Coronavirus Financial Relief Options for Individuals and Businesses

There has been substantial legislation passed recently aiding those in need due to the recent COVID-19 outbreak. These bills/acts have had sweeping legislative changes. We have taken the time to comb through everything and provide a concise guide for individuals and businesses that summarizes your options during this time. In this guide, you will find:  

 

Part I. Executive Summary 

 

Part II. For Individuals: 

 

1.Unemployment updates:

a. State Unemployment 

b. Federal Unemployment 

2. Sick Leave Updates 

3. Stimulus Check Eligibility Information 

4. Tax Return & IRA Deadline Updates 

5. Nutrition Assistance Information 

6. Student Loan Updates 

7. Access to Qualified Retirement Plans Penalty Free 

 

Part III. For Businesses: 

 

1.Small Employer Tax Credits 

2. Sick Leave Mandates (See Sick Leave for Individuals) 

3. Payroll Tax Deferral Options 

4. Employee Retention Credit 

5. Expanded Ability to Help Employees Under Code Section 139 

6. Furlough Option 

7. SBA Loans:

              a. Paycheck Protection Program 

              b. Economic Injury Disaster Loan

 

 

PART I. EXECUTIVE SUMMARY  

 

1. Unemployment has been streamlined. You can collect for your first week out of work. Expect to collect about 50% of your weekly paycheck up to $823 for state, plus an additional $600 from federal. 
2. If you are sick from the Coronavirus or in quarantine, you are guaranteed paid sick leave up to 100% of your salary capped at $511/day for ten days. If you are caring for a sick family member, you can receive 67% of your normal salary capped at $200/day or ten days. 
3. You may be eligible for a $1,200 (if individual) or $2,400 (if married) stimulus check from the government. If you earn over $99,000 (single), $198,000 (married) or $136,500 (Head of Household) you will not receive this. 
4. The tax deadline for Federal and Massachusetts have been extended to July 15th. This includes filing and payments for you 2019 tax return. The IRA funding deadline has also been extended.
5. Federal Student loan payments (interest and principle) have been suspended for 6 months. 
6. Employers will receive tax credits to help pay for the mandatory provision for employee family/sick leave. 
7. Employers can defer payroll taxes for the 2020 year. These payments must be paid back 50% by 2021 and 100% by 2022.  
8. There is an employee retention credit available to employers who keep their employees employed. It is up to 50% of qualified wages, capped at $10,000 per employee. 
9. Code section 139 allows for nontaxable benefits paid to employees. This will be deductible for business owners. 
10. There are two major loans to help businesses through this. One is the Paycheck Protection Program, and the other is the Emergency Economic Injury Disaster Loan. The PPP allows for 2.5x your average monthly payroll up to $10 million. The EEID provides for up to $1 million in loan assistance.

 

 

Part II. FOR INDIVIDUALS 

 

1.UNEMPLOYMENT 

A. Mass Unemployment 

 

The unemployment process has been streamlined due to the Coronavirus. The fastest way to file for unemployment is online.  Updates include: 

1. All requirements regarding attending seminars at the MassHire career centers have been suspended. 
2. Deadlines missed by employers and claimants due to effects of COVID-19 may be excused under the DUA’s good cause provision. 
3. “Work-search” requirements will be interpreted to appropriately permit claimants affected by COVID-19 to collect benefits.  

Unemployment is available to those whose places of work are temporarily shut down. This applies to ALL employees (full and part time). Conditions: 

1. Workers must remain in contact with their employers during the shutdown. 
2. Workers must be available for any work their employer may have for them that they are able to do. 
3. Employees who are temporarily out of work due to COVID-19, whether it be due to quarantine, lay off, or furlough, are granted automatic unemployment benefits for 4 weeks. An employer may request to extend the period of the covered shutdown to 8 weeks, and workers will remain eligible for that longer period.  

Coverage amounts: You will receive approximately half of your weekly wage up to a maximum $823 

How long can you collect: Up to 26 weeks during a benefit year 

When can you receive benefits: You will receive benefits for the first week of unemployment if you filed after March 10, 2020. Traditionally, there is a one week waiting period, but this has been waived.  

