Update on 2021 Filing Season
You may have heard that on March 17 the IRS announced the individual filing and payment deadline has been extended to May 17. Colorado, North Carolina and South Carolina have also extended their deadline. What does this mean for you?
Tax information already in to us?
If we received your information by our March 18 cutoff, we will continue to do everything we can to complete your return by April 15. Unfortunately, due to mid-season legislative changes and the expected extension of the PPP loan application deadline, there is still a possibility that there will be a delay in filing by April 15. Nevertheless, if we have all your information, we do not anticipate your filing to be much later than that.
Still have not submitted your tax documents to us?
Please keep collecting your information and provide it to us when you're ready. We will continue to prepare returns after April 15, though on a slightly reduced schedule (our staff needs a break; we probably won't work as much overtime after April 15). Returns will still be prepared on a first-in, first-out basis.
We are not putting forward a cut-off date for the May 17 deadline. If we are unable to prepare your return before the May 17 deadline, either 1) because we don't have all your information or 2) because we run short on time, we will need to file a standard Form 4868 Request for Extension to extend your return deadline to October 15. If necessary, we will compute an amount to pay with this extension.
If you cannot get all your information to us in time for us to finish your return by May 17:
Please click here to authorize us to file an extension. Note: if you will owe, that payment is due with the extension, not on October 15. So if there is a possibility you will owe, you will still need to provide us enough information to estimate your tax liability to be paid with the extension. This information is due to us no later than May 10.
If you have a different type of tax return:
Business returns (partnerships and S-corps) were due on March 15. This deadline has not been extended. C-Corps and trust returns normally due on April 15 have not been extended.
Important: First quarter 2021 estimated tax payments have not been extended. They are still due April 15.
Important Deadline ReminderMarch 15: Deadline for most business returns
March 18: Internal cutoff for April 15 (individual, c-corp, fiduciary) returns
March 31: Deadline to apply for second round PPP funding
April 15: Deadline for c-corp and fiduciary returns; for extensions with payments for those returns; and for 1st quarter 2021 estimate payments
April 30: First quarter 2021 payroll reports due
May 17: Deadline for individual returns; and for extensions with payments for those returns
Lastly, here is an excellent blog post from a colleague of ours that eloquently sets out the challenges we are facing this year. Please read it to better understand why things are taking a little longer this year.
Tax information already in to us?
If we received your information by our March 18 cutoff, we will continue to do everything we can to complete your return by April 15. Unfortunately, due to mid-season legislative changes and the expected extension of the PPP loan application deadline, there is still a possibility that there will be a delay in filing by April 15. Nevertheless, if we have all your information, we do not anticipate your filing to be much later than that.
Still have not submitted your tax documents to us?
Please keep collecting your information and provide it to us when you're ready. We will continue to prepare returns after April 15, though on a slightly reduced schedule (our staff needs a break; we probably won't work as much overtime after April 15). Returns will still be prepared on a first-in, first-out basis.
We are not putting forward a cut-off date for the May 17 deadline. If we are unable to prepare your return before the May 17 deadline, either 1) because we don't have all your information or 2) because we run short on time, we will need to file a standard Form 4868 Request for Extension to extend your return deadline to October 15. If necessary, we will compute an amount to pay with this extension.
If you cannot get all your information to us in time for us to finish your return by May 17:
Please click here to authorize us to file an extension. Note: if you will owe, that payment is due with the extension, not on October 15. So if there is a possibility you will owe, you will still need to provide us enough information to estimate your tax liability to be paid with the extension. This information is due to us no later than May 10.
If you have a different type of tax return:
Business returns (partnerships and S-corps) were due on March 15. This deadline has not been extended. C-Corps and trust returns normally due on April 15 have not been extended.
Important: First quarter 2021 estimated tax payments have not been extended. They are still due April 15.
Important Deadline ReminderMarch 15: Deadline for most business returns
March 18: Internal cutoff for April 15 (individual, c-corp, fiduciary) returns
March 31: Deadline to apply for second round PPP funding
April 15: Deadline for c-corp and fiduciary returns; for extensions with payments for those returns; and for 1st quarter 2021 estimate payments
April 30: First quarter 2021 payroll reports due
May 17: Deadline for individual returns; and for extensions with payments for those returns
Lastly, here is an excellent blog post from a colleague of ours that eloquently sets out the challenges we are facing this year. Please read it to better understand why things are taking a little longer this year.
