AED News

IRS Releases FAQ on Employee Retention Credit

April 1, 2020 5:18 pm

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) 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 has issued a FAQ on the Employee Retention Credit:

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

Payroll Protection Program Initial Guidance, Application Released

March 31, 2020 10:11 pm

Earlier today, the federal government issued guidance and a sample application for the established under the CARES Act. The Small Business Administration will administer the program through its preferred lenders, banks and credit unions across the country.

The , which according to the administration, is expected to be up and running on April 3, would provide cash-flow assistance through 100 percent federally guaranteed loans to employers with 500 or less employees who maintain their payroll during this emergency. If the employer maintains its payroll, then the portion of the loan used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven, which would help workers to remain employed and affected small businesses and our economy to recover quickly from the COVID-19 crisis.

More information about the program can be found .

A sample application for borrowers can be found .

CARES Act: Employee Retention Credit FAQ

March 31, 2020 7:04 pm

What businesses qualify for the employee retention credit? Any employer, regardless of size, is eligible for the credit during calendar year 2020 if the business: (1) is fully or partially suspended due to a governmental order related to COVID-19, or (2) experiences a significant decline in gross receipts (i.e., a reduction of 50 percent of gross receipts from the same quarter in 2019). The credit also applies to tax-exempt organizations if the operation of the organization is fully or partially suspended due to the circumstances described in (1) above. The credit generally does not apply to governmental employers, including the U.S. Government, state and local governments, or any agency of the foregoing.

Is the credit limited to businesses affected by COVID-19? Yes. The credit only applies to qualified wages paid by a business whose operations have been fully or partially suspended pursuant to a governmental order related to COVID-19, or have experienced a significant decline (i.e., 50 percent) in gross receipts, as described above, during the period from March 13, 2020 through December 31, 2020.

Does the credit only apply to small businesses? No. For eligible employers with 100 or fewer full-time employees, the credit applies to all employee wages. In contrast, eligible employers with greater than 100 full-time employees may only take into account qualified wages paid to employees when they are not providing services due to a governmental order related to COVID-19.

How much is the credit? How is it calculated? The credit is equal to 50 percent of the qualified wages paid by the employer with respect to each employee. The amount of qualified wages with respect to any employee for all calendar quarters in 2020 cannot exceed $10,000.  In other words, there is a $10,000 total cap on the credit per employee for the 2020 tax year.

How much of an employee’s compensation counts toward the credit? Do health care costs count? The definition of qualified wages differs depending on the size of the business. For employers with more than 100 full-time employees, qualified wages include wages paid to employees when they are not providing services due to a governmental order related to COVID-19.  If an employee is performing services on a reduced schedule, wages paid to the employee are only treated as qualified wages if they exceed what the employee would have otherwise been paid for the services performed. In that case, employers will receive a credit for the difference between the total wages paid to the employee and the amount the employer would have paid for the reduced hours or services actually provided by the employee.

For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether or not the employee is providing services to the employer.

Regardless of business size, qualified wages include certain healthcare costs paid by an employer to maintain a group health plan.

Qualified wages do not include wages taken into account for purposes of the payroll tax credit for required paid sick leave or paid family leave as provided in Division G of H.R. 6201, the Families First Coronavirus Response Act (FFCRA). This exception prevents both credits from applying to the same wages paid by an employer.

Does it matter if the business is a corporation? Does it apply to limited liability companies (LLCs), S corporations, partnerships, and sole proprietors? The credit is available to corporations as well as pass-through entities, such as LLCs, S corporations, partnerships, and sole proprietors. The credit also is available to most tax-exempt organizations. Although the credit is available to all entity types, the business must meet the eligibility requirements – see Q&A1 above.

Do I have to wait until my business files its 2020 tax return to claim the credit? No. The tax credit may be claimed against the employer portion of employment taxes, including Social Security and Railroad Retirement payroll taxes. To the extent the credit exceeds the employer portion of employment taxes due, the credit is treated as an overpayment and is refundable to the employer. The IRS is expected to provide guidance regarding the process for claiming the credit and receiving the refund. See Coronavirus Tax Relief on the IRS.gov website.

