1. Unemployment Benefits – This memorandum authorizes an extension of the enhanced unemployment benefits legislated in the CARES Act. It lowers the weekly payment from $600 to $400. According to the action, states are responsible for 25% of the weekly payments while the remainder will be funded by the Disaster Relief Fund.
2. Eviction Protection – Saturday’s White House memo addressing eviction protection directs the secretary of Health and Human Services and the director of the CDC to “consider whether any measures temporarily halting residential evictions of any tenants for failure to pay rent are reasonably necessary to prevent the spread of COVID-19.” It is not an extension of the CARES Act eviction moratorium and provides no financial assistance to renters.
3. Student Loans – This memorandum calls for a waiver of student loan interest until the end of 2020. It only covers loans held by the Department of Education, as the White House does not hold authority over privately held student loans.
4. Payroll Tax – This executive action offers a deferral on federal tax withholdings for those earning less than $100,000 per year, starting September 1st and lasting through the end of 2020. While the President has indicated he would like to explore a way of eliminating the deferred tax, the memo itself includes no tax forgiveness.

The Internal Revenue Service (IRS) recently announced finalized guidance regarding business interest expense limitations. In a helpful article from the Journal of Accountancy, author Sally Schreiber offers an overview of the new rules.

Background

The business interest expense limitation was created by the Tax Cuts and Jobs Act (TCJA) of 2017 and subsequently modified by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020. The TCJA established that for tax years 2018 and beyond, deductions for business interest expenses are limited to the total of three items:

1. Business interest income
2. 30% of adjusted taxable income (ATI)
3. The interest expense of the taxpayer’s floor plan financing

The CARES Act made two changes: it adjusted item number two to 50% for tax years 2019 and 2020 and made it allowable for taxpayers to calculate their 2020 limit using their 2019 ATI.

New IRS Regulations

The recently released IRS regulations offer instructions in four areas:

1. Determining the interest expense limitation
2. The definition of interest, for the purposes of the limitation
3. Who is subject to the limitation
4. How the limitation applies in various special cases

The guidance will go into effect 60 days from the date of its publication in the Federal Register, which has yet to be announced.

Additional Proposed Regulations

In addition to the new final guidance, the IRS published additional proposed regulations regarding business interest expense deduction limitation issues, including how to allocate interest expense for passthrough entities and more. The release of this proposed guidance opens up a 60-day period for written and electronic comment submission, as well as requests for a public hearing regarding the guidance.

For full details on the recent IRS release, click here to read the article at the Journal of Accountancy.

Late last week, the United States Small Business Administration (SBA) released yet another round of guidance updates regarding the Paycheck Protection Program (PPP). The areas covered by this latest release are maturity dates and loan amounts. A recent article from the Journal of Accountancy offers a brief overview of the guidance update.

The additional guidance was released in the form of new and updated PPP FAQ questions on the SBA website. Here are details of the changes made to the FAQ page:

FAQ 49 was added to the list. It clarifies that PPP loans that were assigned an SBA loan number on June 5, 2020 and later have a five-year maturity window. PPP loans assigned an SBA loan number prior to June 5, 2020 maintain the two-year maturity window established by the CARES Act. However, the borrower and lender may work together to extend the loan term to five years.

FAQ 10 was updated to reflect the new maximum loan amounts for self-employed individuals whose businesses were in operation on February 15, 2020 but not in operation between February 15, 2019 and June 30, 2019. For these individuals, the maximum PPP loan amount is calculated by multiplying their average monthly payroll for January and February 2020 by 2.5. If the individual received an Economic Injury Disaster Loan (EIDL) between January 31, 2020 and April 3, 2020, they should add the outstanding amount that will be refinanced by the PPP loan to their calculation.

FAQs 1, 2, and 4-7 were updated to reflect that the Paycheck Protection Program Flexibility Act of 2020 extended the covered period from eight weeks to 24 weeks.

For further details, click here to read the article in full at the Journal of Accountancy.