COVID Case in Office
One of our team members received confirmation on November 19, 2020, that she has tested positive for COVID-19. We believe she was exposed outside the office on Friday, November 13, and she did not return to the office on Friday after that exposure. She was, however, in the office on Monday, November 16, all day and Tuesday, November 17, until about 3:00 pm. If you visited our office on Monday or Tuesday, please be aware of the following CDC guidelines for exposure:
If you were in the office for 15 minutes or more:
We will be contacting those people directly that we believe were exposed by visiting the office on Monday or Tuesday.
Click here to download a document with more information about exposure and quarantining.
If you were in the office for 15 minutes or more:
- Stay home until 14 days after last exposure and maintain social distance (at least 6 feet) from others at all times
- Self-monitor for symptoms
- Check temperature twice a day
- Watch for fever, cough, or shortness of breath, or other symptoms of COVID-19
- Avoid contact with people at higher risk for severe illness from COVID-19
- Follow CDC guidance if symptoms develop
We will be contacting those people directly that we believe were exposed by visiting the office on Monday or Tuesday.
Click here to download a document with more information about exposure and quarantining.
Phase Red Precautions
As you're probably aware, Mesa County is shifting to Phase Red on the COVID-19 Dial provided by the Colorado Department of Health starting November 20, 2020. Although accountants are considered essential, because of this shift and the one positive case in our office, we are taking every precaution recommended by the Health Department for Phase Red, which includes limiting capacity in offices to 10% and working remotely when possible.
Therefore, we are again closing our office to in-person contact while the county is in Phase Red. We are still working full time and available by any means that are non-physical, including phone, email, web, and social media. We have a secure drop box outside our office; if you have documents that you cannot provide to us electronically, please put them in the drop box and inform us you have done so. We will check the drop box at least once per day. Mail is also an option.
We will be contacting clients individually if there is a need to exchange documents in person. We will contact you if we have any upcoming appointments to reschedule them or give you instructions to conduct the meeting virtually.
Therefore, we are again closing our office to in-person contact while the county is in Phase Red. We are still working full time and available by any means that are non-physical, including phone, email, web, and social media. We have a secure drop box outside our office; if you have documents that you cannot provide to us electronically, please put them in the drop box and inform us you have done so. We will check the drop box at least once per day. Mail is also an option.
We will be contacting clients individually if there is a need to exchange documents in person. We will contact you if we have any upcoming appointments to reschedule them or give you instructions to conduct the meeting virtually.
PPP Forgiveness Update
A lot of you are hearing from your banks regarding PPP forgiveness applications. Most, but not all, banks have their application portals open.
We are not in a rush currently to apply for PPP forgiveness for two reasons: (1) we are still hoping new legislation will be passed that provides automatic forgiveness for smaller loans (saving you and us time and effort) and (2) we are awaiting additional IRS guidance and/or legislation that may affect the deductibility of expenses paid with PPP funds. You have 10 months from the end of your covered period (8 or 24 weeks) to apply for forgiveness, meaning the earliest deadline for forgiveness applications will be in early April 2021. Interest accrued on the loans will also be forgiven so there is no downside to waiting to apply.
Nevertheless, please be aware that we will be requesting some documentation from you to complete your forgiveness application, if we are filing it for you:
Please start to gather this information if you haven't already.
We are not in a rush currently to apply for PPP forgiveness for two reasons: (1) we are still hoping new legislation will be passed that provides automatic forgiveness for smaller loans (saving you and us time and effort) and (2) we are awaiting additional IRS guidance and/or legislation that may affect the deductibility of expenses paid with PPP funds. You have 10 months from the end of your covered period (8 or 24 weeks) to apply for forgiveness, meaning the earliest deadline for forgiveness applications will be in early April 2021. Interest accrued on the loans will also be forgiven so there is no downside to waiting to apply.
Nevertheless, please be aware that we will be requesting some documentation from you to complete your forgiveness application, if we are filing it for you:
- Payroll tax reports (if we don't prepare them)
- Canceled checks for covered expenses
- Bank statements for covered period
- Payroll summaries for covered period (if we don't prepare them)
- Copies of lease if rent expense paid with PPP funds
- Copies of utility bills if utilities paid with PPP funds
Please start to gather this information if you haven't already.
Download Our Reopening Plans
Coronavirus FAQ's
What is HR 7010 and what changes does it make to the PPP?
The Senate passed HR 7010 On June 3rd, and the President is expected to sign it into law. It makes some significant changes to the PPP forgiveness rules:
Is your office fully open yet?