Does the business have to pay back the credit? No. As long as the employer meets the requirements for the credit (described in the Q&As above), the employer does not have to repay the credit or the resulting refunds.

What if the business claims the FFCRA credit for mandatory sick leave and/or family leave? If the business claims the FFCRA credit for mandatory sick leave and/or family leave, the wages associated with the FFCRA credit are not eligible as qualified wages for the employee retention credit. This prevents both credits from applying to the same wages paid by an employer.

Is the credit available if the business receives one of the new SBA loans under the CARES Act? The credit is not available to employers receiving a small business interruption loan under the SBA’s Paycheck Protection Program (CARES Act section 1102).

How long is the credit available? The credit is available for qualified wages paid from March 13, 2020 through December 31, 2020.

Where can I get more information on the Employer Retention Credit? The IRS is expected to provide guidance regarding the credit, which will be available on the IRS.gov website – see Coronavirus Tax Relief.

*The above information was prepared by Republican Finance Committee staff for informational purposes and should not be relied on for legal advice. Employers should consult the IRS or a tax advisor to address questions related to their specific circumstances.

U.S. Department Of Labor Publishes More Guidance for Workers and Employers Explaining Paid Sick Leave, Expanded Family and Medical Leave Benefits

March 30, 2020 8:05 pm

Today, the U.S. Department of Labor’s Wage and Hour Division (WHD) announced more guidance to provide information to workers and employers about how each will be able to take advantage of the protections and relief offered by the Families First Coronavirus Response Act (FFCRA) when it takes effect on April 1, 2020.

The new guidance includes questions and answers addressing critical issues such as what documents employees can be required to submit to their employers to use paid sick leave or expanded family and medical leave; whether workers can take paid sick leave intermittently while teleworking and whether workers whose employers closed before the effective date of the FFCRA can still get paid sick leave.

This guidance adds to a growing list of compliance assistance materials published by WHD, including a Fact Sheet for Employees, a Fact Sheet for Employers, and an earlier Questions and Answers document. Available available are two new posters, one for federal workers and one for all other employees, that will fulfill notice requirements for employers obligated to inform employees about their rights under this new law, Questions and Answers about posting requirements and a Field Assistance Bulletin describing WHD’s 30-day non-enforcement policy.

FFCRA, signed by President Trump, offers American businesses with fewer than 500 employees tax credits as reimbursement for providing employees with paid leave, either for the employee’s own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.

WHD provides additional information on common issues employers and employees face when responding to COVID-19 and its effects on wages and hours worked under the Fair Labor Standards Act and job-protected leave under the Family and Medical Leave Act at https://www.dol.gov/agencies/whd/pandemic

CISA Issues Updated Essential Critical Infrastructure Workers Guidance

March 30, 2020 4:06 pm

The federal government recently issued updated guidance for states outlining “Essential Critical Infrastructure Workers.” These guidelines were announced by the Cybersecurity & Infrastructure Security Agency (CISA). Please note that these guidelines are advisory to states and localities, not mandatory. While some states may specifically reference CISA’s guidance in their essential businesses, others will make their own determinations.

You should review these guidelines and similar requirements as states make determinations. Equipment dealers likely fit into more than one category, including:

“Workers who support the operation, inspection, and maintenance of essential public works facilities and operations, including bridges, water and sewer main breaks, fleet maintenance personnel, construction of critical or strategic infrastructure, traffic signal maintenance, emergency location services for buried utilities, maintenance of digital systems infrastructure supporting public works operations, and other emergent issues.”

Also, a new determination was added that applies to many AED members:

“Workers necessary for mining and production of critical minerals, materials and associated essential supply chains, and workers engaged in the manufacture and maintenance of equipment and other infrastructure necessary for mining production and distribution.”

According to CISA, these guidelines are intended to be construed broadly. We’ve been told the document will be altered and amended by the federal government continually. However, this guidance may be used by state and local officials and interpretations could vary by locality.

