Pandemic Assistance Checklist

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Pandemic Aid Checklist

Delays in Filing and Paying

  • Federal tax payments and returns were due 5/17/21 at this time
  • For individuals, trusts, estates, associations, and C corporations
  • Calendar year S corporations and partnerships were due 3/15/21

Direct Stimulus Payments to Individuals (sometimes called Recovery Rebates or Economic Impact Payments)

Round 1

  • Individuals with adjusted gross income (AGI) ≤ $75,000 receive $1,200
  • Married couples with AGI ≤ $150,000 receive $2,400
  • Head of households with AGI ≤ $112,500 receive $1,200
  • Parents with children under age 17 receive $500 / child
  • Phase-outs occur for individuals from $75,001 – $99,000 (head of household from $112,501 – $136,500)
  • Phase-outs occur for married couples from $150,001 – $198,000
  • Rebate was reduced by $5 for each $100 that exceeds the above AGI
  • Income was based on 2018 return unless 2019 return is filed
  • Rebate is not subject to tax
  • Receive even if you don’t file a return as long as you have a SSN and are not claimed by someone else
  • Get My Payment – IRS website tool for payment status information and entering direct deposit information
  • Reconciled on 2020 return (keep if you got too much and claim a credit if you got too little based on 2020 income)
  • Rebate was not subject to offset or reduction by amounts owed

Round 2

  • Same rules as Round 1
  • Second set of payments $600 per taxpayer and $600 per qualifying child

Round 3

  • $1,400 per eligible individual and dependent
  • Quicker phase-outs: Individuals $75,001 – $80,000 (head of household from $112,501 – $120,000)
  • Phase outs for married couples from $150,001 – $160,000
  • Parents with children under age 17 receive $600 / child
  • 2019 return will be used for eligibility unless the 2020 returns have been filed at time of payment
  • Taxpayers deceased before 1/1/21 are not eligible
  • Reconciled on the 2021 return (keep if you got too much and claim a credit if you got too little based on 2021 income)

Expanded Unemployment Benefits

  • Extra $600 / week through 7/31/2020 (in addition to state benefit). A presidential executive order lowered and extended to $300 / week from 8/1/2020 – 12/27/20. It is now extended through 9/6/21.
  • Maximum of 50 weeks for combined federal and state assistance
  • Self-employed and independent contractors would be eligible
  • Up to $10,200 of unemployment benefits (applies to both spouses) are considered tax free if AGI is < $150K (for all filing statuses)
  • Tax free begins in 2020. It is retroactive. The IRS will send refunds.

Retirement Account Withdrawals

  • Required minimum distributions (RMD) for 2020 can be waived (even inherited IRA’s)
  • 10% penalty is waived on up to $100,000 distributions (must be used for Corona related purposes)
  • Started 1/1/20
  • It can be repaid within 3 years from the date received; or
  • It is taxed over 3 years (2020 – 2022) or you can elect out and pay all the tax on the 2020 tax return

Student Loans Held by the Dept. of Education

  • All payments can be suspended through 9/30/20. Extended to 12/31/20.
  • Certain student loans forgiven are excluded from income from 1/1/21 to 12/31/25.
  • 0% interest will accrue

Health Insurance Premium Assistance

  • Premium assistance (subsidies) have been expanded
  • Larger subsidies are available to all and some subsidy to some higher income levels now
  • Employers who provide coverage and pay premiums may claim a credit for their share of medicare tax.
  • Cobra qualified beneficiaries are eligible for a 100% subsidy from 4/1/21 to 9/30/21

Child Tax Credit (for 2021 only)

  • 17 year-olds are able to receive credit
  • Credit is increased from $2,000 to $3,000 ($3,600 if under age 6)
  • Increased credit amounts are phased-out at $50 / $1,000 income
  • Phase-out starts at $75,000 single, $112,500 head of household and $150,000 married filing joint
  • IRS will develop a program to pay 50% in advance between 7/1/21 – 12/31/21 using 2020 returns if filed (otherwise 2019)
  • You can opt out of advance payments
  • Credit will be reconciled on the 2021 return

Earned Income Credit (starting in 2021)

  • Qualifying minimum age for individuals with no qualifying children is reduced from 25 to 19 with some exceptions
  • Being in school at least 5 months is the main exception
  • Earned income used can be 2019 instead of 2021 if 2019 is greater than 2021
  • Disqualifying investment income was raised to $10,000 starting in 2021

Child & Dependent Care Benefits (starting in 2021)

  • Dependent care assistance is increased from $5,000 to $10,500 ($5,250 for married filing separate) starting in 2021.
  • Dependent care dollar limit is increased from $3,000 to $8,000 for 1 child and from $6,000 to $16,000 for 2 or more children
  • Credit % is increase to 50% reduced by 1% in excess of $125,000 AGI
  • Maximum credits are $4,000 for 1 child and $8,000 for 2 or more children
  • Old 20% is used once the higher percentage phases-out at $185,000 AGI
  • Credit phases-out from $400,000 to $440,000 AGI and is completely gone when AGI exceeds $440,000