We are operating at about 75% full staff in the office as of right now but are still not scheduling in-person meetings in the office. You can drop-off or pick-up your documents in the office, but we ask you wear a face covering and wait until there are no other clients in the office before you knock on the door to be assisted. We will most likely be revisiting our in-person meeting policy in the coming week or so. We are continuing to process tax returns and other projects as we normally would.
We are accepting tax documents via upload or mail. We continue to be available via email, phone, client portal, IM, mail and online meeting. We now have a black, unmarked, secure dropbox located on the brick pillar outside our office. You may drop items in that box at any time. We will be checking the box once per weekday.
You didn't finish my return by April 15th. Am I going to have a penalty? When will my return be finished?
The April 15th deadline to file tax returns and pay taxes has been automatically extended until July 15th. This means there will be no penalties or interest for paying your taxes after April 15th but before July 15th. Details are still emerging on this extension. The Colorado Department of Revenue has extended the deadline for Colorado return filing to October 15th, and for payments to July 15th.
We are still going full steam ahead and continue to process tax returns in the order they came in. With the 1,000+ page legislation to learn, helping clients with SBA and other relief, working remotely, and limited staff availability, things are taking a little longer than normal. Please be patient with us and trust that we have your filing deadlines in mind.
How do I get my copy of my completed return and sign my documents?
We will be contacting those who have completed tax returns. Since we are working from home, it's not feasible to print and put together paper copies of returns as we normally do. We can provide you electronic copies of your return for your review, and we can collect your signatures electronically. We can accept signed documents by client portal, fax, mail, or even photographed with your phone. We'll print and assemble paper copies of returns when the stay-at-home order is lifted and we can responsibly return to the office. If you prefer to wait for a paper copy of your return before you sign the returns, that is perfectly fine.
What are you doing to support and protect your staff during the outbreak?
Our server is already cloud-based and has been for several years, meaning that we can pick up right where we left off at any place. We are complying with the stay-at-home order by working remotely, even though as an accounting service, we are considered a critical service. We also are offering our staff additional sick pay if necessary.
What are you doing to support your community and clients who may be facing economic consequences due to the outbreak?
We are offering a Pro Bono Tax Prep Program to members of our community who have been affected by a lay off or other financial consequence of the outbreak. Click here to apply. Also, we know what a difficult and stressful time this is for our clients. As always, we are here for our clients and can offer advice on cash flow, budgeting, cost cutting, cloud accounting, and government assistance for small business clients. Please feel free to reach out on how we can ease the burden of the outbreak on your family or small business.
What about Economic Impact (stimulus) Payments?
The first wave of these began hitting bank accounts about two weeks ago. The IRS Get My Payment tool has been updated over the last few days, so if you were unable to access it before, try again now. You can use this tool to update your bank information if you didn't use direct deposit on your last filed tax return. We have also heard that entering your address in all caps has worked for some people who were having trouble (if this works for you when a lower case address didn't, we'd love to hear about it because we don't know if there's any truth to this trick). Paper checks for those who aren't able to use the tool are expected to begin mailing next week.
What about other assistance?
There are many many programs to assist businesses and individuals with finances during this time. Expanded Unemployment, SBA loans that can sometimes be forgivable, Expanded Sick Leave and Family Medical Leave, and tax credits for retaining employees are just a few. The section below discusses many of these programs in more detail. Let us know if you have questions or would like help accessing any of these programs.
Is the SBA out of money for its PPP and EID loans?
You might have heard that a second round of funding for SBA PPP loans and EIDL assistance was approved on Friday, April 24th. If you wanted to get an application in for either but missed the first round of funding, now would be a good time to submit your application. Funds are expected to run out quickly again, so apply as soon as you can. Congress is already discussing a third round of funding in case the second-round funds run out. You can still utilize our Coronavirus Relief Analysis service to help you figure out which program(s) are best for you.
The Senate passed HR 7010 On June 3rd, and the President is expected to sign it into law. It makes some significant changes to the PPP forgiveness rules:
- The forgiveness period is extended from 8 weeks to 24 weeks, or the end of the year, whichever comes first, from the disbursement date of the loan. We think this means that the individual payroll limit is increased from about $15,400 to about $46,100; and that the payroll limit for owners is increased from 8/52 of 2019 salary to 24/52 of 2019 salary. We await regulations to clarify. You can still choose to use the 8 week period if you prefer.
- The rule that limited non-payroll expenses to 25% of total forgiveness is changed to a rule which allows 40% of the loan to be spent on non-payroll costs. It’s important to note, however, that the legislative language reads that 60% of the loan must be spent on payroll costs for any of the loan to be forgivable. While this may be changed in future regulations, we have to rely on this language unless and until that happens.
