Resources for Employers and Individuals
during the Current Economic Crisis
Every TJT business and individual client will be impacted significantly by the 2019 novel coronavirus that causes the disease known as COVID-19. We will be a resource for you as the situation continues to develop and evolve. The team at TJT will monitor regulations and legislation in order to provide our clients with the most current and useful information.
Historical Disaster Recovery Legislation
CARES ACT- passed March 27, 2020
On Friday, March 27, Congress passed the Coronavirus Aid, Relief and Economic Security Act which was aimed at helping millions of Americans and businesses get back on their feet after the detrimental effects of the Coronavirus. There are numerous provisions in this legislation that will assist our clients during these trying times. We are here to help and guide you through these provisions along the way. We thank you for putting your trust in us during this time. Please utilize the resources provided below.
Families First Coronavirus Response Act- Passed March 18,2020
Business Assistance and Debt Restructuring
The Small Business Administration has been a part of offering disaster assistance programs for years. The COVID-19 crisis has put much of the US in a state of Economic turmoil. The SBA has expanded relief in two loan programs.
Economic Injury Disaster Loans (EIDL)
Businesses and non-profits can apply for relief using the following form. Check the box for “economic injury” under item one of the form.
Paycheck Protection Program 7(a) loans
This loan was implemented as part of the CARES program and is intended to provide small business employers the means to keep their employees on payroll. The program provides loan forgiveness for retaining employees by temporarily expanding the traditional SBA 7(a) loan program.
Applications for the PPP opened April 3, 2020 for small businesses with less than 500 employees and on April 10th for sole proprietors and independent contractors.
One of the perks of the PPP is the forgiveness component for expenses paid during the 8-week period starting the date you receive your loan proceeds. Please contact us to talk through strategies to maximize this benefit.
Please consult your banker for more information on this program and see additional resources below:
Guidance Issued on Deductibility of PPP Expenses (Updated May 1, 2020)
The IRS issued guidance on Apr 30, 2020 disallowing tax deductions for expenses paid with PPP loan proceeds. Congress declared that PPP loan forgiveness would not be included in taxable income. However, the IRS is not permitting taxpayers to also deduct expenses paid using this tax-exempt income. We expect further guidance relating to PPP loans to be issued in the coming weeks.
Safe Harbor Guidance for PPP Loans Less than $2 Million (Updated May 13, 2020)
On May 13, Treasury/SBA issued highly favorable guidance to borrowers (particularly under 2mm borrowers). This guidance will provide greater peace of mind to many taking the PPP loans.
Borrowers have faced much confusion when reviewing their certification that “current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.” Treasury had given borrowers a safe harbor until May 14, 2020 to return funds (if they believe that the certification was not made in “good faith”). In their updated FAQs, Treasury/SBA explain how they will review this certification. Link to Treasury’s FAQ #46.
Per their guidance:
- Under $2 million borrowers: Treasury states “Any borrower that, together with its affiliates, received PPP loans with an original principal amount of less than $2 million will be deemed to have made the required certification concerning the necessity of the loan request in good faith”. This provides some certainty for borrowers receiving funds of less than $2 million.
- Over $2 million borrowers: Treasury states these borrowers “may still have adequate basis for making the required good-faith certification”. They will review these applications to determine if they believe the good faith certification was met. In the case that they determine the loan is not eligible for loan forgiveness, they will inform the lender. If the borrower pays back the loan the “SBA will not pursue administrative enforcement or referrals to other agencies”. While there are still questions for larger PPP applicants based on the vagueness of “uncertainty”, this guidance at least offers a path forward and potential remedies as we learn more per forthcoming guidance.
PPP – AICPA Loan Forgiveness Calculator plus Loan Forgiveness Application
Treasury/SBA issued their Loan Forgiveness Application along with instructions and related schedules. Additionally, the AICPA recently issued a loan forgiveness calculator you might find helpful (based upon guidance to date). We are monitoring loan forgiveness matters closely and will continue communicating updates as we learn more. Here are some takeaways and links for your reference.
· Loan Forgiveness Application: The basic premise of loan forgiveness provisions per legislation remain intact within the Application. For instance, to be eligible for forgiveness, PPP borrowers must spend PPP loan proceeds on payroll, rent, utilities and mortgage interest during the 8 weeks after receiving the loan; likewise, headcount and wage reductions can reduce forgiveness eligibility. We believe the Application offers clarity on some of the commonly asked questions as well some new provisions (e.g., see “Alternative Payroll Covered Period” on page 1 of app). We also believe more forgiveness guidance will be forthcoming and remains much needed (especially with restaurants/retail and their covered period in mind), We further note across the board there remains many more determinations to be made by both Treasury/SBA as well as for Lenders to navigate. Link to Loan Forgiveness Application
· AICPA Loan Forgiveness Calculator: The AICPA’s calculator uses available guidance from Treasury/SBA in order to track eligible costs covered by the PPP and provides a look at how much of your PPP loan may be eligible for forgiveness. We think this is a useful tool you might leverage based upon guidance known to date. Link to AICPA’s PPP Resources
TJT Webinar Series:
PPP – Focus on Forgiveness
On Tuesday, May 12, TJT hosted a webinar to discuss emerging issues around PPP loans. Discussing planning strategies to help your business qualify for loan forgiveness.