Federally Backed Mortgage Loans such as FNMA and FHLMC

  • 180 day forbearance can be requested by the borrower. An additional 180 days was added.
  • No fees, penalties or interest beyond contractual amounts will be added

Above-the-Line Charitable Deduction

  • Maximum $300 ($600 Married Filing Joint Filers for 2021)
  • Permitted if you don’t itemize
  • Donations to a donor advised fund don’t count

Qualified Family Leave (Extended to 9/30/21)

  • Employees unable to work or telework who leave for care of a child under age 18 (school or childcare is closed)
  • Employed at least 30 days
  • First 10 days may be unpaid but the employee can use vacation, personal, medical or sick leave benefits
  • The 10 days can reset.between 4/1/21 to 9/30/21
  • After 10 days, paid leave is required (2/3 of normal gross pay not to exceed $200 / day)
  • The aggregate maximum is 10 weeks and $10,000
  • Increased from $10,000 to $12,000 for 4/1/21 – 9/30/21
  • Self-employed qualify up to 50 days at $200 / day ($10,000 maximum)
  • Self-employed individuals qualify for up to 60 days for 4/1/21 to 9/30/21

Qualified Sick Leave (Extended to 9/30/21)

  • Unable to work or telework for specific virus-related reasons
  • Subject to quarantine, isolation order, advised by health provider to self-quarantine, and experiencing symptoms
  • 80 hours of paid sick time to full-time employees
  • Part-time employees based on average hours worked over a 2 week period
  • No limit for length of service
  • Regular rate up to a maximum of 10 days at $511 / day not to exceed $5,110 / employee to take care of self
  • Regular rate up to a maximum of 10 days at $200 / day not to exceed $2,000 to take care of someone else
  • Self-employed qualify up to 10 days at $200 / day ($2,000 maximum)

Qualified Family or Sick Leave General Rules

  • Administered by the Department of Labor
  • Increased by portion of qualified health plan expenses
  • Increased by 6.2% Social Security and 1.45% Medicare tax
  • Refundable tax credit if it exceeds the credit on employer’s payroll tax
  • Comparable credits are offered to self-employed individuals (prior year net earnings divided by 260 days)
  • This can be claimed even if you received a PPP loan

Small Business (generally < 500 employees) Loans (Paycheck Protection Program)

Round 1

  • Covers employee and owner payroll costs
  • Administered by banks who are certified SBA Lenders (guaranteed 100% by SBA)
  • Eligible if in operation on 2/15/20
  • Sole proprietors and independent contractors (self-employed) are eligible and use net Income from self-employment
  • Qualified expenditures include payroll, group health care, mortgage interest, rent, utilities, interest on existing debt
  • Payroll costs include salary, commission, tips, health care insurance, and state unemployment
  • Employees have qualifying costs up to $100K with an 8 week max of $15,385 and a 24 week max of $46,154
  • Owners have qualifying costs up to $100K with an 8 week of $15,385 and a 24 week max of $20,833
  • Those having a principal residence outside the US do not qualify
  • Utilities include electric, gas, water, transportation, phone, and internet
  • 8/8/20 is last day to apply or receive a loan but it is first come first serve…move quick!!!
  • Loan is 2.5 * monthly payroll costs (2019) (special seasonal and industry rules) up to $10 million
  • Interest at 1% loan
  • Loans issued before 6/5/20 have a 2 year maturity and loans issued starting 6/5/20 have a 5 year maturity
  • Payments will be deferred for a minimum of 6 months from date of loan disbursement
  • No collateral, personal guarantees or recourse to owners
  • Funds should be used during the covered period in the 8 or 24 weeks after loan origination (loan can be forgiven in whole or part)
  • Loan principal is forgiven for proceeds used over an 8 or 24 week period for qualified costs listed above
  • The 8 or 24 week period begins on the date of the loan origination
  • Expected forgiveness is the amount lender expects borrower to expend
  • At least 60% of the loan must be used for payroll costs to have full forgiveness
  • Amount forgiven is reduced if FTE headcount or salaries decrease (↓ >25% during covered period compared to 1/1/20 – 3/31/20)
  • Start gathering monthly payroll (W-2’s and 941’s) and self-employed information (Sch. C and bank statements) for 2019
  • Applicant must submit SBA Form 2483 to the bank and whatever forms the bank requires (varies by bank)
  • Applicant may be able to use shortened SBA Form 3508 EZ (check this first!)
  • Applicants with less than $150K of PPP loan proceeds can use SBA Form 3508S…easiest…changing the form again soon
  • PPP proceeds are tax exempt and related expenses are deductible if the loan is forgiven
  • There is a really good calculator at the website below

Round 2

  • A second PPP loan program (PPP 2.0) has been approved
  • PPP 2.0 will be based on a 25% decrease in quarterly gross receipts in 2020 as compared to 2019
  • PPP 2.0 uses the same 2.5 times 2019 monthly payroll costs will be used except for restaurant industry that can use 3.5 times
  • PPP 2.0 lowers qualifying employers to ≤ 300 employees

