The CARES Act implemented the Employee Retention Credit, designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.
For more information, contact John Rittichier at jrittichier@hsccpa.com or Mike Vogel at mvogel@hsccpa.com.
Applicable section of the bill:
(3) The Department of Revenue shall adhere to any declarations or changes in tax filing and payment requirements provided by the U.S. Treasury Department or the Internal Revenue Service and provide the same to taxpayers for comparable tax filing and payment requirements under Kentucky law, including an extension of time to file a return or report and an extension of time to pay any tax due with that return or report, without the imposition of penalty under KRS 131.180, 141.044, 141.305, or 141.990 on that extended payment, and notwithstanding KRS 131.175 and 141.170, without the imposition of interest under KRS 131.183 or 141.985.
For more information please contact John Rittichier, CPA at jrittichier@hsccpa.com.
We have been in communication over the last several days about the Paycheck Protection Loan Program that is available as part of the CARES Act. This article is a follow up on what we discussed and to provide the tools we have developed to assist you. We recommend that you reach out to your bank immediately if you haven’t already and begin to provide the necessary information that they request.
In the meantime, we wish to provide some guidance which may be of assistance to you. Below are 4 documents:
Finally, each bank may require additional source data to support your applications so please work directly with your banking relationships for those specifics.
IMPORTANT UPDATES
Based on the SBA form that came out today and a discussion with an official close to the source, as well as new information released from the US Treasury, we have learned some new information which is different or in contradiction to the way the original bill read:
This is all moving very fast (the above guidance was released yesterday) and our team is diligently working to stay on top of it and to help you stay on top of it. We apologize in advance if anything changes along the way but we feel the urgency to get this information out to you now so you can get started.
Thank you for trusting in HSC to assist you as we work through these difficult and uncertain times together.
For more information, contact Scott Touro, MBA at stouro@hsccpa.com.
The CARES Act Spreadsheet is a downloadable tool we have created to help employers calculate the amount of the loan available to them based on prior payroll costs. There is also a tab which describes the information that some (not all) banks have indicated they will require. You will want to get direct guidance from your bank regarding this, we only provide as information to assist you if you want to get a head start.
There is much confusion regarding the loans and aid available to companies. In general, there are three primary options for middle market businesses:
1) SBA Economic Injury Disaster Loan Assistance (EIDL) – SBA program that existed before COVID-19 that offers up to $2 million in loans for eligible businesses.
2) Paycheck Protection Program – Created through the Coronavirus, Aid, Relief, and Economic Security Act (CARES Act), the Paycheck Protection Program expands SBA support for businesses with loans of up to $10 million.
Borrowers are precluded from receiving SBA funding under the Paycheck Protection Program and an Economic Injury Disaster Loan (EIDL) for the same purpose (i.e., double dipping).
3) Emergency Relief Funding: Midsize Businesses – The CARES Act authorizes a relief program for losses incurred as a result of coronavirus, an amount not to exceed $500 billion, for the Treasury to make loans, loan guarantees and other investments in support of eligible businesses, states and municipalities. This includes special assistance for eligible mid-size businesses (500 to 10,000 employees). We expect guidance on this program to be published in the near future.
These three options are further described in this helpful overview provided by RSM US.
The CARES Act provides for a credit against old age, survivors and disability insurance (OASDI) taxes or Tier 1 Railroad Retirement excise taxes for businesses to use to offset the effects of COVID-19 related business issues. The credit will be available to all qualified employers that either had to suspend operations or had a significant drop in gross receipts in an applicable credit quarter.
Specifically, the credit applies to:
(1) Any employer who was carrying on a trade or business in calendar year 2020 that was suspended due to orders from an ‘appropriate government authority’ limiting commerce, travel, or group meetings due to COVID-19; OR
(2) any employer who during the period: 1) beginning with the first calendar quarter after 2019 in which it experienced a 50% or greater reduction in gross receipts in that quarter when compared against the gross receipts of the same quarter in the prior year; and 2) ending with the subsequent quarter (to which the credit was claimed) in which it had gross receipts greater than 80% of the gross receipts in the same quarter of the previous calendar year. Non-profits might also qualify for this credit under the suspension of operations rules.
This credit is generally allowed for 50% of qualified wages for each qualified employee. Qualified wages are generally any wages paid to employees during shutdowns caused by COVID-19, or in a quarter with a significant decrease in gross receipts as described above.
For companies with employees greater than 100, the employee must not be working because of either a suspension in operations or substantial drop in gross receipts. For companies with less than 100 employees, the wages must be paid because of a suspension in operations, or wages paid with respect to a quarter of significant drop in gross receipts. The important distinction is that companies with less than 100 employees will be allowed to claim the credit for wages paid to employees during an applicable quarter whether or not the business is operating.
