Employee Retention Credit

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020, is designed to encourage Eligible Employers to keep employees on their payroll, despite experiencing economic hardship related to COVID-19, with an employee retention tax credit (Employee Retention Credit).

The IRS released a set of frequently asked questions regarding the Employee Retention Credit available as part of the newly released CARES Act.

https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. This Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000.

Eligible Employers for the purposes of the Employee Retention Credit are those that carry on a trade or business during calendar year 2020, including a tax-exempt organization, that either:

  1. Fully or partially suspends operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
  2. Experiences a significant decline in gross receipts during the calendar quarter.

Please note: Self-employed individuals are not eligible for this credit for their self-employment services or earnings.

The IRS has defined a significant decline in gross receipts begins with the first quarter in which an employer’s gross receipts for a calendar quarter in 2020 are less than 50 percent of its gross receipts for the same calendar quarter in 2019.  The significant decline in gross receipts ends with the first calendar quarter that follows the first calendar quarter for which the employer’s 2020 gross receipts for the quarter are greater than 80 percent of its gross receipts for the same calendar quarter during 2019.

Eligible Employers will report their total qualified wages and the related credits for each calendar quarter on their federal employment tax returns, usually Form 941, Employer’s Quarterly Federal Tax Return.  Form 941 is used to report income and social security and Medicare taxes withheld by the employer from employee wages, as well as the employer’s portion of social security and Medicare tax. You will need to contact your payroll company for help with this.

An Eligible Employer may not receive the Employee Retention Credit if the Eligible Employer receives a Small Business Interruption Loan under the Paycheck Protection Program that is authorized under the CARES Act (“Paycheck Protection Loan”). An Eligible Employer that receives a paycheck protection loan should not claim Employee Retention Credits.

 

 

Paycheck Protection Program

Yesterday, the Treasury Department released details about how small businesses can apply for the Paycheck Protection Program – which provides $349 billion in loans to businesses employing fewer than 500 people. To expedite the process, the loans will have same-day approval.

CLICK HERE TO DOWNLOAD THE APPLICATION FORM 

Starting April 3, 2020, small businesses and sole proprietorships can apply. Starting April 10, 2020, independent contractors and self-employed individuals can apply. We encourage you to apply as quickly as you can because there is a funding cap.

HOW TO APPLY
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. A list of participating lenders can be found at www.sba.gov. 

Have more questions about the Paycheck Protection Program? Click here for more information: PAYCHECK PROTECTION OVERVIEW

Small Business Relief Quick Guide

Options to help small businesses through the Covid-19 Shutdown

  1. Small Business Assistance (SBA) Economic Injury Disaster Loan program, there are two programs
  • SBA’s Economic Injury Disaster Loan program provides small businesses with working capital loans of up to $2 million that can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing
  • Small business owners in all U.S. states, Washington D.C., and territories can apply for an Economic Injury Disaster Loan Advance of up to $10,000 in the SBA loan process.

Link to application https://covid19relief.sba.gov/#/

OR

  1. Employee Retention Tax Credit

If you receive the SBA loan you are not able to take advantage of the employee retention tax credit

  • If you’ve had to close your business or have lost half of your year-over-year revenue, the employee retention tax credit is available to help you cover the cost of keeping your employees on payroll.
  • It’s a refundable tax credit you can claim against your payroll taxes for half of any wages you are still paying to your employees, even if they’ve been furloughed or are working reduced hours.
  • The tax credits are available to any employer who has been forced to close or partially close as a result of federal, state, local, or tribal orders to limit commerce, travel, or group gatherings as a result of COVID-19 and/or any employer who has experienced at least a 50 percent drop in quarterly revenues, as compared to the same quarter from 2019.
  • The credit is provided for wages paid to furloughed or reduced-hour employees, up to $10,000 of wages per employee.
  • Smaller employers, with 100 employees or less, can claim the credit for all employee wages, up to $10,000 per employee, regardless of whether or not the employee is furloughed. As the credit is worth 50 percent, this means the maximum credit will be $5,000 per employee
  1. Deferring Federal Employer Payroll Taxes
  • Employers can defer paying the employer portion of certain payroll taxes through the end of 2020.
  • Deferred amounts will become due in two equal installments, one at the end of 2021, the other at the end of 2022.
  • Payroll tax deferral is not provided to employers that avail themselves of SBA programs.
  • Please discuss with your payroll service provider, as applicable.