The CARES Act’s Paycheck Protection Program Guide & Checklist

March 30, 2020 4:02 pm

The U.S. Chamber Commerce has produced an excellent document detailing the Paycheck Protection Program from the CARES Act. The initiative provides 100 percent federally guaranteed loans to small businesses who maintain their payroll during  this emergency.

Importantly, these loans may be forgiven if borrowers maintain their payrolls during the crisis or restore their payrolls afterward.

Congress Approves Historic COVID-19 Relief Legislation

March 27, 2020 5:35 pm

Earlier today, the U.S. House followed the U.S. Senate’s 96-0 vote, by approving the , a more than $2 trillion bill to support individuals and businesses withstand the devastating economic impact of the COVID-19 pandemic. A section by section analysis is available . The legislation is expected to be signed immediately by President Trump.

AED engaged with both Congress and the administration every step of the way to ensure the best possible outcome for equipment distributors as this vital legislation was finalized.

Upon the bill’s passage, AED’s President & CEO Brian P. McGuire said:

“AED commends congressional leadership for swift, bipartisan action to buttress American families and businesses as the United States and the world deal with the COVID-19 pandemic. Most importantly, this legislation will allow small-medium-sized businesses to continue to pay their employees and serve customers despite limited economic activity. We look forward to working with Congress and the Trump administration to ensure the equipment industry emerges stronger and more resilient than ever in a post-Coronavirus economy.”

Be sure to join us for a free webinar “” on Monday, March 30, at 2:00 pm ET, which will go into detail about the benefits to companies of the these recent congressional actions.

Highlights of the legislation are:

Creation of the Paycheck Protection Program.
This program will provide cash-flow assistance through 100 percent federally guaranteed loans to small employers (500 or under) who maintain their payroll during this emergency. If the employer maintains its payroll, then the portion of the loan used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven. Loans would be available immediately through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions, and SBA would be required to streamline the process to bring additional lenders into the program.

  • Maximum Loans: Generally, monthly payroll costs for 2.5 months, not to exceed $10 million. Payroll costs exclude compensation paid to individuals, including the self-employed, above $100,000 a year.
  • Requirements: The employer certifies loan will be used to retain workers, maintain payroll, make mortgage or lease payments, and pay utilities.
  • Loan Forgiveness: The borrower shall have a portion of their loan forgiven in the amount equal to their payroll costs (not including costs for compensation above $100,000 annually), interest payments on mortgages, rent payments, and utility payments between February 15 and June 30, 2020. Loan forgiveness will be reduced if the borrower reduces employment by a ratio similar to their reduction in employment or if the borrower reduces salaries and wages by more than 25 percent.

Employee retention credit for employers subject to closure due to COVID-19.
The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

Delay of payment of employer payroll taxes.
The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.

Modifications for net operating losses.
The provision relaxes the limitations on a company’s use of losses. Net operating losses (NOL) are currently subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to offset income fully. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.

Modification of limitation on losses for taxpayers other than corporations.
The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.

Modification of credit for prior year minimum tax liability of corporations.
The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act. Still, corporate AMT credits were made available as refundable credits over several years, ending in 2021. The provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.

Modification of limitation on business interest.
The provision temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.

Exclusion for certain employer payments of student loans.
The provision enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.

 

For those employing more than 500 employees, it’s expected the Federal Reserve and Treasury Department will be announcing new credit facilities that are likely to be set up to support lending to larger companies.

Updated Guidance on Paid Sick Leave & Expanded Medical Leave Under FFCRA

March 27, 2020 5:09 pm

The U.S. Department of Labor’s Wage and Hour Division (WHD) announced more guidance to provide information to workers and employers about how each will be able to take advantage of the protections and relief offered by the Families First Coronavirus Response Act (FFCRA) when it takes effect on April 1, 2020.

The new guidance includes a new poster  that will fulfill notice requirements for employers obligated to inform employees about their rights under this new law. It also includes  about posting requirements, and a  describing WHD’s 30-day non-enforcement policy. The new guidance addresses critical issues such as whether employers may post required notice electronically, whether employers must provide notice of this law to recently laid-off individuals, and when enforcement of the new rules will begin.

The guidance announced today supplements information WHD published yesterday, including a , a  and a  document. Additional guidance is forthcoming.