SBA Economic Injury Disaster Loans (EIDL) (< 500 employees)

  • Emergency advance (grant) up to $10,000 within 3 days of applying (have not seen any of these after weeks)
  • Up to $2M in loans (amounts over $10,000 are loans at 3.75% for up to 30 years) (Non-profits get 2.75%)
  • Must have been in business as of 1/31/20
  • Loans available from 1/31/20 – 12/31/20
  • Includes sole proprietors with and without employees
  • Can still do the paycheck protection program above but the $10,000 will be applied against the loan
  • Targeted EIDL advances are considered tax free income

Employee Retention Credit (Extended to 12/31/21)

  • For employers whose operations were fully or partially suspended as a result of a government order; or
  • For employers who had a significant decline in gross receipts (declined by > 50% from same quarter in prior year)
  • Employers with ≤ 100 employees, all wages are eligible (limits if >100)
  • Refundable payroll tax credit of 50% of wages (new IRS Form 7200)
  • Up to $10,000 / employee / quarter
  • Cannot use this credit and the PPP loan above for the same expenses
  • Relates to wages paid 3/13/20 – 12/31/21
  • Extended to 6/30/21 with credit increased to 75% of qualified wages, ≤ 500 employees, and a > 20% gross receipts decline
  • Extended to 12/31/21 with credit decreased to 70% of qualified wages, claimed against medicare tax only
  • Severely financially distressed companies (90% decrease in a quarter between 2019 and 2020) treat all wages as qualified

Payroll Tax Payment Delay

  • Employers and self-employed
  • 6.2% employer’s matching money
  • 3/27/20 – 6/31/21
  • 50% of qualified wages through 12/31/20 up to $10,000 / year
  • Increased to 75% from 1/1/21 – 6/30/21 up to $10,000 / quarter
  • Pay ½ by 12/31/21 and ½ by 12/31/22

Employer Payments of Student Loans

  • Tax free to the employee with a maximum of $5,250
  • Paid by employer for employee (3/27/20 – 12/31/25)

Net Operating Loss Expansion

  • NOL’s generated in 2018, 2019 or 2020 can be carried back 5 years
  • The 80% limit on NOL’s is suspended to fully offset income
  • Farmers can elect to retain the 2-year carryback, claim 5-year carry back, or waive the carryback

Business Interest Deduction

  • Business interest deduction was increased from 30% of taxable income to 50% of taxable income

Qualified Improvement Property Technical Correction

  • 100% bonus depreciation is permitted on interior improvements for non-residential property
  • Retroactive for improvements after 9/27/17 filed on Form 3115 Change in Accounting

Loans to Certain Industries (the Big Winners)

  • Air and cargo carriers
  • Businesses critical to national security
  • Hospitals & COVID care providers
  • Many government branches
  • Education
  • Restaurants have a revitalization grant program based on decline of gross revenue

Disaster Relief

  • Qualified disaster areas declared 1/1/20 – 2/25/21 with incidence period 12/27/19 – 12/27/20
  • Waives 10% penalty on retirement withdrawals up to $100,000
  • Borrow up to $100,000 from a retirement plan

Ohio Considerations

  • Ohio and most Ohio cities have delayed filing and payment date to 7/15/20
  • Ohio Dept. of Insurance – employees with reduced hours still can have group coverage, health insurance payments can be delayed for 60 days, COBRA and continuation rules are loosened for now
  • Ohio unemployment pays 50% of average weekly wage with a $118 minimum / week and a $424 maximum / week for 26 weeks

Other Considerations

  • Business meals can be 100% deducted for 2021 and 2022 when bought at a retail restaurant even if taken offsite
  • Business interruption insurance – hard to prove claim
  • Business liability insurance – are you exposing employees or clients to the virus
  • Workers compensation – probably not but health care workers maybe
  • Off premise insurance – have you thought about property being kept offsite now
  • Employee rights must be posted by 4/1/20
  • Proactively call lenders and work out payment arrangements
  • Teachers can use their $250 educator deduction on PPE and other COVID related supplies
  • 7.5% medical expense limit has been made permanent
  • Can deduct cash charitable contributions up to 100% of income in 2020 and 2021 (does not apply to 20% / 30% property)
  • Stay safe!!!

Some Helpful References

Learn more about taxes, bookkeeping and payroll

Pandemic Aid Checklist
Aid & Assistance

Pandemic Assistance Checklist

This checklist was prepared for our clients and friends as a quick way to identify eligible programs. Please contact us for the details. This is not meant to be an all-inclusive summary of all programs.

Providing High Quality Tax Preparation and Business Services

American Bookkeeping & Tax Service, Inc., provides you with quality Tax Preparation, Bookkeeping, and Payroll services. Owner, Cathy Baker has been providing Tax Preparation Services since 1991 and Bookkeeping Services since 1978.