Options to provide to your employees or gig workers like Uber drivers, self-employed people, freelancers and contract workers during the Covid-19 Shutdown

All employees gig workers like Uber drivers, self-employed people, freelancers and contract workers that have any of the following, can apply for unemployment benefits.

  • Reduced hours
  • Not working due to company closure by government mandate

Link to apply for Disaster Unemployment Assistance (recommended to select online) https://www.edd.ca.gov/unemployment/disaster_unemployment_assistance.htm

4. Individuals can now take a “Corona-virus-related distribution” penalty free from a qualified retirement account. Early distribution escapes the 10% penalty but not income tax. Distribution must be paid within the 3-year period beginning in 2020 in order for funds to not be counted as taxable income.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act)

On March 27, 2020, the United States Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), aimed at providing financial relief to the American people and American businesses in response to the economic fallout from the fast-developing coronavirus (COVID-19) pandemic. The measure provides direct financial aid to American families, payroll and operating expense support for small businesses, and loan assistance for distressed industries.

  • The legislation will provide billions of dollars in credit for struggling industries, a significant boost to unemployment insurance and direct cash payments to Americans.
  • The measure increases unemployment payments and extends the benefit to those who typically do not qualify, such as gig economy workers, furloughed employees and freelancers. The bill increases the maximum unemployment benefit that a state gives to a person by $600 per week for four months.
  • The bill also provides for direct payments to Americans, giving individuals who make up to $75,000 a year checks for $1,200, couples making up to $150,000 payments of $2,400, and an additional $500 per child. The payments decrease for those making more than $75,000, with an income cap of $99,000 per individual or $198,000 for couples.
  • Your payment will be reduced by $5 for every $100 of income that exceeds the limits. So if you made $80,000 in 2019, you will receive $950. The payment decreases to $0 for an individual making $99,000 or more or a couple making $198,000 or more.
  • Calculate how much you will receive here: https://www.usatoday.com/story/money/2020/03/26/stimulus-checks-how-much-money-get-government/2921123001/
  • According to the treasury Secretary, the payments should be sent out within 3 weeks to whom the IRS has information. You don’t need to sign up or fill out a form to receive a payment if you’ve been working and paying taxes since 2018. If you have not filed taxes, you must have received a SSA 1099 form for 2019. If your address has changed since 2018 and you have not filed a return for 2019, you must file 2019 ASAP to get the refund.
  • If you’ve received a refund the last two years by direct deposit, that is where the money will be sent. If not, the IRS will mail a check to the “last known address”
  • The amount you will receive is based on the adjusted gross income for 2019 or if you haven’t filed, then the AGI for 2018. Line 7 on form 1040 tax return for 2018 or line 8B on your 2019 return.
  • Payment is not taxable and will not be included in wages for 2020.
  • Payroll Tax relief – Business that continue to employ workers through the coronavirus would be eligible to delay paying payroll taxes for 2020, then pay 50% in 2021 and the other 50% in 2022.
  • SBA interruption loan – Business with 500 or fewer employees that continue to employ and pay workers through the coronavirus crisis.
  • The government would provide loans to small and mid-size businesses to prevent layoffs and to continue to pay employees.
  • Individual loans could cover six weeks of payroll, capped at $1,540 per week, per employee.
  • Applicants must verify the previous six weeks of payroll and later verify that they have paid employees for eight weeks after receiving loan.
  • For businesses with existing SBA loans, principal and interest would be waived for six months.
  • The legislation also provides $100 billion to hospitals $500 billion to corporations, including airline companies and cruise lines; and about $150 billion for state and local stimulus funds.
  • Under the CARES Act, the loans can be for as much as 2.5 times payroll or $10 million, whichever is less. Payments can be deferred by up to a year, and businesses will be able to apply for forgiveness of the loan (or a portion of it), based on the amount used during the eight weeks following loan approval. Any amount not forgiven would have a maximum interest rate of 4%.The legislation also waives typical SBA loan requirements that credit must be unavailable elsewhere and that the borrower must personally guarantee the amount or provide collateral.

