. These key measures are summarized below.
This bill still has to pass through House and sign by the President and therefore there might be additional changes.
Recovery Rebate for Individual Taxpayers
Stimulus checks in the form of a refundable tax credit up to $1,200 per individual or $2,400 for joint taxpayers.
Taxpayers with children will get an additional $500 per child
Rebate is reduced by $50 for any additional $1000 earned in excess of $75,000 AGI (adjusted gross income) for single filers and $150,000 for joint filers. The rebate is completely phased out at $99,000 for singles and $198,000 for joint taxpayers with no children.
AGI will be based on 2019 return if filed, 2018 if not.
Taxpayers that are adversely affected by the coronavirus can withdraw up to $100k without early withdrawal penalties.
Charitable Deduction Limits
Allow up to $300 above the line deduction for charitable contributions in 2020 (aka taxpayers who don't normally itemize deductions can now deduct up to $300 of charitable contribution).
Expand AGI limitation on charitable contributions to allow 100% of AGI for individuals and 25% of taxable income for corporations.
Increase food contribution limits to 25%.
Income Tax Exclusion for Student Loans Payments
Up to $5,250 in student loan repayment assistance from employer can be excluded from taxable income
Paycheck Protection Program (SBA Emergency Loan Application)
Small businesses less than 500 employees are eligible for a loan up to $10M to cover payroll and other expenses.
Loans may be forgiven if the loan is used to cover payroll, interest payments on mortgage, rent, and utilities. Loan forgiveness amount would be reduced proportionally by the number of employees retained and employees that had salary reduction of 25% or more as compared to the previous year.
Expanded Unemployment Insurance (Link to Unemployment Application)
$600 per week flat as Federal Pandemic Unemployment Compensation for up to four months on top of the regular State's unemployment amount.
Extended benefits to those not usually eligible for unemployment such as those who are self-employed, independent contractors, and those with limited work history.
The federal government will fund an additional 13 weeks of unemployment benefits through December 31, 2020, after state UI benefits end.
Delay of Employer-Side Payroll Taxes
Employer's side payroll taxes may be delayed until January 1, 2021, by 50% with the remaining 50% due on December 31, 2022.
Employee Retention Credit
Employers are allowed a credit against employment taxes equal up to 50% of qualified wages up to $10,000 per employee.
Eligible employers are those who are forced to close by government authorities and those who had more than 50% decrease in gross receipts for the same calendar quarter last year.
Qualified wages for employers with 100 or more employees are defined as wages paid to employees who are not providing services. For employers with 100 or less, all wages paid are considered as qualified wages.
Modifications to the Following Business Tax Provisions
Temporarily increase the limitation of business interest expenses from 30% to 50% of taxable income for 2019 and 2020.
Enable business to immediately write off of qualified improvement property (this was to correct a drafting error in the 2017 tax reform bill). Would allow amending the prior-year return to take advantage of this provision.
Net operating losses for 2018, 2019, and 2020 can be carried back five years and 80% taxable income is temporarily repealed to allow NOL to fully offset taxable income.
Repeals excess loss limitations to noncorporate tax filers to allow full deduction of NOL
Update March 23,2020
Governor Charlie Baker issued an emergency order requiring all businesses and organizations that do not provide “COVID-19 Essential Services” to close their physical workplaces and facilities to workers, customers and the public as of Tuesday, March 24th at noon until Tuesday, April 7th at noon. These businesses are encouraged to continue operations remotely.
The Baker-Polito Administration issued a list of designated businesses and other organizations that provide essential services and workforces related to COVID-19 that shall continue to operate brick and mortar facilities during this two-week time period. This list is based on federal guidance and amended to reflect the needs of Massachusetts’ unique economy. While these businesses are designated as essential, they are urged to follow social distancing protocols for workers in accordance with guidance from the Department of Public Health.
If your business is not listed, you can apply for essential service designation.
If you are sick, call your doctor first.
And wash, wash, wash your hands.
I will be reaching out to businesses this week and next. If you want to brainstorm or need support, call my cell phone, 617-283-0203
With care & respect,
Director, Fields Corner Main Street