- You now have until December 31 (instead of June 30) to restore your wages and full-time equivalent employees (FTE’s) to prevent reduction in your forgiveness.
- If you are unable to restore your wages or FTE’s to previous levels due to continued government restrictions, you can get an exception to the reduction in forgiveness.
- The repayment term for new PPP loans is now five years. Borrowers with existing PPP loans may renegotiate repayment terms with their lenders.
Is your office fully open yet?
We are operating at about 75% full staff in the office as of right now but are still not scheduling in-person meetings in the office. You can drop-off or pick-up your documents in the office, but we ask you wear a face covering and wait until there are no other clients in the office before you knock on the door to be assisted. We will most likely be revisiting our in-person meeting policy in the coming week or so. We are continuing to process tax returns and other projects as we normally would.
We are accepting tax documents via upload or mail. We continue to be available via email, phone, client portal, IM, mail and online meeting. We now have a black, unmarked, secure dropbox located on the brick pillar outside our office. You may drop items in that box at any time. We will be checking the box once per weekday.
You didn't finish my return by April 15th. Am I going to have a penalty? When will my return be finished?
The April 15th deadline to file tax returns and pay taxes has been automatically extended until July 15th. This means there will be no penalties or interest for paying your taxes after April 15th but before July 15th. Details are still emerging on this extension. The Colorado Department of Revenue has extended the deadline for Colorado return filing to October 15th, and for payments to July 15th.
We are still going full steam ahead and continue to process tax returns in the order they came in. With the 1,000+ page legislation to learn, helping clients with SBA and other relief, working remotely, and limited staff availability, things are taking a little longer than normal. Please be patient with us and trust that we have your filing deadlines in mind.
How do I get my copy of my completed return and sign my documents?
We will be contacting those who have completed tax returns. Since we are working from home, it's not feasible to print and put together paper copies of returns as we normally do. We can provide you electronic copies of your return for your review, and we can collect your signatures electronically. We can accept signed documents by client portal, fax, mail, or even photographed with your phone. We'll print and assemble paper copies of returns when the stay-at-home order is lifted and we can responsibly return to the office. If you prefer to wait for a paper copy of your return before you sign the returns, that is perfectly fine.
What are you doing to support and protect your staff during the outbreak?
Our server is already cloud-based and has been for several years, meaning that we can pick up right where we left off at any place. We are complying with the stay-at-home order by working remotely, even though as an accounting service, we are considered a critical service. We also are offering our staff additional sick pay if necessary.
What are you doing to support your community and clients who may be facing economic consequences due to the outbreak?
We are offering a Pro Bono Tax Prep Program to members of our community who have been affected by a lay off or other financial consequence of the outbreak. Click here to apply. Also, we know what a difficult and stressful time this is for our clients. As always, we are here for our clients and can offer advice on cash flow, budgeting, cost cutting, cloud accounting, and government assistance for small business clients. Please feel free to reach out on how we can ease the burden of the outbreak on your family or small business.
What about Economic Impact (stimulus) Payments?
The first wave of these began hitting bank accounts about two weeks ago. The IRS Get My Payment tool has been updated over the last few days, so if you were unable to access it before, try again now. You can use this tool to update your bank information if you didn't use direct deposit on your last filed tax return. We have also heard that entering your address in all caps has worked for some people who were having trouble (if this works for you when a lower case address didn't, we'd love to hear about it because we don't know if there's any truth to this trick). Paper checks for those who aren't able to use the tool are expected to begin mailing next week.
What about other assistance?
There are many many programs to assist businesses and individuals with finances during this time. Expanded Unemployment, SBA loans that can sometimes be forgivable, Expanded Sick Leave and Family Medical Leave, and tax credits for retaining employees are just a few. The section below discusses many of these programs in more detail. Let us know if you have questions or would like help accessing any of these programs.
Is the SBA out of money for its PPP and EID loans?
You might have heard that a second round of funding for SBA PPP loans and EIDL assistance was approved on Friday, April 24th. If you wanted to get an application in for either but missed the first round of funding, now would be a good time to submit your application. Funds are expected to run out quickly again, so apply as soon as you can. Congress is already discussing a third round of funding in case the second-round funds run out. You can still utilize our Coronavirus Relief Analysis service to help you figure out which program(s) are best for you.