 

Tax Credits for small and mid size businesses:

https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus

SBA Loan Information: 

https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources#section-header-0

https://www.sba.gov/disaster/apply-for-disaster-loan/index.html

CARES ACT Bill: 

https://www.congress.gov/bill/116th-congress/senate-bill/3548/text#toc-id40c30dd4a08343e7b83eefd391b45c4e

LATEST RELIEF UPDATES

As we continue to navigate through the impact of COVID-19, we want you to know that you and your family are our top priority. We pray that you continue to stay safe and healthy.

As the situation surrounding COVID‑19 rapidly evolves, we want to keep you informed of all the latest news updates and resources available to you.

Yesterday, Gov. Gavin Newsom announced that several major banks have agreed to delay foreclosures and offer mortgage relief to homeowners impacted by the coronavirus.

Wells Fargo, US Bank, Citi and JP Morgan Chase have all agreed to a 90-day waiver of payments for those that have been impacted by COVID-19. Bank of America has agreed to waive payments for 30 days. Many other credit unions and smaller banks have also agreed to the 90-day waiver as well.

The agreement does not eliminate debt for California Homeowners. Instead,  it gives them a 90-day grace period in which to make each month’s payment. Homeowners who want to use the grace period should contact their lender to make arrangements.

1. Last night, the Senate passed a 2 Trillion Dollar Coronavirus relief package, the largest economic rescue bill in US history. The House is expected to vote on the rescue bill tomorrow.

Key terms include:

A. Direct payments of $1,200 per adult and $500 per child for Americans earning up to $75,000 for single tax payers and $150,000 for married tax payers

B. Enhanced unemployment benefits (including gig-economy workers for the first time).

C. $367B of support for small businesses.

D. $500B of loans for larger companies and industries.

E. $150B of grants to state and local governments.

F. $130B for hospitals and healthcare systems.

Read more about these points here: nwppr.co/s185

G. Companies will have through the end of 2022 to pay their 2020 payroll taxes.
Read more here: https://www.cnbc.com/2020/03/26/coronavirus-stimulus-bill-includes-payroll-tax-delay-for-employers.html

2. Leaders from the G20 (a group of 20 major economies including the US) will meet today on the current state of the outbreak. Over 470k people have now been infected globally (up from 330k on Monday)
Read more here: nwppr.co/s286 .

3. Dow posts best 3-day gain since 1931 even as jobless claims surge to record 3.3 million. U.S. stocks rose Thursday even as data revealed a record 3.3 million Americans filed for unemployment benefits.
Read in USA TODAY: https://apple.news/Abh5iBfnzRTm4CPLsB4U0Ng

Philip L. Liberatore, CPA remains committed to providing you with the greatest sense of security and personalized care. Please contact us with any questions or concerns.

An Encouraging Message from Phil & Dana Liberatore

As our country continues to fight this pandemic, we want to encourage you with a message from Phil & Dana Liberatore.

We truly appreciate you and our thoughts and prayers are with you and your family.

Thank you for being the best part of Philip L. Liberatore, CPA.

Blessings,

Philip L. Liberatore, CPA
(562) 404-7996 | (714) 522-3337
Facsimile (562) 404-3126
[email protected]

Disaster Relief for Business Owners

The world finds itself in an unprecedented time filled with anxiety, stress, and concern. We hope that you and your family are healthy and safe.

Thank you for your flexibility and patience as we work together during the COVID-19 pandemic. As the situation surrounding COVID‑19 rapidly evolves, we want to assure you that Philip L. Liberatore, CPA is committed to providing you with seamless and uninterrupted service, as we continue to maintain our operations and protect our employees and communities.

Federal, State and some local governments have been responding to the evolving need for relief in this time, here are some important things that you should know:

IRS filing deadline: The Treasury Department has extended the April 15 deadline to file returns and to pay taxes to July 15.

California deadlines: The Franchise Tax Board has extended both the filing and payment deadline to July 15 for those impacted by COVID-19.

SBA Economic Injury Disaster Loan Program

If you need cash to offset lost revenue and help keep your business afloat, the programs below can help. The U.S. Small Business Administration (SBA) coronavirus resource page provides a list of relief programs, as well as offering guidance to small business owners during this crisis.

