Source and Purpose – The information provided here is only to be used to assist our clients during this difficult time. Your financial well-being is important to you and us and our objective is to provide as many tools as possible to help you make responsible financial decisions using available information. We have accumulated this information from Various Sources including National News Internet Sites, Professional Publications and varied other Sources. This is not an attempt to source each contributors information, but is an attempt to communicate information that we see in our daily readings and review of current events.
“Extended NC income tax payments past April 15th will incur interest charges” says the North Carolina Department Of Revenue
“In addition to the filing extension, the NCDOR will not charge penalties for those filing and paying their taxes after April 15, as long as they file and pay their tax before the updated July 15 deadline. However, the department cannot offer relief from interest charged to filings after April 15. Unless state law is changed, tax payments received after April 15 will be charged accruing interest over the period from April 15 until the date of payment. “
As of June, 12 2019 – “The N.C. Department of Revenue has set the interest rate at 5 percent, the lowest allowed by statute.”
Mecklenburg County Coronavirus Hotline for Residents with Symptoms: 980-314-9400
Gaston County Coronavirus Hotline for Residents with Symptoms: 704-862-5303
North Carolina Coronavirus Hotline for Residents with Symptoms: 866-462-3821
South Carolina Hotline for Residents with Symptoms: 855-472-3432
NOTICE : Make sure your current information is on file with the IRS to ensure your Economic Impact Payment (COVID19 Stimulus Payment) is properly delivered.
For those wishing to receive a DIRECT DEPOSIT – If your bank account has changed from the time of you last filing please check the “Economic Impact Payments” page on the IRS website regularly. The IRS is currently building the “Get My Payment” tool to make sure that all Economic Impact Payments are distributed properly. This tool is currently still under construction but the IRS estimates that it should be available in mid-April
For those wishing to revive a PAPER CHECK – If you have moved since the time of you last filing please submit a “Form 8822 – Change of Address”
For those that DID NOT FILE for Tax Year 2018 and are not planning to file for Tax Year 2019 – Please visit the “Non-Filers: Enter Payment Info Here” page on the IRS website. Please read over all the eligibility requirements and if needed then update your information with the IRS here.
PAYCHECK PROTECTION PROGRAM
The PPP is a new emergency Small Business Administration (SBA) loan program that was included as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed into law at the end of March.
What differentiates the PPP from other SBA loan programs is that most of the loans under the PPP will be forgiven on a tax-free basis, meaning that borrowers are effectively receiving a grant from the federal government – a one-time cash infusion in exchange for which they are expected to maintain employee headcounts at the levels they were at before the COVID-19 emergency.
In addition to the potential for tax-free loan forgiveness, PPP loans offer the following benefits:
· Interest rates set at 1 percent for all borrowers.
· No personal guarantee is required.
· No collateral is required.
· Loans are nonrecourse with respect to shareholders, members, and partners as long as proceeds are used in accordance with the loan terms.
· No fees for borrowers.
· All loan payments are deferred for six months (however, interest still accrues).
· To the extent balances are not forgiven, loans mature in two years.
· Fully guaranteed by the SBA.
· Not contingent on the borrower’s creditworthiness (but delinquency on other open SBA loans and past defaults can be disqualifying).
The main downside of PPP loans is that they are heavily predicated on borrowers maintaining the employee headcounts that they had going into the COVID-19 crisis, and keeping any reductions in wages and salaries within specified limits – actions that may not be feasible in this highly uncertain business environment.
If you think you might want to pursue a PPP loan, please bear in mind a couple of time constraints: (1) the last day to apply for and receive a loan under this program is June 30, 2020, and (2) the program will likely run out of funding and close before then. The SBA and the Treasury Department have said that PPP loans will be available on a first-come, first-serve basis and the program will close when the $349 billion budgeted by the CARES Act runs out. That said, the program went live in early April and lenders are working on getting all the kinks out. So, if you are interested in applying for a PPP loan, the sooner you get started, the better.