CARES Act and Other Economic Relief Available for Small Businesses
Family First Coronavirus Relief Act (FFCRA)
Emergency Paid Sick Leave (EPSL)
Employers of fewer than 500 employees must provide 10 days (80 hours) of sick pay for employees who are unable to work or telework their normal hours for one of the following reasons:
1. Subject to a quarantine or isolation order
2. Advised by a health care provider to self-quarantine
3. Experiencing symptoms of COVID-19 and seeking a diagnosis
4. Caring for an individual under #1 or 2
5. Caring for a child who school or daycare has been closed
6. Experiencing any other substantially similar condition specified by the Secretary of Health and Human Services
Closing business due to lack of work or because it is required to under a government order is not a reason an employer must provide EPSL. If the employee is out for reasons 1-3 above, sick leave must be paid at the employee’s required compensation and is capped at $511 per day and $5,110 in total. If the employee is out for reasons 4-6 above, sick leave must be paid at 2/3 the employee’s normal compensation, and is capped at $200 per day and $2,000 in total per employee.
Expanded Family Medical Leave (FMLA+)
After taking two weeks sick leave, whether under the EPSL provision above, under the employer’s normal sick leave policy, or unpaid, employees may be eligible for an additional 10 weeks of partially paid expanded family and medical leave only under reason #5 above (that is, caring for a minor child whose school or daycare has closed). The rate of pay under this provision is 2/3 the employee’s regular pay and is capped at $200 per day or $10,000 total.
For both types of paid leave, there is an exception for employers of fewer than 50 employees if providing the sick leave would cause a hardship.
Important: Employers will receive a 100% reimbursement for compensation paid under this law (both EPSL and FMLA+) through a credit against payroll taxes. The government is paying your employees' sick leave for two weeks if they are unable to work (or can’t work their full hours) due to one of the reasons above, and another 2/3 of pay for 10 more weeks if they are unable to work because their child’s school or daycare is closed. It is imperative you keep excellent records regarding employee’s hours and the amount of sick pay you pay your employees under this provision. Self-employed individuals will be eligible for the tax credit as well.
There are many more detailed rules regarding these provisions, and new guidance is emerging almost daily. We will be trying to contact as many of you directly that we believe can benefit from these provisions to help you determine whether it makes sense for you to provide these benefits to your employees.
Action Steps:
1. Print out and post this notice. This is required for everyone whether or not you will have eligible employees.
2. Determine whether you have any employees eligible for EPSL under reasons 1-6 above. If your business is closed due to lack of work or because of the stay-at-home order, you are not eligible (however, see this FAQ from the State regarding businesses that are considered essential and not required to close).
3. Calculate how much to pay eligible employees. There is a special averaging calculation for employees who are part-time or work variable hours.
4. Set up your payroll system with a separate payroll item for paid sick leave to make it easier to track. Begin paying the special paid leave on April 1st.
5. Document everything, including the employee’s reason for sick leave.
Coronavirus Aid Relief and Economic Security Act (CARES)
Small Business Interruption Loans (Paycheck Protection Program [PPP])
Note: As of April 16th, funding for this program has been exhausted. There is talk of appropriating additional funds for this program, and some banks are still accepting applications for processing if that happens, but the SBA is no longer accepting new applications.
Perhaps the most valuable provision in either law for small businesses, this allows small businesses (fewer than 500 employees) to receive a loan to be used for payroll as well as paid sick, medical, or family leave, costs related to the continuation of group health care benefits, mortgage payments and rent, utilities, and other debts. A portion of these loans is forgivable, meaning the government may pay 8 weeks’ worth of some of your business expenses.
You will be eligible to apply for a loan for your average total monthly payroll costs during the one-year period prior to the loan being made times 2.5. Payroll costs include salaries, wages, tips, payments for sick leave, insurance premiums and state and local taxes assessed on the compensation of employees (Colorado withholding). It does not include compensation of individual employees in excess of annual salary of $100,000. The maximum loan amount is $10 million.
Payments are deferred on these loans for up to one year.
You will be eligible to apply for loan forgiveness (which is tax free) equal to the amount spent during an 8-week period after the loan closing date on payroll costs, interest on mortgages, payments of rent, and utility payments. Principal payments of mortgage payments will not be eligible for forgiveness. The amount forgiven will be reduced proportionally by any reduction in employees retained, compared to the previous year, and by the reduction in pay of any employee beyond 25% of the prior year’s compensation. However, reductions in pay for employees who have an annualized salary of more than $100,000 are not considered in this calculation. Importantly, borrowers who re-hire workers previously laid off between February 15 and April 1, 2020, won’t have those numbers counted against them during such period for loan forgiveness purposes, if they are rehired by June 30, 2020.
The demand for these loans is expected to be very high, so start getting ready now.
