EMD&R COVID-19 / STATE OF EMERGENCY ADVISORY FOR BUSINESSES IN MASSACHUSETTS AND NEW HAMPSHIRE
APRIL 3, 2020: At EMD&R we are receiving many calls from our business clients who are looking for direction to maneuver the rapid changes in laws and regulations that directly relate to business. Guidelines and advice to decipher the public statements of governors and mayors that may impact day-to-day business operations are also in high demand. As you make it through the COVID-19 crisis, we will be sending you weekly advisory updates to assure you that you have the most recent information to meet your current business needs.
Last week, the federal government passed the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act.
This bill is the largest single expenditure of wealth in American history. Two trillion dollars are being spent and understanding how this spending affects you can be an exercise in losing the forest for the trees. The act itself is 883 pages, which is why we have read it for you.
Of interest to our business clients are the provisions that provide emergency loans to business, extended unemployment insurance, direct payments to individuals, and somealterations to income tax provisions.
Many of these topics will require discussions about strategies and business planning specifically related to your business. Some of these provisions will require the publishing of further regulations or discussions with your financial institution. Feel free to reach out to us to help you along that path.
Called the Recovery Rebate, Americans are entitled to a one-time payment of $1,200 per individual adult, and $500 per child. These payments are subject to some limitations. The full sum is available for individuals making $75,000 per year or less, or married couples making $150,000 per year or less.
If you are making more than this amount, the relief is reduced by $5 for every $100 your income exceeds these thresholds. These payments will be made to taxpayers who have filed either their 2019 or 2018 taxes, so if you have not yet filed your 2018 taxes, be sure to do so as soon as possible.
Be aware that these payments do not count as income in 2020 for next year’s return.
CHANGES TO RETIREMENT ACCOUNT RULES
Both IRA and 401K accounts have had their minimum distribution requirements waived in 2020 to help meet immediate needs. Further, the ordinary penalties for withdrawals from retirement accounts have been relaxed up to $100,000, but only if the account holder is adversely affected by the pandemic. These sums can be repaid to the account over three years.
UNEMPLOYMENT INSURANCE ALTERATIONS
Furloughed and laid-off employees are eligible for an increase in benefits of $600/week through July 31, 2020.
NEW TAX PROVISIONS FOR BUSINESSES
New Loans through SBA for Companies that Retain Employees: These loans are forgivable up to the extent that the money borrowed is spent on payroll, rent, utilities, and interest on mortgage debt for up to eight weeks from the date of loan origination. The sum forgivable is reduced for businesses that lay off employees who make less than $100,000 or reduce employee wages by 25%.
These “loans”, which operate more like a grant, are unprecedented and should be seriously considered. You should contact your banker or lender immediately and ask what options are available to you.
Payroll Tax Credits for Businesses Affected by COVID-19: 50% of your payroll tax is credited to reimburse employee wages up to $10,000 per employee. This credit is available only to companies that have been significantly impacted by the outbreak.
Tax Carrybacks Expansion: Businesses can now carry back their losses in 2018, 2019, and 2020 to the five prior taxable years. These losses are permitted to completely offset the taxable income in those years, and the law temporarily removes the rule limiting loss claims to 80% of income. This means that on your 2020 taxes you can claim prior over-payment of tax to ensure greater refunds or deeper offsets.
Delayed Payroll Tax Payments: Businesses can delay payment of payroll tax until January 1, 2021.
$500 billion, or one dollar in every four of the Act, is entrusted to the Treasury to administer and provide relief to businesses. The Treasury has not yet released any guidance on what that relief will look like. This information is required by law to be disclosed to the public.
Any company that receives a government loan is forbidden to conduct stock buybacks for the duration of the loan plus one year.
Up to $4 trillion in direct aid from the Federal Reserve to local governments.
$16 billion to replenish the national stockpile of PPE equipment and vaccine development.
$400 million will be provided to states to help them prepare for elections in 2020 for early voting, vote by mail, and online registration.
The scheduled cuts to Medicare and Medicaid that were a part of the 2017 tax law are being rolled back, and federal programs that support local health centers are being extended.
Student Loan Payments can be deferred for 6 months.
We will keep you posted as regulations come down from the various agencies that will be responsible for administering these programs.