On May 22, the Small Business Administration (SBA), in conjunction with the U.S. Treasury, released additional guidance for recipients of loans through the Paycheck Protection Program (PPP). A recent article from the Journal of Accountancy examines the details of the new release.

The SBA issued two new interim final rules, one regarding requirements for loan forgiveness and the other covering procedures for loan review and responsibilities of borrowers and lenders. The article pulls out highlights from the new releases.

From the new interim final rule governing requirements for loan forgiveness:

• Creation of an alternative method for defining the start period of a business’ eight-week cycle for using PPP funds.
• Further explanation regarding bonuses and hazard pay—they are eligible for loan forgiveness, as long as the amount does not exceed an employee’s pro-rated annual salary of $100,000.
• Creation of loan forgiveness caps for owner-employees and payroll compensation for self-employed individuals.
• Further explanation regarding the timing of non-payroll costs and their eligibility for loan forgiveness.
• A restatement of guidelines for excluding employees who refuse to be rehired from loan forgiveness reduction calculations. Borrowers must notify their state’s unemployment office of rejected re-employment offers within 30 days.
• Guidance regarding the definition of full-time for the purposes of PPP loan forgiveness and for calculating FTEs for non full-time employees.
• A statement that PPP loan recipients may restore forgiveness by rehiring employees and reversing any salary and wage reductions.

From the new interim final rule governing loan review:

• A statement that the SBA has the authority to review any PPP loans.
• Guidance regarding a borrower’s ability to appeal SBA eligibility determinations—borrowers have 30 days from when they receive the SBA’s decision.
• Requirement that lenders must make application decisions within 60 days of receipt.
• Further explanation regarding the ability of lenders and the SBA to ask borrowers questions.
• A statement regarding lender fees for PPP loans—lenders will not be paid for loans that are deemed ineligible.

For further details, including information on potential legislation that would impact the PPP, click here to read the article in full.

On March 27^th, President Trump enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The historic $2.2 trillion stimulus bill includes a wide range of business tax provisions, including a new credit for employers that retain their employees.

Below, we address some of the common questions regarding this particular initiative. If you cannot find the answer to your question, please do not hesitate to reach out to your WNDE accounting advisor for further assistance.

What is the Employee Retention Credit?

The Employee Retention Credit (ERC) is a new tax credit created by the CARES Act. It is fully refundable for eligible employers. It applies to qualified wages paid between March 12, 2020 and January 1, 2021.

Do I qualify for the credit?

For the purposes of the ERC, eligible employers are employers, including tax-exempt organizations, that carry on a trade or business during 2020. To be eligible, an employer must fit one of these two criteria:

1. Suspended operations, either fully or partially, during any calendar quarter in 2020 as a result of government orders regarding COVID-19 (limitations on commerce, travel, or group meetings for commercial, social, religious, or other purposes). Partial suspension occurs when an operation can continue to operate but not at its normal capacity.
2. Experienced a significant decline (more than 50% as compared to the same quarter in 2019) in gross receipts during the calendar quarter.

Who does not qualify for the credit?

Neither governmental employers nor self-employed individuals are eligible for this credit.

How much is the credit?

The ERC is equal to 50 percent of qualified wages paid to employees by eligible employers. Eligible employers may take into account up to $10,000 in qualified wages per employee. This means that the maximum credit per employee is $5,000 for the entire year.

What are qualified wages?

Qualified wages (QW) are wages and compensation paid to employees of eligible employers between March 12, 2020 and January 1, 2021. QW include qualified health plan expenses.

The definition of QW varies depending on if an eligible employer has greater than 100 full time employees or equal to or less than 100 full time employees.

• Greater than 100 full time employees (on average in 2019): QW are wages paid to employees that are not providing services while the employer is considered an eligible employer. Wages taken into account may not exceed what the employee would have been paid for working during the 30 day period just prior to the period of economic hardship.
• Equal to or less than 100 full time employees (on average in 2019): QW are wages paid to all employees, whether or not they are providing services while the employer is considered an eligible employer.

How do I claim the credit?