Action Steps:
Payroll Tax Deferrals
If you are concerned about your cash flow in the coming months, consider holding off on paying the employer’s portion of social security tax (6.2% of gross payroll). Payments for these taxes for 2020 are deferred until December 31, 2021, (first half) and December 31, 2022, (second half). If you are receiving loan forgiveness as described above, you’re not eligible for this deferral.
Action Steps:
Employee Retention Payroll Tax Credit (ERTC)
Certain employers may receive a payroll tax credit of as much as $5,000 per employee for wages and health benefits paid after March 12, 2020, and before January 1, 2021. This credit is for businesses that were fully or partially suspended due to government orders associated with COVID-19 or that experienced a significant decline in revenue (generally 50% quarter over same quarter last year). For employers with fewer than 100 full-time employees, the credit amount is 50% of the wages up to $10,000 per employee.
Action Steps:
Net Operating Loss (NOL) Rule Relaxation
If you had an NOL for 2018, 2019, or 2020, you can now carry those losses back five years. Prior to the Tax Cuts and Jobs Act of 2017 (TCJA), taxpayers were allowed to carry NOL’s back two years, often resulting in a refund (and cash infusion). The TCJA removed the carryback provision and only allowed losses to be carried forward. The CARES Act restores the carryback provision and expands it to five years, allowing taxpayers to file amended returns and claim refunds immediately. You can also claim an NOL for up to 100% of taxable income (the TCJA had limited it to 80% of taxable income).
Action Steps:
These are just the provisions we feel are most relevant to our business clients. There is so much more, so please take a little bit of time to inform yourself. Here are some links to articles and resources we feel are good places to start:
Miscellaneous
Tax Deadline Extensions
You’re probably aware by now that the IRS has extended the deadline for tax returns and payments due on April 15th to July 15th. There’s nothing you need to do to receive this extension; it is automatic. This includes 2019 tax due on April 15th, returns for individuals, corporations, and trusts/estates that would have been due on April 15th, and first quarter 2020 estimate payments due on April 15th. It does not include payroll tax deposits due on April 15th, s-corp and partnership returns due on March 16th, or second quarter 2020 estimate payments due on June 15th. Colorado has extended its filing deadline automatically to October 15th and its payment deadline to July 15th. This does include first and second quarter estimate payments due April 15th and June 15th.
Sales Tax Furlough
The City of Grand Junction has issued a sales tax furlough for sales taxes collected in February and due to the city in March. Between now and April 20th, you can request a temporary refund of taxes already paid in March here https://gjcity.seamlessdocs.com/f/EmerRefund. Any business owner who has not yet paid, will also need to fill out this form to provide us information on their sales and agree to the terms of the deferment. Once the form is completed, a member of the sales tax department will contact you within 24 hours. They will confirm the request is being made by the business owner/management and discuss method of payment. At this time, the State and County have not decided to defer February 2020 taxes. This refund only applies to City sales, use and lodging taxes paid.
Debt Deferral
Many banks and financial institutions are offering borrowers deferred payments. These usually won’t be forgiveness, but instead no requirement to make payments for a specified amount of time. Contact your bank to see if they are offering a deferral and what the terms are.
Individual Provisions
You may have noticed that provisions in these tax laws, most notably the $600/$1200/$2400 stimulus checks, applicable only to individuals have not been mentioned. This is because most of these provisions require no current action on your part, so we feel the dissemination of this information is not as critical. We will be writing a summary of those provisions as soon as we can, so watch for that.
Family First Coronavirus Relief Act (FFCRA)
- Effective April 1st, 2020
Emergency Paid Sick Leave (EPSL)
Employers of fewer than 500 employees must provide 10 days (80 hours) of sick pay for employees who are unable to work or telework their normal hours for one of the following reasons:
1. Subject to a quarantine or isolation order
2. Advised by a health care provider to self-quarantine
3. Experiencing symptoms of COVID-19 and seeking a diagnosis
4. Caring for an individual under #1 or 2
5. Caring for a child who school or daycare has been closed
6. Experiencing any other substantially similar condition specified by the Secretary of Health and Human Services
Closing business due to lack of work or because it is required to under a government order is not a reason an employer must provide EPSL. If the employee is out for reasons 1-3 above, sick leave must be paid at the employee’s required compensation and is capped at $511 per day and $5,110 in total. If the employee is out for reasons 4-6 above, sick leave must be paid at 2/3 the employee’s normal compensation, and is capped at $200 per day and $2,000 in total per employee.