The SBA is administering a lending program for small businesses. The SBA is providing low-interest working capital loans of up to $2 million to small businesses and nonprofits affected by the coronavirus in presidential and SBA-declared disaster areas. The disaster assistance is made in the form of low-interest loans to businesses

These loans carry an interest rate of 3.75% for small businesses and 2.75% for nonprofits. Loan repayment terms vary by applicant, up to a maximum of 30 years.

How to Apply

  • Apply online and select “Economic Injury” as the reason you’re seeking assistance.
  • You’ll need to supply required supporting documentation that could include the business’s most recent tax returns, a personal financial statement and a schedule of liabilities that lists all your current debts.
  • Call the SBA Disaster Assistance Customer Service Center at 1-800-659-2955 for help with your application.

Apply here: https://www.sba.gov/funding-programs/disaster-assistance

City of Los Angeles Small Business Emergency Microloan Program
Businesses and microenterprises in Los Angeles that are responsible for providing low-income jobs can get an emergency microloan of $5,000 to $20,000. Loans with repayment terms of six months to one year carry an interest rate of 0% and five-year loans have interest rates of 3% to 5%.

Who’s eligible: To get a loan, you must meet requirements including having “reasonable and responsible” individual credit history, committing to use the loan for working capital only and ensuring your business is located within the City of Los Angeles. If you own 20% or more of the business, you must guarantee the loan.

How to apply: 

Apply online and provide supporting documentation including business and personal tax returns, three months of bank statements and business and personal financial statements.

Apply here: https://ewddlacity.com/index.php/microloan-program
Los Angeles has also instituted a moratorium on evictions of businesses impacted by the coronavirus through March 31.

The city has also released a coronavirus resilience kit as a guide in dealing with the crisis, see it here: Coronavirus resilience kit

Mandates for Employers under the Families First Coronavirus Response Act
President Trump on Wednesday signed into law the Families First Coronavirus Response Act, the initial coronavirus relief bill. The new law requires small employers — those with fewer than 500 employees — to provide limited paid-leave benefits to employees who are affected by the coronavirus emergency. Small employers are given new tax credits and federal payroll-tax relief to pay for the new mandatory benefits.

To read the Families First Coronavirus Response Act, go to: www.congress.gov/bill/116th-congress/house-bill/6201.

We have a task force and leadership team who are working tirelessly to ensure that we are prepared for any contingency in serving you during these challenging times.

We want to encourage you to stay informed of things that you can do to keep yourself and your family safe using reliable sources. For your convenience, we have provided the links below, as well as the attached CDC informational sheet.

CDC COVID-19 Information page
WHO COVID-19 Information page

Philip L. Liberatore, CPA remains committed to providing you with seamless and uninterrupted service, feel free to reach out to us and we pray that you and your family are healthy and safe.

Philip L. Liberatore, CPA
(562) 404-7996 | (714) 522-3337
Facsimile (562) 404-3126
[email protected]

New Tax Filing Deadline – July 15, 2020

As our country continue to fight this pandemic, we will continue to update you with pertinent information that may impact you or your business.

As part of a growing effort to stem the financial pain from the coronavirus pandemic the IRS is extending the federal income tax filing deadline to July 15th without incurring penalties or interest.

The IRS is still processing refunds, as a result, we are designated as an essential business and will remain open to provide you with your tax and accounting needs.

However, for your protection we kindly ask if you are experiencing any of the symptoms that have been associated with the COVID-19 virus, please allow us to render our services via conference call, email, mail or fax, or reschedule your appointment to a later date.

Please contact us with any questions or concerns. We truly appreciate you, our thoughts and prayers are with you and your family.

Thank you for being the best part of Philip L. Liberatore, CPA.

Blessings,

Philip L. Liberatore, CPA
(562) 404-7996 | (714) 522-3337
Facsimile (562) 404-3126
[email protected]

Did You Pay Tax on Home Mortgage Debt Relief in 2018? You May Be Entitled to a Refund

Article Highlights:

  • Appropriations Act of 2020
  • Cancellation-of-Debt (COD) Income
  • Retroactively Extended Special Exclusion
  • Home Affordable Modification Program (HAMP)
  • Amended Return

On December 20, 2019, President Trump signed into law the Appropriations Act of 2020, which included a number of tax law changes, including retroactively extending certain tax provisions that expired after 2017 or were about to expire, a number of retirement and IRA plan modifications, and other changes that will impact a large portion of U.S. taxpayers as a whole. This article is one of a series of articles dealing with those changes and how they may affect you.