To claim the ERC, eligible employers will need to report quarterly qualified wages paid on their federal employment tax return (usually Form 941, Employer’s Quarterly Federal Tax Return).

Can I fund my payments of qualified wages in advance?

Yes, eligible employers who anticipate receiving the credits can fund qualified wages by reducing their federal employment tax deposits. They will not incur a failure to deposit penalty under section 6656 for doing so. The eligible employer should account for the reduction in deposits on Form 941, Employer’s Quarterly Federal Tax Return.

Additionally, if an eligible employer does not have sufficient federal employment taxes set aside to fund their qualified wages, they can file Form 7200, Advance Payment of Employer Credits Due to COVID-19 to claim an advance refund.

If I receive the ERC under the CARES Act, can I still receive the tax credits for qualified leave wages under the FFCRA?

Yes, eligible employers can receive both credits, but not for the same wages.

If I receive the ERC, can I still receive a Small Business Interruption Loan under the Paycheck Protection Program?

No, eligible employers may not receive both the ERC and a Small Business Interruption Loan.

Can I receive ERC for wages paid to employers who are also owners or part owners of my eligible employer?

For the purposes of the ERC, wages paid to any individual who is more than 50% owner and/or familial relations of the eligible employer (including children, parents, aunts, uncles, certain cousins, and more), may not count towards the ERC.

On March 27^th, President Trump enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The historic $2.2 trillion stimulus bill includes an allowance for penalty-free early withdrawals from retirement accounts.

Below, we address some of the common questions regarding this particular initiative. If you cannot find the answer to your question, please do not hesitate to reach out to your WNDE accounting advisor for further assistance.

What changes did the CARES Act make to retirement withdrawals?

For 2020, eligible plan participants can now receive coronavirus-related distributions from their retirement plans (401(k)-type defined contribution plans or individual retirement accounts (IRAs)).

Am I eligible to make a withdrawal from my retirement account?

To be eligible, you must fit at least one of the following criteria:

1. You or your spouse or dependent has been diagnosed with COVID-19, or
2. You have suffered adverse financial consequences due to COVID-19 (e.g., suffering loss of business, unable to work due to childcare, required to quarantine, put on furlough, etc.)

Plan participants will simply self-certify that they meet the conditions for a coronavirus-related distribution.

How much can I withdraw from my retirement account?

Eligible individuals can take out up to $100,000.

If I make early withdrawals, do I have to pay a penalty?

No, if you make an eligible withdrawal you are exempt from the 10 percent early withdrawal penalty. Additionally, the 10 percent penalty waiver applies retroactively to withdrawals beginning January 1, 2020.

When do I pay taxes on the money I withdraw?

Income taxes are still owed on withdrawn amounts. The CARES Act allows for tax payments to be spread over a three-year period.

Is there a way to re-invest the money that I take out?

Yes, individuals who make coronavirus-related withdrawals may replace the money within three years, regardless of the annual contribution level of their plan. Additionally, they may also be able to recover the federal and state income taxes that they paid.

 I already have one or more loans on my 401(k), can I still take a coronavirus-related distribution?

This depends on the particular rules of your plan—consult your plan sponsor.

On Thursday, April 2, the Internal Revenue Service (IRS) issued a warning concerning the development of new scams related to the coronavirus. It is not surprising that criminals are taking advantage of the chaos resulting from the coronavirus outbreak to perpetrate fraud.

The IRS has observed an uptick in fraudulent requests related to the coronavirus outbreak. In particular, the economic impact payments legislated in the CARES Act have opened the door to new scams.

As a reminder, here are some facts about the economic impact payments:

• Most taxpayers will receive their economic impact payments via direct deposit into the bank account they previously provided on a 2018 or 2019 tax return.
• Taxpayers without direct deposit information on file with the IRS will have the opportunity to provide banking information via a secure portal website. The website is still in development and does not yet exist.
• Taxpayers for whom the IRS does not have or receive direct deposit information will be mailed a check to their address on file.
• Retirees who do not normally file a tax return do not need to do anything. The IRS will use the information on file to automatically distribute economic impact payments to them.
• The IRS exclusively uses the terminology “economic impact payment” to refer to the payment.