Please note: Small businesses with fewer than 50 employees can potentially qualify for an exemption. So far, the Department of Labor has said exemptions will be available if the expanded paid leave requirements would threaten the business’ viability but hasn’t yet issued specific guidelines on who qualifies or how to apply.

Be sure to join AED for a  on Monday at 2:00 pm ET on FFCRA’s paid sick and medical leave provisions, and the relief provided to employees by the Coronavirus Aid, Relief and Economic Security (CARES) Act, which is expected to become law later today. Register .

Your AED membership provides solutions and options. For additional information, please contact AED’s legal counsel at 312-506-4450.

Coronavirus Aid, Relief, and Economic Security Act Passes the Senate

March 26, 2020 3:48 am

The U.S. Senate approved the . A section by section analysis is available . The House is expected to approve the bill on Friday and the President will sign it into law soon after.

AED is still analyzing it’s provisions, and will put out further information, but the legislation should be extremely beneficial as equipment dealers deal with the volatile economic circumstances resulting from COVID-19.

Highlights of the legislation are:

  • Creation of the Paycheck Protection Program. This program will provide eight weeks of cash-flow assistance through 100 percent federally guaranteed loans to small employers (500 or under) who maintain their payroll during this emergency. If the employer maintains its payroll, then the portion of the loan used for covered payroll costs, interest on mortgage obligations, rent, and utilities would be forgiven. Loans would be available immediately through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions, and SBA would be required to streamline the process to bring additional lenders into the program.
  • Employee retention credit for employers subject to closure due to COVID-19. The provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year. The credit is based on qualified wages paid to the employee. For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.
  • Delay of payment of employer payroll taxes. The provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government concerning their employees. Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021 and the other half by December 31, 2022.
  • Modifications for net operating losses. The provision relaxes the limitations on a company’s use of losses. Net operating losses (NOL) are currently subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. The provision also temporarily removes the taxable income limitation to allow an NOL to offset income fully. These changes will allow companies to utilize losses and amend prior year returns, which will provide critical cash flow and liquidity during the COVID-19 emergency.
  • Modification of limitation on losses for taxpayers other than corporations. The provision modifies the loss limitation applicable to pass-through businesses and sole proprietors, so they can utilize excess business losses and access critical cash flow to maintain operations and payroll for their employees.
  • Modification of credit for prior year minimum tax liability of corporations. The corporate alternative minimum tax (AMT) was repealed as part of the Tax Cuts and Jobs Act. Still, corporate AMT credits were made available as refundable credits over several years, ending in 2021. The provision accelerates the ability of companies to recover those AMT credits, permitting companies to claim a refund now and obtain additional cash flow during the COVID-19 emergency.
  • Modification of limitation on business interest. The provision temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.
  • Exclusion for certain employer payments of student loans. The provision enables employers to provide a student loan repayment benefit to employees on a tax-free basis. Under the provision, an employer may contribute up to $5,250 annually toward an employee’s student loans, and such payment would be excluded from the employee’s income. The $5,250 cap applies to both the new student loan repayment benefit as well as other educational assistance (e.g., tuition, fees, books) provided by the employer under current law. The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.

DOL Publishes Guidance Explaining Paid Sick Leave & Expanded Family and Medical Leave

March 25, 2020 12:28 am

Today, the U.S. Department of Labor’s Wage and Hour Division (WHD) announced its first round of published guidance to provide information to employees and employers about how each will be able to take advantage of the protections and relief offered by the Families First Coronavirus Response Act (FFCRA) when it takes effect on April 1, 2020.

The guidance – provided in a Fact Sheet for Employees, a Fact Sheet for Employers and a Questions and Answers document – addresses critical questions, such as how an employer must count the number of their employees to determine coverage; how small businesses can obtain an exemption; how to count hours for part-time employees; and how to calculate the wages employees are entitled to under this law.

The guidance announced today is just the first round of information and compliance assistance to come from WHD. A workplace poster required for most employers will be published later this week, along with additional fact sheets and more Q&A. Stay tuned to AED for further updates.

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