Whenever a taxpayer’s debt is forgiven, whether it is credit card debt, home mortgage debt, an auto loan, or other debt, that forgiven debt – referred to as cancellation-of-debt (COD) income – becomes taxable income to the taxpayer unless the debt was discharged in a bankruptcy proceeding or the taxpayer qualifies for one of the tax law exclusions providing relief from taxation of COD income.

The decline in the real estate market over a decade ago, combined with the recession, left many homeowners upside down – their mortgages were significantly higher than the value of their home. As a result, many homes went back to the lenders via foreclosure, abandonment, and voluntary reconveyance, leaving taxpayers with taxable COD income.

To alleviate this situation and relieve homeowners from COD income, back in 2007, Congress created a special rule that allowed taxpayers to exclude COD income from taxation if the income arose from cancellation of the debt used to acquire the taxpayer’s primary residence. This debt is termed acquisition debt. However, this special provision expired at the end of 2017, and those facing a similar problem after 2017 were stuck paying taxes on the COD income.

Thankfully, Congress has retroactively extended that special exclusion (home mortgage debt relief) back to 2018 and through 2020. By making it retroactive, if you were required to pay tax on forgiven home acquisition debt income in 2018, then your 2018 return can be amended, and you can recover those tax dollars you paid in 2018.

This exclusion may also apply to home debt discharged as part of the Home Affordable Modification Program (HAMP). Under this program, certain qualifying individuals could have their mortgage debt reduced so they could afford to remain in their homes. Although this program ended in 2016, the debt was forgiven over three years, which means in some cases, taxpayers may have had debt forgiveness (COD income) in 2018. This COD income will probably qualify for income exclusion that will result in a refund of taxes if the taxpayer amends their 2018 tax return.

If you have questions related to home mortgage debt relief or if you paid taxes on home mortgage debt relief in 2018, please give our office a call.

If you missed any of the earlier tax law change articles you can view those articles at the links below:

Phil Liberatore,CPA, Responds to IRS Challenges and Important Tax Preparation Tips for 2020

On January 2, 2020, The IRS announced the official date in which they will begin accepting individual income tax returns for the 2019 tax season. Tax season will officially commence on Monday, January 27th through April 15th.

With tax season beginning in less than a week, many Americans can expect to encounter several challenges when dealing with the IRS. Customer services continues to top the list at number one. The IRS has continued to place budget cuts. As a result, a decrease in the number of employees and an increased workload for current employees. In 2019 alone, the IRS received roughly 100 million calls and representatives only answered about 29% of them.

So how can you ensure that your returns are accepted quickly? Decide who will prepare your taxes. The ever-changing filing industry has made it possible for many untrained preparers who have little to no knowledge of tax law to enter the business. Unlike most preparers, Certified Public Accountants are required to pass exams and continue their education to renew their license each year.

“If you had major life events in 2019, such as starting a business, growth in business or a sale of a property, your taxes will be more complicated and you need to hire a reputable professional to prepare them”, Phil Liberatore, CPA says. “Don’t wait until the last minute to make that decision because you could end up overpaying your taxes.”

The tax preparation process can be stressful and burdensome, hiring a reputable CPA can relieve that weight off your shoulders. They would have the knowledge and experience to efficiently assist you with your current tax needs. “The IRS has established a more scrutinized approach to certain deductions that you might take, so If you plan on including dependents, claiming head of household, tuition and/or itemizing your deductions, make sure you provide the accurate records for each along with your income statements such as W-2’s or 1099’s that you have received for 2019.”

To ensure that you receive your refund in a timely manner, have your bank account information handy for a direct deposit.

There is an increase in tax scams like phone calls, emails and text messages from scammers pretending to be the IRS. “It is crucial to understand that the IRS will NEVER call you to collect payment over the phone, send you a text message or an email,” Phil Liberatore CPA says. “If you are a recipient of one of these scams, DO NOT respond and immediately report them to the IRS at [email protected]

Phil Liberatore, The IRS Problem Solver, and his team are dedicated to serving all individuals and businesses by providing a strategic and customized approach to your specific tax needs by delivering an exceptional level of outstanding service.