Paycheck Protection Program(PPP) Loan
The government is offering $350 billion for the loan program.
Businesses with employees, independent contractors all qualify.
A household employer can not apply.
The loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (over 75% of the forgiven amount must have been used for payroll)-detail rules apply
This Loan has a maturity of 2 years and an interest rate of 1%.
You need to be in operation on February 15, 2020, and had employees for whom you paid salaries and payroll taxes or paid independent contractors, as reported on a Form 1099-MISC.
The maximum amount of Loan Calculation:
-Aggregate payroll costs from last 12 months ( payment over $100,000 per person max)/12 x2.5
-“Payroll costs” means Payroll costs consist of compensation to employees. Payment to independent contractors does not count.
Independent contractors can apply it's own PPP loan. “Payroll costs” for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation.
Submit such documentation as is necessary to establish eligibility such as payroll processor records, payroll tax filings, or Form 1099- MISC, or income and expenses from a sole proprietorship·
Best to contact your bank to start the application early. First come, first serve. There are still much confusion regarding the requirement and procedures.
Economic Injury Disaster Loans(EIDL)
The max EIDL is $2 million.
Business, sole proprietorship, independent contractor all qualify.
Businesses need to be in operation before January 30, 2020.
Rate is 3.75% for businesses up to 30-year term. It can be deferred one year due to Coronavirus.
Eligible applicants for an EIDL can receive a$10,000 emergency grant within three days of application. There is no obligation to repay the grant.
Satisfactory credit history is important. They will need to review your 2019 business tax return if filed, or your 2019 year-end profit and loss statement, along with your balance sheet and the most recently filed business tax return 2020 year-to-date profit and loss statement
Apply at SBA.gov/disaster
If you receive EIDL and you want to apply for PPP loan, EIDL amount will count towards the max PPP loan amount allowed.
Employee Retention Credit
Applies to wages paid after March 12, 2020, and before January 1, 2021.
Equal to 50 percent of the qualified wages with respect to each employee of the employer for the calendar quarter
The credit is used against the employer portion of Social Security taxes. Any excess if refundable.
Wage Limit is $10,000/employee/quarter. So that the maximum credit for an eligible employer for qualified wages paid to any employee is $5,000
The Employer’s gross receipts are below 50% of the comparable quarter in 2019. Once The employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit. The eligible employer must account for the reduction in deposits on Form 941, Employer’s Quarterly Federal Tax Return, for the quarter.
Extension of Time to Pay Employment Taxes
Delay payment of applicable employment taxes for the payroll period beginning on March 27, 2020, and ending before January 1, 2021.
50% of the delayed amount needs to be paid before December 31, 2021, the remaining
amounts due December 31, 2022.
For self-employed taxpayers, they will revise the tax forms so 50 percent of the self-employment taxes for the payroll tax deferral period will not be treated as taxes to which that penalty applies. I will update our clients who are affecting by this soon as IRS clarifies the procedures more.
Employer Paid Sick Leave Credit
For employee sick leave related to Coronavirus
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 related Coronavirus, caring for a child due related to Coronavirus(or facility closing due to Coronavirus)
Employer credits equal to 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.
An additional tax credit for costs to maintain health insurance coverage for the eligible employee during the leave period.
Employers may claim the credit by filing their quarterly federal employment tax returns.
A similar credit is available for self-employed individuals and I believe you claim the credit on your income tax returns.
Employers can retain an amount of the payroll taxes equal to the amount of qualifying sick 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.
Child Care Leave Employer 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(In addition to the sick leave above)
Employers may receive refundable child care leave credit equal to two-thirds of the employee's regular pay, up to $200 per day or $10,000 total. Up to 10 weeks of qualifying leave can be counted towards the child-care leave credit
An additional tax credit determined based on costs to maintain health insurance coverage for the eligible employee during the leave period.
Employers may claim the credit by filing their quarterly federal employment tax returns·
A similar credit is available for self-employed individuals.
Employers can retain an amount of the payroll taxes equal to the amount of Child care leave they paid, rather than deposit them with the IRS.
Circular 230:The articles are for general information only. In accordance with IRS Circular 230 they are not considered tax opinions for purposes of relying on such statements in any challenge of the reporting of the above transaction by the IRS. If a full tax opinion is required certain procedures must be met . Also there is a significant cost for a full tax opinion to meet the requirements of Circular 230.