 

B. Federal Unemployment 

 

The Coronavirus Relief Package from the CARES Act:  

1. Once you are on unemployment in your state, you will receive an additional $600/week. This benefit will continue for until the end of July. It is distributed by your state unemployment agency either as an increase to your existing state unemployment check, or as a separate check. You must be on state unemployment to receive this additional benefit.  
2. A new program has been created called “Pandemic Unemployment Assistance” to provide assistance to self-employed, part time, and contract workers that normally would not be eligible for benefits. These workers will receive the $600/week plus half of the average unemployment benefit received in their state. This $600 applies regardless of what your salary was.  
3. Benefits will also be extended to those in quarantine or those who have had to leave their jobs to take care of someone who is sick or tend to children who are home due to school or daycare closings. 

 

2. SICK LEAVE 

 

The Families First Coronavirus Response Act was passed March 18th. Under this act, employees who fall ill to the Coronavirus or are in quarantine (mandated by government order or on the advice of a healthcare provider) will receive up to 10 days paid sick leave at 100% of their salary up to $511/day. These paid leave provisions go into affect April 1, 2020 and end December 31, 2020. It is available for both part time and full-time employees.  

If a family member is sick with the virus, and you are losing work time to care for them, you will be eligible to receive up to 10 days paid family medical leave at 67% your normal pay, up to $200/day. 

12 weeks job protected family leave is required for an employee if they or their family member is in coronavirus quarantine or if they have a child whose school or childcare provider has closed due to coronavirus. The employer must pay at least 2/3 of the employee’s usual pay, up to $200/day with an overall employer obligation limited to $10,000 in total family-leave payments.  

These payments come from your employer, not the government.  

Employers cannot require employees to use paid time off. 

Self employed individuals effected by the virus are eligible for a tax credit equal to the lesser of the daily self employment income or $511 per day, for up to ten days. This is a refundable credit they will receive on their 2020 tax return first applied against federal and self employment tax, with the remainder to be refunded. There is no immediate financial relief for self employed individuals for sick leave. 

Limitations: 

If you work for an employer with more than 500 employees, you will not be eligible. Small employers may be eligible for an exception if they fear paying for the sick leave would put them out of business. This exception is only available for the provision of the law requiring paid leave for employees who need to take care of children due to school or childcare facility closures.   

 

3. STIMULUS CHECKS 

 

Part of the CARES act which was passed by the House Friday March 27th calls for stimulus checks to be sent to Americans who have valid social security numbers. The amounts received would be the following: 

Single: $1,200 

Married: $2,400 

Dependent Children: Additional $500 per child 

Limitations:  

The check is available to those who have adjusted gross income of $75,000 or less if you are single. At that point, the amount received is reduced pro-rata until you are no longer eligible to receive anything at $99,000. For married couples, the thresholds are doubled to $150,000 and $198,000. Head of household thresholds are $112,500 to $136,500. 

Current estimates are for a three-week waiting time to receive the check. The issuance will be automatic (you do not need to apply to receive the check if you are eligible) 

If you do not have automatic deposit/withdrawal set up on your tax filings, a physical check will be mailed to your last known address. 

You are not eligible to receive a payment if you are claimed as a dependent.  

The AGI thresholds are based off your most recently filed tax return (2019 or 2018). The check is technically an advance of a credit based on your 2020 Adjusted Gross Income, but because that is not known yet, the government is using your most recent return to determine if you are eligible to receive the check. What this means is, if you should have received a check, and didn’t , or you should have received more than you did (because you just had a child that the IRS is not aware of yet, or something of that nature), you’ll end up getting the appropriate amount to make up the difference when you file your 2020 tax return.  

 

4. TAX RETURN & IRA DEADLINES 

 

The Federal deadline to file (and pay if you have amounts due up to $1,000,000) is July 15, 2020.  First and second quarter estimates for 2020 are also not due until July 15th. 

The Massachusetts filing deadline and deadline for 2019 tax payments has also been extended to match the federal deadline of July 15th.   

The deadline to fund a 2019 IRA has been extended to July 15th as well. 

There has traditionally been a 10% penalty for access to qualified retirement plans before the age of 59 ½. This penalty has been waved on early withdrawals up to $100,000 for coronavirus related purposes. This will include withdrawals during the 2020 calendar year to an individual diagnosed with coronavirus or someone who experiences adverse consequences due to quarantine, layoff, reduced hours, etc. Withdrawals are subject to income tax, but that tax is allowed to be paid over a three-year period.  