Expanded Family Medical Leave (FMLA+)
After taking two weeks sick leave, whether under the EPSL provision above, under the employer’s normal sick leave policy, or unpaid, employees may be eligible for an additional 10 weeks of partially paid expanded family and medical leave only under reason #5 above (that is, caring for a minor child whose school or daycare has closed). The rate of pay under this provision is 2/3 the employee’s regular pay and is capped at $200 per day or $10,000 total.
For both types of paid leave, there is an exception for employers of fewer than 50 employees if providing the sick leave would cause a hardship.
Important: Employers will receive a 100% reimbursement for compensation paid under this law (both EPSL and FMLA+) through a credit against payroll taxes. The government is paying your employees' sick leave for two weeks if they are unable to work (or can’t work their full hours) due to one of the reasons above, and another 2/3 of pay for 10 more weeks if they are unable to work because their child’s school or daycare is closed. It is imperative you keep excellent records regarding employee’s hours and the amount of sick pay you pay your employees under this provision. Self-employed individuals will be eligible for the tax credit as well.
There are many more detailed rules regarding these provisions, and new guidance is emerging almost daily. We will be trying to contact as many of you directly that we believe can benefit from these provisions to help you determine whether it makes sense for you to provide these benefits to your employees.
Action Steps:
1. Print out and post this notice. This is required for everyone whether or not you will have eligible employees.
2. Determine whether you have any employees eligible for EPSL under reasons 1-6 above. If your business is closed due to lack of work or because of the stay-at-home order, you are not eligible (however, see this FAQ from the State regarding businesses that are considered essential and not required to close).
3. Calculate how much to pay eligible employees. There is a special averaging calculation for employees who are part-time or work variable hours.
4. Set up your payroll system with a separate payroll item for paid sick leave to make it easier to track. Begin paying the special paid leave on April 1st.
5. Document everything, including the employee’s reason for sick leave.
Coronavirus Aid Relief and Economic Security Act (CARES)
- Most provisions effective upon the signing of the bill (March 27th, 2020)
Small Business Interruption Loans (Paycheck Protection Program [PPP])
Note: As of April 16th, funding for this program has been exhausted. There is talk of appropriating additional funds for this program, and some banks are still accepting applications for processing if that happens, but the SBA is no longer accepting new applications.
Perhaps the most valuable provision in either law for small businesses, this allows small businesses (fewer than 500 employees) to receive a loan to be used for payroll as well as paid sick, medical, or family leave, costs related to the continuation of group health care benefits, mortgage payments and rent, utilities, and other debts. A portion of these loans is forgivable, meaning the government may pay 8 weeks’ worth of some of your business expenses.
You will be eligible to apply for a loan for your average total monthly payroll costs during the one-year period prior to the loan being made times 2.5. Payroll costs include salaries, wages, tips, payments for sick leave, insurance premiums and state and local taxes assessed on the compensation of employees (Colorado withholding). It does not include compensation of individual employees in excess of annual salary of $100,000. The maximum loan amount is $10 million.
Payments are deferred on these loans for up to one year.
You will be eligible to apply for loan forgiveness (which is tax free) equal to the amount spent during an 8-week period after the loan closing date on payroll costs, interest on mortgages, payments of rent, and utility payments. Principal payments of mortgage payments will not be eligible for forgiveness. The amount forgiven will be reduced proportionally by any reduction in employees retained, compared to the previous year, and by the reduction in pay of any employee beyond 25% of the prior year’s compensation. However, reductions in pay for employees who have an annualized salary of more than $100,000 are not considered in this calculation. Importantly, borrowers who re-hire workers previously laid off between February 15 and April 1, 2020, won’t have those numbers counted against them during such period for loan forgiveness purposes, if they are rehired by June 30, 2020.
The demand for these loans is expected to be very high, so start getting ready now.
Action Steps:
- Reach out to your bank or your lender and let them know you are interested in applying for an SBA 7(a) loan. They will be able to tell you if they offer these types of loans and what the application process will be.
- Begin collecting your financial records. Get your bookkeeping up to date! You will need, at a minimum, a balance sheet and profit & loss for last year and this year to date; a year to date payroll summary that shows number of employees and total payroll; anticipated operating costs (payroll, rent, equipment leases, utilities, insurance, taxes, repairs and maintenance); and existing debt obligations. Reach out if we can help you with collecting this information.
Payroll Tax Deferrals
If you are concerned about your cash flow in the coming months, consider holding off on paying the employer’s portion of social security tax (6.2% of gross payroll). Payments for these taxes for 2020 are deferred until December 31, 2021, (first half) and December 31, 2022, (second half). If you are receiving loan forgiveness as described above, you’re not eligible for this deferral.