Eligibility for a PPP Loan
The PPP is for any small business with fewer than 500 employees (including sole proprietorships, independent contractors, and self-employed persons), private non-profit organizations, or Section 501(c)(19) veterans organizations affected by COVID-19. Businesses in certain industries may also be eligible where they have more than 500 employees and meet the SBA’s size standards for those industries. Small businesses in the hospitality and food industry with more than one location could also be eligible if their individual locations employ fewer than 500 workers.
You are ineligible for a PPP loan if – (1) you are a household employer (individuals who employ household employees such as nannies or housekeepers); (2) you are engaged in any activity that is illegal under federal, state, or local law; (3) the owner of 20 percent or more of a business applicant is incarcerated, on probation, on parole; presently subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction; or has been convicted of a felony within the last five years; or (4) you, or any business owned or controlled by you or any of the business owners, have ever obtained a direct or guaranteed loan from SBA or any other federal agency that is currently delinquent or has defaulted within the last seven years and caused a loss to the government.
Maximum Amount of Loan
The maximum loan amount is the lesser of $10 million or an amount calculated using a payroll formula based on aggregate payroll costs from the last 12 months less any compensation paid to an employee in excess of an annual salary of $100,000 and/or any amounts paid to an independent contractor or sole proprietor in excess of $100,000 per year. The resulting amount is divided by 12 to arrive at the average monthly payroll costs and that amount is multiplied by 2.5. To the resulting amount is added the outstanding amount of an Economic Injury Disaster Loan (EIDL) made between January 31, 2020, and April 3, 2020, less the amount of any advance under an EIDL COVID-19 loan (because it does not have to be repaid).
Payroll Costs Defined: In calculating the maximum amount of the loan, payroll costs consist of compensation to employees (whose principal place of residence is in the United States) in the form of salary, wages, commissions, or similar compensation; cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips); payment for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement; payment of state and local taxes assessed on compensation of employees; and for an independent contractor or sole proprietor, wages, commissions, income, or net earnings from self-employment or similar compensation.
Amounts Excluded from Payroll Costs: The following are not included in the payroll cost calculation: any compensation of an employee whose principal place of residence is outside of the United States; the compensation of an individual employee in excess of an annual salary of $100,000, prorated as necessary; federal employment taxes imposed or withheld between February 15, 2020, and June 30, 2020, including the employee’s and employer’s share of FICA (Federal Insurance Contributions Act) and Railroad Retirement Act taxes, and income taxes required to be withheld from employees; and qualified sick and family leave wages for which a payroll tax credit is allowed under the Families First Coronavirus Response Act.
Repayment of PPP
Loan payments are deferred for six months. Thus, you will not have to make any payments of principal and interest for six months following receipt of the loan. However, interest will continue to accrue on the loan during this six-month deferment period. The SBA Administrator is authorized to defer loan payments for up to one year. PPP loans have a maturity of two years and an interest rate of 1%.
Loan Forgiveness Details
For most borrowers, receiving tax-free loan forgiveness is the ultimate goal in seeking a PPP loan. Your loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities during the 8-week period beginning on the date your loan is funded. At least 75% of the forgiven amount must have been used for payroll costs. Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salaries at least 75% of the level they were at in the full calendar quarter preceding the funding of the loan. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages are cut by more than 25%. Employers who reduce headcount or salaries between February 15, 2020, and April 26, 2020, can avoid reductions in the loan forgiveness amount by rehiring and/or restoring salaries by June 30, 2020.
To obtain loan forgiveness, you’ll need to submit an application with your loan servicing provider, who is required to reach a decision on your request within 60 days. Any loan forgiveness will be provided on a tax-free basis, meaning that even though the loan proceeds were effectively income to your business or organization, that income will not be subject to income tax.
