Covid-19 Tax Updates For Business


Family and Medical Leave Act (FMLA)

Effective April 1, 2020, changes to the Family and Medical Leave Act (FMLA) will allow for employees to take 2 weeks of emergency leave in order to care for a family member stricken with COVID-19 or care for children who are quarantined at home during government-mandated school closures. After the initial 2 weeks, employees may be eligible for another 10 weeks of paid leave. Employers must notify their employees immediately and in a conspicuous space of the FMLA updates, which are mandatory for all employers with fewer than 500 employees.

Employers with fewer than 50 employees may be exempt. All employers can receive 100% credit for these costs via their 941 forms.

For more information visit the U.S. Department of Labor,the IRS, or contact your tax advisor at Diamond & Associates, PC CPAs.

Economic Injury Disaster Loan (EIDL)

Businesses that are economically distressed due to the global health crisis can now apply for an EIDL up to $2 million through the SBA (Small Business Association). Loan funds can be used to cover general expenses, including rent, payroll, accounts payable and general operating expenses and is offered at a rate of 3.75% for a term of up to 30 years. Loan amounts under $25,000 do not require collateral.  Up to $10,000 of the EIDL can be forgiven as an EIDL grant.

PLEASE NOTE:  If your business will also be applying for a PPP (Paycheck Protection Program) loan, you MUST apply for the EIDL no later than Friday, April 3, 2020.

Information about EIDL is available here.  Apply for an EID loan.

For more information visit SBA Disaster Assistance.

Paycheck Protection Program (PPP)

The Paycheck Protection Program allows for employers affected by the global health crisis to apply for loans to help them retain employees during these difficult times. Qualifying businesses can apply for a loan of up to 2 ½ months of payroll costs. Payroll costs include wages, payroll taxes and employee benefits, including health insurance paid by the employer and employer retirement contributions.  If the loan is used exclusively for payroll costs, including benefits, interest on certain mortgage obligations, rent and utilities, and certain requirements are met regarding employee retention during a specified period, the principal does not have to be paid back.

The deadline for small businesses to apply for PPP (Paycheck Protection Program) loan assistance has been extended to August 8, 2020. Because more than $130 billion of the original PPP allocation still remains in the PPP fund, small businesses are still able to apply for subsidies to assist with payroll, rent and other costs.  If your business uses at least 60% of the funds for payroll, the loans can be forgiven. Please contact us if you have questions or need assistance with your PPP application.

For detailed information and eligibility requirements click here.

The Internal Revenue Service announced on April 30th that it would not allow a tax deduction for expenses paid with PPP loan forgiven funds, which would turn the PPP loan forgiveness into taxable income.  Some members of Congress announced they would try to change that, but to-date no official determination has been made.

Loan Forgiveness

The SBA has issued a revised the Paycheck Protection Program (PPP) loan forgiveness application, which includes a new EZ application that many business owners may qualify for. Also issued was a new Final Interim Rule to help determine forgiveness for payroll costs and owner compensation under the new 24-week covered period.

Before completing the forgiveness application, we recommend that business owners seek professional guidance if they do not understand the details of the various laws Congress has passed and the interim guidance and rules issued by the U.S. Treasury and the SBA. The rules have changed a great deal since the onset of the program and the application process can be complex.

You can download the revised PPP Loan Forgiveness Application at https://bit.ly/2YruAIu.

For the latest information regarding loan forgiveness, see our blog on the PPP Flexibility Act here.

Employee Retention Credit

On March 27, 2020, Congress enacted The Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which is designed to encourage eligible employers to keep employees on their payroll, even if they are experiencing financial difficulties due to the global health crisis. The IRS will provide eligible employers with an employee retention tax credit (Employee Retention Credit).

The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages that eligible employers pay their employees. The credit will apply to qualified wages paid after March 12, 2020, through the end of this calendar year. The maximum credit for an Eligible Employer for qualified wages paid to any employee during this time period is $5,000.

For more information about the Employee Retention credit click here.

COVID-19 Resource Links

Pennsylvania Department of Revenue

State of New Jersey