Action Steps:
- Determine how much of your payroll tax payments due since March 27th are the employer portion of social security. Adjust your scheduled payroll tax payments to exclude this amount. Keep good records of how much you are deferring so that you can pay it by the due dates.
- If we do your payroll, inform us you would like to take advantage of this deferral and we’ll handle the rest.
Employee Retention Payroll Tax Credit (ERTC)
Certain employers may receive a payroll tax credit of as much as $5,000 per employee for wages and health benefits paid after March 12, 2020, and before January 1, 2021. This credit is for businesses that were fully or partially suspended due to government orders associated with COVID-19 or that experienced a significant decline in revenue (generally 50% quarter over same quarter last year). For employers with fewer than 100 full-time employees, the credit amount is 50% of the wages up to $10,000 per employee.
Action Steps:
- Notify your payroll processor if you believe you are eligible for this credit.
- Contact us if you need help determining if you qualify. Note: you cannot take both this credit and the SBA Interruption Loan, so please plan on evaluating which will be more beneficial for you.
Net Operating Loss (NOL) Rule Relaxation
If you had an NOL for 2018, 2019, or 2020, you can now carry those losses back five years. Prior to the Tax Cuts and Jobs Act of 2017 (TCJA), taxpayers were allowed to carry NOL’s back two years, often resulting in a refund (and cash infusion). The TCJA removed the carryback provision and only allowed losses to be carried forward. The CARES Act restores the carryback provision and expands it to five years, allowing taxpayers to file amended returns and claim refunds immediately. You can also claim an NOL for up to 100% of taxable income (the TCJA had limited it to 80% of taxable income).
Action Steps:
- We will be reviewing individual situations for taxpayers eligible for this provision, but to speed things up, please contact us if you think you are eligible. If you had a business loss in 2018 or 2019, and you had a tax liability in the five years prior, you may be eligible for a refund.
These are just the provisions we feel are most relevant to our business clients. There is so much more, so please take a little bit of time to inform yourself. Here are some links to articles and resources we feel are good places to start:
- Senate Passes Coronavirus Stimulus Bill: Here’s What The Relief Looks Like
- House Passes Bill To Allow For Paid Leave, Testing & Tax Credits To Lessen Impact Of Coronavirus
- CARES Act Summary – Tax
- Department of Labor Issues Guidance on Families First Coronavirus Response Act
Miscellaneous
Tax Deadline Extensions
You’re probably aware by now that the IRS has extended the deadline for tax returns and payments due on April 15th to July 15th. There’s nothing you need to do to receive this extension; it is automatic. This includes 2019 tax due on April 15th, returns for individuals, corporations, and trusts/estates that would have been due on April 15th, and first quarter 2020 estimate payments due on April 15th. It does not include payroll tax deposits due on April 15th, s-corp and partnership returns due on March 16th, or second quarter 2020 estimate payments due on June 15th. Colorado has extended its filing deadline automatically to October 15th and its payment deadline to July 15th. This does include first and second quarter estimate payments due April 15th and June 15th.
Sales Tax Furlough
The City of Grand Junction has issued a sales tax furlough for sales taxes collected in February and due to the city in March. Between now and April 20th, you can request a temporary refund of taxes already paid in March here https://gjcity.seamlessdocs.com/f/EmerRefund. Any business owner who has not yet paid, will also need to fill out this form to provide us information on their sales and agree to the terms of the deferment. Once the form is completed, a member of the sales tax department will contact you within 24 hours. They will confirm the request is being made by the business owner/management and discuss method of payment. At this time, the State and County have not decided to defer February 2020 taxes. This refund only applies to City sales, use and lodging taxes paid.
Debt Deferral
Many banks and financial institutions are offering borrowers deferred payments. These usually won’t be forgiveness, but instead no requirement to make payments for a specified amount of time. Contact your bank to see if they are offering a deferral and what the terms are.
Individual Provisions
You may have noticed that provisions in these tax laws, most notably the $600/$1200/$2400 stimulus checks, applicable only to individuals have not been mentioned. This is because most of these provisions require no current action on your part, so we feel the dissemination of this information is not as critical. We will be writing a summary of those provisions as soon as we can, so watch for that.
Links to Disaster Resources for Individuals and Small Businesses
Our Update Emails
COVID Update 1
COVID Update 2
COVID Update 3
COVID Update 4
COVID Update 5
COVID Update 6
COVID Update 7
COVID Update 8
COVID Update 2
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COVID Update 4
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COVID Update 7
COVID Update 8
This page was last modified 11/19/2020 14:27:32