Do Independent Contractors Count as Employees for Purposes of PPP Loan Calculations? No. Because independent contractors have the ability to apply for a PPP loan on their own, they do not count for purposes of a borrower’s PPP loan calculation.
Is More Than One PPP Loan Allowed? No. No eligible borrower may receive more than one PPP loan. Thus, if you apply for a PPP loan, you should consider applying for the maximum amount.
Where Can I Apply for a PPP Loan? Contact the bank or lender you do business with and see if they are making PPP loans and, if so, whether or not they are processing applications yet. Certain lenders are only considering making loans to businesses with which they have a preexisting relationship. If your lender isn’t making PPP loans, you’ll need to begin looking for a lender as soon as possible. It may take some time for other banks and lenders to become part of the program, so don’t be discouraged. The main idea is to begin your search for a lender now.
To Our Clients,
Fast on the heels of passing the Families First Coronavirus Response Act (a law which ensures paid sick leave and unemployment benefits for employees affected by the COVID-19 pandemic along with payroll tax credits for affected employers), Congress passed and the President signed the CARES Act – a massive economic relief package with numerous tax breaks – on March 27, 2020.
For individuals, the most important form of tax-related relief may be the recovery rebate tax credits, which are direct payments (sometimes referred to as “stimulus checks”) the government will be making to those with income under a certain level. For businesses, key tax-related provisions include a payroll tax credit to encourage employee retention, an extension of the time for paying employment taxes, and a small business loan program with provisions for converting qualifying loans to grants (which do not have to be repaid).
The following are the key tax provisions of the CARES Act.
CARES Act Tax Relief for Individuals
Direct Payments: Single individuals and joint filers can expect to receive a payment of $1,200 or$2,400, respectively, plus $500 for each qualifying child. However, the rebate is reduced (but not below zero) by 5 percent of the amount by which the taxpayer’s adjusted gross income exceeds(1) $150,000 in the case of a joint return, (2) $112,500 in the case of a head of household, and (3)$75,000 in the case of a single taxpayer or a taxpayer with a filing status of married filing separately. Rebates will be issued based on 2019 income tax returns, or 2018 returns for individuals who haven’t yet filed in 2019. The rebates are eligible for electronic disbursement to any account to which the payee authorized, on or after January 1, 2018, the delivery of a refund of taxes or of a federal tax payment, including federal retirement benefits.
Using Retirement Funds Without Penalty: The CARES Act waives the 10% early withdrawal penalty for coronavirus-related distributions from retirement plans and provides the option of recontributing the funds for up to three years after such distributions are made. A “coronavirus- related distribution” is any distribution from an eligible retirement plan made: (1) on or after January 1, 2020, and before December 31, 2020, (2) to an individual (i) who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention, (ii) whose spouse or dependent is diagnosed with such virus or disease by such a test, or (iii) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, the closure or reduction of hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury.
Required Minimum Distribution Rules Waived for 2020: The CARES Act waives the required minimum distribution rules for 2020 for defined contribution plans, including an eligible deferred compensation plan, and individual retirement plans.
Above-the-Line-Deduction for Charitable Contributions of Up to $300: Individuals, whether they itemize deductions or not, can take a deduction of up to $300 for charitable contributions made during 2020 and the limitations on the amount of charitable contributions that a taxpayer may take an itemized deduction for are loosened. In addition, the CARES Act loosens the deduction limitation on contributions of food inventory.
Repayment of Student Loan Debt Excluded from Income: The CARES Act excludes from income certain student loan debt repaid by an individual’s employer. It applies to repayments made after date of enactment and before 2021.