The IRS recommends that taxpayers watch out for emails, text messages, websites, and social media requests containing any of the following:

• Requests to provide banking information in order to ensure that the IRS can direct deposit an economic impact payment check.
• Requests for any information from retirees in order to allow them to receive their economic impact payment.
• Requests that refer to the economic impact payment as a “stimulus check” or “stimulus payment.”
• Request for the economic impact payment to be signed over to somebody.
• Request for verification of any personal or banking information in order to speed up the arrival of an economic impact payment.
• Offers that claim to speed up economic impact payments.
• Physical checks for an odd amount with instruction to call a number and verify information in order to cash it.

If you suspect that you may have received a fraudulent communication from somebody imitating the IRS, please reach out to phishing@irs.gov. You can also report suspected scams at irs.gov.

For more details, click here to read the IRS release in full.

On March 27^th, President Trump enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The historic $2.2 trillion stimulus bill includes $10 billion in funding to provide emergency grants to small businesses and nonprofits that apply for economic injury disaster loans.

Below, we address some of the common questions regarding this particular initiative. If you cannot find the answer to your question, please do not hesitate to reach out to your WNDE accounting advisor for further assistance.

Who is eligible for an emergency economic injury grant?

Emergency economic injury grants are available to businesses and non-profits that apply for a Small Business Administration (SBA) economic injury disaster loan (EIDL). Typically, the timeline for EIDL approval and disbursement takes 3-4 weeks. That’s where the emergency economic injury grant comes in.

The goal of the emergency economic injury grant program is to provide a rapid funds advance within three days of the EIDL application. EIDL applicants simply need to request the emergency grant when they apply. The SBA will provide the grant within three days of receiving the EIDL application. Even if your application for the EIDL loan is denied, you do not have to repay the $10,000 emergency economic injury grant. That said, when you apply for the EIDL and request an emergency economic injury grant, you will be required to certify—under penalty of perjury—that you are eligible to receive an EIDL.

Please note: applicants must have been in operation on January 31, 2020 to receive the grant.

What can I use the emergency economic injury grant money for?

The grant can be used to provide paid sick leave to employees, maintain payroll, meet increased production costs due to supply chain disruptions, and/or pay business obligations (debts, rent, mortgage payments).

How do I apply for an emergency economic injury grant?

When you apply for an EIDL, you will have the opportunity to request the emergency grant at the same time. To apply for an EIDL, click here to visit the SBA website.

What if I apply for other SBA loan programs, like the Paycheck Protection Program?

You may apply for an EIDL, the emergency grant, and the Paycheck Protection Program (PPP). If you receive a loan through the PPP, the amount that is forgiven will be decreased by the $10,000 grant.

On March 27^th, President Trump enacted the Coronavirus Aid, Relief, and Economics Security (CARES) Act. The historic $2.2 trillion stimulus bill includes a $349 billion paycheck protection program (PPP) that targets aid to small businesses dealing with losses resulting from the coronavirus pandemic.

The PPP uses the already-existing small-business loan framework of the Small Business Administration (SBA) but includes some changes. The SBA was already impacted by provisions included in the March 6 stimulus law, the Coronavirus Preparedness and Response Supplemental Appropriations Act (CPRSA). The CPRSA expanded the qualification criteria for SBA loans under the organization’s Economic Injury Disaster Loan Program (EIDLP).

Below, we address some of the common questions we are encountering about the PPP. If you cannot find an answer to your question, please do not hesitate to reach out to your WNDE accounting advisor for further assistance.

What is the Paycheck Protection Program?

The CARES Act designates $349 billion for general business loans to be distributed under section 7(a) of the Small Business Act during a designated “covered period,” February 15 through June 30, 2020. Borrowers can qualify for up to $10 million in 100% federal government guaranteed covered loans.  Under the CARES act, the portion of these loans that is used for allowable purposes will be forgiven.

Who qualifies for the program?