 

5. NUTRITION ASSISTANCE 

 

Certain households will be eligible for help if a child’s school has been closed for at least 5 consecutive days. We are still waiting for more information on who will qualify. 

The Families First Coronavirus Response Act also provides waivers in order to expand who qualifies for benefits through SNAP. Work requirements for the program are also suspended. 

 

6. STUDENT LOANS 

 

Federal student loan interest has been automatically set to 0% for the next six months until September 30, 2020. No principal payments are necessary during this time either. There is no need to call your lender, but it is suggested you review your account to show no payment is required.  

For those who are relying on the Public Service Loan Forgiveness (which allows student loan forgiveness for federal loans on balances remaining after 120 consecutive payments are made), payments made during suspension will be treated as regular payments.  

Nothing has changed for privately held loans such as those with Sallie Mae. Sallie Mae has indicated that those struggling to make private loan payments should contact them. It is possible you may be eligible for a three-month suspension of required payments that will not impact your credit.  

The bill provides a new temporary exclusion in employee income for employer loan payments of up to $5,250. The loan must be for the education of the employee (not their family member, friend, etc). This payment can be made either to the employee or to the lender directly. This exclusion extends until January 1, 2021.  

 

           7. ACCESS TO QUALIFIED RETIREMENT PLANS PENALTY FREE

There has traditionally been a 10% penalty for access to qualified retirement plans before the age of 59 ½. This penalty has been waved on early withdrawals up to $100,000 for coronavirus related purposes. This will include withdrawals during the 2020 calendar year to an individual diagnosed with coronavirus or someone who experiences adverse consequences due to quarantine, layoff, reduced hours, etc. Withdrawals are subject to income tax, but that tax is allowed to be paid over a three-year period.

 

PART III. FOR BUSINESSES 

 

1. SMALL EMPLOYER TAX CREDITS 

 

There are tax credits in place to help employers who are required to offer paid family leave. A small employer can receive a tax credit equal to 100% of emergency sick/family leave. The credit is also increased to cover a portion of an employer’s increased expenses related to emergency sick/family leave.  

These credits are applied first to an employer’s payroll tax bill. Any excess will be issued as a refundable credit. These payments are not subject to employer Social Security Tax but ARE subject to Employer Medicare tax.  

Small employers may be eligible for an exception if they fear paying for the sick leave would put them out of business. This exception is only available for the provision of the law requiring paid leave for employees who need to take care of children due to school or childcare facility closures. 

 

2. SICK LEAVE (see sick leave for individuals) 

  

3. PAYROLL TAX DEFERRAL 

 

The CARES Act allows employers to defer the employer portion of FICA for the remainder of the year. This is true for the employer portion of FICA taxes for those who are self employed as well. The first half of deferred payments is due by the end of 2021. The second half of any deferrals will be due by December 31, 2022. 

 

4. EMPLOYEE RETENTION CREDIT 

 

This is a big one. For wages paid after March 12 and until December 31, 2020, eligible employers will be able to receive a payroll tax credit equal to 50% of the qualified wages paid up to $10,000 in wages per employee (meaning a maximum credit of $5,000/employee). The following criteria must be met: 

1. The employer must have carried on a trade or business during 2020. 
2. The operation must have been fully or partially suspended due to government order related to the Coronavirus 
3. Gross receipts in at least one calendar quarter must be 50% or less than those in the same quarter from a prior year.  After this decline is proven, the period of significant decline is recognized until receipts are 80% of those in the related quarter from the previous year.  

Employers with 100 or more employees are subject to rules 1-3 while employers with under 100 employees are only subject to rules 2-3.   

 

5. EXPANDED ABILITY TO HELP EMPLOYEES 

 

Code section 139 allows for a considerable expansion of employer’s ability to help employees structured under disaster relief payments.   

These payments can be tax deductible to the employer and are tax free to the employee. The amounts paid must be for the benefit of an individual to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster. Based on the IRS delay of tax filing, it appears the IRS has deemed the COVID-19 situation a “qualified disaster” under this provision.  

There are no limits on the amounts that can be paid, although payments to replace salary or wages are not qualified.  