CARES Act Tax Relief for Businesses
Employee Retention Credit: The CARES Act provides eligible employers a credit against applicable employment taxes for each calendar quarter equal to 50 percent of the qualified wages with respect to each employee of the employer for the calendar quarter. The employee retention credit applies to wages paid after March 12, 2020, and before January 1, 2021. For purposes of determining the credit, the amount of qualified wages with respect to any employee which may be taken into account for all calendar quarters is limited to $10,000. An “eligible employer” is any employer that was carrying on a trade or business during calendar year 2020, and whose operation is fully or partially suspended during the calendar quarter due to orders by a government authority due to COVID-19, or for which the calendar quarter is within a period of “significant decline in gross receipts.” A period of significant decline in gross receipts means a period beginning with the first calendar quarter beginning after December 31, 2019, for which gross receipts (as defined in Code Sec. 4 48(c)) for the calendar quarter are less than 50 percent of gross receipts for the same calendar quarter in the prior year, and ending with the first calendar quarter in which gross receipts are greater than 80 percent of the gross receipts for the same calendar quarter in the prior year.
Extension of Time to Pay Employment Taxes: Under the CARES Act, a business can delay payment of applicable employment taxes for the period beginning on March 27, 2020, and ending before January 1, 2021 (i.e., the payroll tax deferral period). Generally, under this provision, an employer will be treated as having timely made all deposits of applicable employment taxes that would otherwise be required during the payroll tax deferral period if all such deposits are made not later than the “applicable date,” which is defined as (1) December 31, 2021, with respect to 50 percent of the amounts due, and (2) December 31, 2022, with respect to the remaining amounts. In addition, for self-employed taxpayers, the payment for 50 percent of the self-employment taxes for the payroll tax deferral period is not due before the applicable date. For purposes of applying the penalty for underpayment of estimated income taxes to any tax year which includes any part of the payroll tax deferral period, 50 percent of the self- employment taxes for the payroll tax deferral period will not be treated as taxes to which that penalty applies.
Net Operating Losses (NOLs) Can Be Carried Back to Eliminate Prior Year Income: If your business has incurred NOLs that you have not gotten the benefit of deducting, the CARES Act may help as it modifies the limitation on deducting NOLs, as well as the rules relating to NOL carrybacks. In general, for any NOL arising in a tax year beginning after December 31, 2017, and before January 1, 2021, such loss is an NOL carryback to each of the five tax years preceding the tax year of such loss and the provisions limiting the carrybacks of farming losses do not apply. For tax years beginning after December 31, 2020, the provision allows the deduction of the sum of the aggregate amount of NOLs arising in tax years beginning before January 1, 2018, carried to such tax year plus the lesser of (1) the aggregate amount of NOLs arising in tax years beginning after December 31, 2017, carried to such year, or (2) 80 percent of the excess (if any) of taxable income computed without regard to certain deductions over the aggregate amount of NOLs arising in tax years beginning before January 1, 2018, carried to such year.
Elimination of the Deduction Limitation on Excess Farm and Business Losses: Under the CARES Act, in the case of a taxpayer other than a corporation, for any tax year beginning after December 31, 2017, and before January 1, 2026, the deduction limitation on excess farm losses of certain taxpayers, does not apply. Further, excess business losses, previously disallowed for tax years beginning after December 31, 2017, and before January 1, 2026, are now allowed for tax years beginning after 2017 and before January 1, 2021.
Increase in Deductible Business Interest Expense: For tax years beginning in 2019 or 2020, 50 percent of the taxpayer’s adjusted taxable income, rather than 30 percent, is used to determine the business interest expense limitation. A special rule is provided for partnerships.
Accelerates Ability of Corporations to Recover Prior Year Minimum Tax Liability Credits: The CARES Act modifies the rules for the minimum tax credit for alternative minimum tax (AMT) incurred by a corporation in a prior tax year. Under the provision, the limitation does not apply to a corporation’s 2020 and 2021 tax years and the AMT refundable credit amount is 100 percent, rather than 50 percent, of the amount determined for tax years beginning in 2019.