Firstly, businesses and other entities seeking PPP loans must have been in operation on February 15, 2020. Eligible recipients include:

• Small businesses (fewer than 500 employees)
• Sole proprietors, independent contractors, and eligible self-employed individuals (see below for more details)
• IRC Section 501(c)(3) nonprofits
• IRC Section 501(c)(19) veterans’ organizations
• Tribal businesses under Section 31(b)(2)(C) of the Small Business Act (see below for more details)

For the purposes of the PPP, sole proprietors, independent contractors, and eligible self-employed individuals are those that are entitled to receive paid leave per the Emergency Paid Sick Leave Act. When applying, these individuals must submit documentation that establishes their eligibility (payroll tax filings, 1099s, and income/expense details for sole proprietorships). Tribal businesses that qualify are those with 500 or fewer employees (includes full-time, part-time, and other) or those that are the size standard established by the SBA for the industry in which they operate.

Eligible businesses can be precluded from receiving loans through the PPP by certain business affiliations. If the business is affiliated with a larger business (greater than 500 employees), they may be disqualified from participating in the PPP. An affiliation exists in two cases:

1. One business controls another (or has the power to control it)
2. A third party controls multiple businesses (or has the power to control them)

Additionally, the PPP expands eligibility to certain businesses with multiple locations, provided that each location has fewer than 500 employees. These eligible businesses have a North American Industry Classification System (NAICS) code that begins with 72 (accommodation and food services sector). The CARES Act waives affiliation rules for these businesses.

How much are the loans under the PPP?

The maximum loan amount is $10 million, though not every applicant is eligible for that much. There are three methods by which an entity’s loan amount can be calculated:

1. For entities in business from February 15, 2019 – June 30, 2019: Calculate your average total monthly payments for payroll during the period and multiply it by 2.5.
2. For entities that were not in business from February 15, 2019 – June 30, 2019: Calculate your average total monthly payments for payroll between January 1, 2020 and February 29, 2020 and multiply it by 2.5.
3. For entities that took out an Economic Injury Disaster Loan (EIDL) between February 15, 2020 and June 30, 2020: You can refinance your loan into a PPP loan. Add the outstanding loan amount to the payroll sum.

How can the loan money be used?

Allowable uses of the PPP loans include:

• Salaries, wages, commissions, or similar compensations (up to $100,000 per year per employee, prorated)
• Cash tips or equivalent
• Employee leave, including parental, family, medical, or sick (excluding family or sick leave under the Families First coronavirus Response Act)
• Allowances for dismissal or separation
• Group healthcare benefits, including insurance premiums
• Retirement benefits
• State or local taxes on employee compensation (not including the employer’s share of FICA payroll taxes, railroad retirement act taxes, or other required U.S. income tax withholding)
• Continuation of group healthcare benefits during employee leave and insurance premiums
• Mortgage interest, rent, utility payments, and any other debt obligations incurred prior to February 15, 2020

Additionally, sole proprietors and independent contractors may use the loan money to cover compensation and income of up to $100,000 per year (prorated).

What if I use the money for a non-allowable purpose?

Loan money used for any of the allowable purposes listed above will be forgiven; loan money used for non-allowable purposes must be repaid. Any balance remaining after the amount used on allowable purposes is forgiven will continue to be a fully guaranteed loan for up to ten years from the date of application.

What fees are associated with getting a PPP loan?

All service fees, prepayment fees, and borrower guarantees are waived for PPP loans.

What sort of collateral or personal guarantees are required?

Loans covered under the PPP require neither collateral nor personal guarantees, if the money is used for allowable purposes.

What is the interest rate on the loans?

The maximum interest rate is 4%.

What if I can obtain credit elsewhere?

While normally SBA loans only go to borrowers who cannot obtain credit elsewhere, for PPP loans, this requirement is waived.

How do I apply for the program?

The SBA and the Department of Treasury have approved thousands of institutions to be authorized lenders for the PPP. You can contact any local banking institution to find out if they are an approved lender, or use the Lender Match, an online tool from the SBA. Additionally, you can reach out to an SBA development center