The reporting requirements for employers who make these payments are also far less stringent than normal wages. They are not required to be disclosed or included on a W2 or 1099.  Receipts or other proof of expenses is not required.   

While there has been no specific guidance as to what payments will qualify, one can draw from this that amounts paid to employees to help them set up a home office (computer, phone, etc.) increase in utility costs, reimbursed medical expenses, at home cleaning supplies, or even daycare if a home office employee’s children are forced to be at home due to the outbreak would be qualified under this provision.  

 

6. EMPLOYEE FURLOUGH 

 

While it may be a final resort, furloughing your employees may be a way to keep costs down. Furloughed employees are not eligible to receive a paycheck. Therefore, they are eligible for unemployment. As the employer, you would continue to pick up their benefits (such as health insurance). As your employees are still officially your employees during this time (at will) this can help avoid severance packages and can also avoid replacement costs that may come with a full layoff like recruiting and training of new employees once business rebounds.  

Furloughed employees are banned from doing work for their employer. This is a zero-tolerance policy. They can’t so much as take a phone call.  

Differences between furlough and a layoff:  

1. There is an expectation that furloughed employees will eventually return to work. 
2. Retention of benefits 
3. Furloughed employees retain their employment rights. They can’t be replaced or fired without due process. 
4. Laying off employees is far more cumbersome. Furloughing employees is relatively seamless. 

 

7. SBA LOANS – PPP & EIDL 

 

Even with credits, there may simply be a lack of cash flow during this crisis to keep your business afloat. There has been an expansion of loan offerings for businesses to account for this.   

A. Paycheck Protection Program (PPP)

Based on the language, any business in operation as of February 15, 2020 having fewer than 500 employees will be eligible for this loan. Under the CARES Act, lenders will be able to determine eligibility and creditworthiness of small businesses applying for the loan without having to go through the typical SBA channels. Each business is eligible to receive 2.5 times their average monthly payroll cost over the last year, up to a maximum of $10 million.   

These funds can be used for: 

• Payroll costs (wages, medical/sick leave, healthcare, retirement benefits, etc. 

• Interest payments on mortgage obligations incurred before February 15th 
• Rent 
• Utilities 

The funds cannot be used for compensation for employees whose salaries exceed $100,000. When calculating an employer’s monthly average, employees making $100,000+ are not included. 

One major difference between this new provision and typical 7(a) loans is that no personal guarantee is necessary to receive the funds, nor is there a required pledge of collateral. One additional requirement is the need for borrowers to certify that the funds are necessary due to economic uncertainty, and that they will use the funds for the approved uses outlined above.  

All payments can be deferred for six months to a year, with interest rates not to exceed 4%.  Loan terms can not exceed ten years. 

Incredibly, the SBA has no recourse against non-payment of the loan, except if the funds were used for unapproved purposes. For loan forgiveness, employers must also maintain the average number of full-time employees when compared to those employed from February 15, 2019 – June 30, 2019 or January 1, 2020 – February 29, 2020 (choice of period for comparison is at the discretion of the borrower). The employer also must not reduce an employee’s pay by more than 25%. Loan forgiveness is eligible after eight weeks from the origination date of the loan. Borrowers must apply for loan forgiveness and will receive a decision within 60 days of application. 

 

B. Economic Injury Disaster Loan Program (EIDL)

 

The SBA has also set up a loan program allowing for up to $1,000,000 in loan assistance. Businesses with fewer than 500 employees are eligible. Like the Paycheck Protection Program, there is no need to provide personal guarantee (for loans less than $200,000). 

Loans are available with long term payment plans up to 30 years. Terms are determined on a case-by-case basis, based on the borrower’s ability to pay.  

Borrowers can receive a $10,000 emergency advance within three days of applying for the EIDL grant. If the application is denied, the borrower does not need to pay back this $10,000 as long as the funds were used for approved uses like paid leave, payroll, increased costs from supply chain disruption, mortgage/lease payments, etc.  

Borrowers can apply for both the Paycheck Protection Program and the Economic Injury Disaster Loan Program if the funds are not used for the same purpose.   

 

Follow us on Facebook / LinkedIn and check out our blog to stay up to date on all things Tax, Accounting, Investment, and Financial Planning.