Qualified Improvement Property Qualifies as 15-Year and Bonus Depreciation Property: Congress finally fixed the notorious “retail glitch” in the Tax Cuts and Jobs Act of 2017 (TCJA). Due to a drafting error in that piece of legislation, the 15-year recovery periods that were available for qualified leasehold improvements, qualified restaurant property, and qualified retail improvement property (i.e., qualified improvement property) placed in service before 2018, no longer existed for such property placed in service after 2017. Instead, the depreciation period was 39 years. The CARES Act fixes this mistake so that such property now has a 15-year depreciation life and meets the criteria for taking a bonus depreciation deduction.
And they may still do more, depending on how long the pandemic lasts. Lawmakers are already talking about another round of intervention in their phased approach. While it may take some time to see results of this broad-ranging stimulus, here’s a look at what you can expect in the near term, according to Washington Policy Analyst
The passage of the Families First Coronavirus Response Act (Families First Act) on March 18 will have a significant impact on both individuals and businesses. In addition to containing four new tax credits for businesses and self-employed individuals, the Families First Act includes the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act, which are aimed at helping employees who have lost wages due to business closures.
Additional pieces of legislation dealing with the economic fallout of the Coronavirus Disease 2019 (COVID-19) pandemic, most notably the CARES Act, a $2 trillion economic relief package, are winding their way through Congress.
Families First Act Paid Leave Requirements
The Families First Act generally requires employers to provide an employee with paid sick time to the extent that the employee is unable to work or telework due to a need for leave in any of the following situations:
Full-time employees are entitled to 80 hours of paid sick time. Part-time employees are entitled to paid sick time equal to the average number of hours that the employee works over a two-week period. Paid sick time under this provision does not carry over from one year to the next. Additionally, a notice of the requirements under this law must be posted in a conspicuous place on the employer’s premises.
The Families First Act requires that certain employers provide public health emergency leave to employees under the Family and Medical Leave Act of 1993. This requirement generally applies when an employee is unable to work or telework due to a need for leave to care for a son or daughter under age 18 because the school or place of care has been closed, or the child care provider is unavailable, due to a public health emergency. A public health emergency is defined as an emergency with respect to COVID-19 declared by a federal, state, or local authority. The first 10 days of public health emergency leave required under the law may consist of unpaid leave, after which paid leave is required. The paid leave is for the duration of the period provided in the Families First Act, which is a maximum of 10 weeks. The amount of required paid leave under the provision is based on an amount not less than two-thirds of an employee’s regular rate of pay, and the number of hours the employee would otherwise be normally scheduled to work. Additional guidance is provided for employees with varying schedules. The paid leave mandated by the Families First Act may not exceed $200 per day and $10,000 in the aggregate.
Families First Act Employer Tax Credits
Paid Sick Leave Credit: 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. 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. A similar credit is available for self-employed individuals.
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 child-care facility is closed or whose child care provider is unavailable due to the Coronavirus, eligible employers may receive a refundable child care 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 child-care 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. A similar credit is available for self-employed individuals.
Eligible employers who pay qualifying sick or child-care leave can retain an amount of the payroll taxes equal to the amount of qualifying sick and child-care leave that they paid, rather than deposit them with the IRS. The payroll taxes that are available for retention include withheld federal income taxes, the employee share of social security and Medicare taxes, and the employer share of social security and Medicare taxes with respect to all employees. If there are not sufficient payroll taxes to cover the cost of qualified sick and child care leave paid, employers will be able file a request for an accelerated payment from the IRS.
Eligible employers are businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave under the Families First Act. Eligible employers can claim these credits based on qualifying leave they provide between the effective date (which is defined as not later than 15 days after the date the Act was signed on March 18) and December 31, 2020.
Pending Economic Relief Legislation: The CARES Act
The CARES Act is a $2 trillion economic relief package that passed the Senate unanimously on March 25. The massive bill, which includes numerous tax measures, is widely expected to pass the House and be signed into law by the President.
For individual taxpayers, the CARES Act –
For business taxpayers, the CARES Act –
Please call or write if you would like to discuss the impact this new law may have on you or your business.