Refinance debt with lower interest rates
The Applicable Federal Rates have dropped to below 1.0% in April 2020. Be sure to look at your loan terms for seller-financed notes and refinance your terms.
Use the below link for a history of AFR for interest rates:
Congress eases Loan Forgiveness per PPP Flexibility Act
On June 5th, 2020 President Trump signed into law the PPP Flexibility Act. Key changes to the law include:
- Borrowers may keep original 8-week period OR extend their 8-week period to 24-weeks. (This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.)
- Changes minimum payroll costs threshold to 60% (previously 75%).
- Borrower’s safe harbor to restore FTE/wages is now 12/31/20 (previously 6/30/20). (If safe harbor met, a borrower may avoid reduction to loan forgiveness.)
- New exemptions from reductions to loan forgiveness if either:
- Inability to return to pre-2/15/20 business activity levels due to compliance with OSHA requirements related to sanitation, social distancing, worker/customer safety, etc.; or,
- Inability to hire similarly qualified employees. (This is in addition to the already available exemption for an inability to rehire employees who turned down good faith offers to be rehired at same hours/wages as before pandemic.)
- Borrowers now have five years to repay the loan instead of two. The interest rate remains at 1%.
- Borrowers can now defer the employer’s share of FICA payroll taxes for two years. Half of the payroll taxes will be due in 2021, with the rest due in 2022.
We believe further Treasury/SBA guidance is critically needed and forthcoming, and will continue updating you as we learn more.
Employers and Unemployment
Many employers and their employees will be affected by the Families First Coronavirus Response Act recently passed by Congress and signed by the President. Areas of the bill that may impact our business clients are outlined in the document below.
Paid Sick & Family Leave
Congress passed legislation March 18 (to be enacted no later than April 2, 2020) that created a federal paid sick leave requirement for COVID-19 needs and expanded the Family and Medical Leave Act to include a paid leave component for employees caring for children whose schools or child care facilities were closed because of the virus outbreak. Here are some of the key provisions to consider.
Tax Implications and Tax Deferrals
Income tax deferrals
For individuals, the April 15th tax filing and payment deadline for 2019 returns has been moved to July 15th. First and second quarter federal estimate payments for 2020 are also moved to July 15th. Corporate Income tax due for 2019 as well as 2020 first and second quarter federal estimates has also been deferred until July 15th. Underpayment of estimated tax may still apply.
North Carolina has also extended the filing and payment deadline to July 15th.
If you need more time to file your Federal return beyond July 15th, an extension of time can be filed which extends the filing due dates to the statutory extended dates below for entities with a 12-31-19 year end:
- Partnerships and S Corporations September 15, 2020
- Trusts September 30, 2020
- Individuals and Corporations October 15, 2020
Payroll tax deferrals
Under the CARES act, Employers and self-employed taxpayers can delay payment of the employer portion of payroll taxes through the end of 2020. Fifty percent of any payroll taxes deferred under this provision must be paid by December 31, 2021, with the remaining fifty percent paid by December 31, 2022.
North Carolina tax deferrals
North Carolina expanded penalty relief from March 15th, 2020 to July 15th 2020 for failing to file and pay taxes for various taxes including the following:
- Income and Franchise tax
- Withholding Tax
- Sales and Use Tax
Taxpayers do not need to request a penalty waiver to qualify for the relief.
Opportunity Zones and 1031 updates
IRS Notice 2020-23 Provides Some Deadline Relief for Qualified Opportunity Zone Investments and Like-Kind Exchanges
Through IRS Notice 2020-23, the IRS has provided an extension of time to complete “Specified Time-Sensitive Actions”, which includes investments at the election of a taxpayer for purposes of completing 1031 Like-Kind Exchanges, Qualified Opportunity Zone Investments and 1033 Condemnation Transactions. This extends the time-period for which taxpayers can complete their investment to July 15 if the original due date fell between April 1, 2020 – July 15, 2020. This notice does not provide an extension of time for taxpayers who sold their investment during the disaster period. For more information on COVID-19 effects on Qualified Opportunity Zone Funds view: Opportunity Zones in the Wake of COVID-19.