The qualified wages include health care plan expenses that are allocable to wages in a group health plan (excluded from income of employees under section 106(a)). However, the qualified wages cannot exceed $10,000, or the amount the employee would have been paid for an equivalent time during the 30 preceding days. Qualified wages also cannot include any wages considered in the Families First Coronavirus Response Act (FFCRA).
This credit applies to offset employment taxes after they are reduced by credits for employment of qualified veterans, research expenses for qualified small businesses, and the payroll credits for either qualified required paid sick leave or required paid family leave under the FFCRA. Any amount in excess of these limitations is refundable under sections 6401(a) and 6413(b), and treated as other refunds under section 1324. The credit does not apply to government employers, and can be elected out of by an employer. The employer must also exclude an employee if such employee is included in a work opportunity tax credit, and the employer cannot use wages used to compute the paid family and medical leave credit enacted in the 2017 Tax Cuts and Jobs Act. Finally, an employer is not eligible if they are taking a small business interruption loan.
For more information, please read RSM’S article, or contact John Rittichier at jrittichier@hsccpa.com or Mike Vogel at mvogel@hsccpa.com for additional information.
According to the Healthcare Business Management Association (HBMA) there are a couple of provisions in the law that will be of interest to healthcare providers.
“1. Healthcare Provider “lost revenue/ increased cost” Grants
The CARES Act establishes a $100 Billion Grant Fund exclusively for healthcare providers who are enrolled in the Medicare and Medicaid program. The purpose of this fund is to provide grants to practices that have experienced a reduction in revenue or an unexpected increase in costs due to the COVID-19 pandemic. The money will be available during the period of the national emergency.
Many healthcare providers have reported that they have seen a significant drop in revenue because of a drop in patient volume. Patients are concerned about coming into the office – even for routine visits. Similarly, many “elective” non-essential surgeries have been canceled leaving surgeons and anesthesiologists without income. These are not just Medicare patients, but Medicaid and commercially insured patients as well. Consequently, cash flow for many healthcare providers is a serious problem.
The Healthcare Provider Lost Revenue Grant program is intended to provide medical practices with an infusion of money that will help replace the money lost due to reduced patient volume because of the COVID-19 pandemic.
The Department of Health and Human Services (HHS) is currently working on a formula to determine how to calculate a provider’s lost revenue. This is lost revenue whether it is reduced volume for Medicare, Medicaid, or commercially insured patients.
It may take a week to 10 days for CMS to have all of the necessary applications in place to get the money flowing but these grants could be critically important for healthcare providers that are experiencing a revenue decline due to COVID-19.
More on this as it becomes available.
2. Medicare Advanced Payments
The Coronavirus Aid, Relief, and Economic Security (CARES) Act authorizes CMS to expand the current Accelerated and Advance Payment Program to a broader group of Medicare healthcare providers and suppliers. The expansion of this program is only for the duration of the public health emergency.
An accelerated/advance payment is a payment intended to provide necessary funds when there is a disruption in claims submission and/or claims processing.
CMS is authorized to provide accelerated or advance payments during the period of the public health emergency to any Medicare provider/supplier who meets the required qualifications(see below) and who submits a request to the appropriate Medicare Administrative Contractor (MAC).
To qualify for advance/accelerated payments the provider/supplier must:
Healthcare providers seeking an advanced Medicare payment can request a specific amount using a form available on each Medicare Administrative Contractor’s website. Most healthcare providers will be able to request up to 100% of the Medicare payment amount for a three-month period. The provider can continue to submit claims as usual after the issuance of the accelerated or advance payment
Repayment of the advanced payments will commence 120 days after the date of issuance of the payment and providers will have 210 days from the date of the accelerated or advance payment was made to repay the balance.
At the end of the 120-day period, the recoupment process will begin and every claim submitted by the provider will automatically be offset from the new claims to repay the advanced payment. Thus, instead of receiving payment for newly submitted claims, your outstanding advance payment balance is reduced by the claim payment amount.
For a more detailed explanation of this initiative, you can review the CMS Advanced Payment Fact Sheet.
For more information and to get a copy of the form to request an advanced payment, go to your Medicare Administrative Contractor’s website or call your MACs Corona Virus Hotline:
For more information or for any questions, please contact Brenda Wallace at bwallace@hsccpa.com.
*Used with permission from Healthcare Business Management Association
Copyright © 2020 The Healthcare Business Management Association (HBMA), All rights reserved.
Ten Percent Tax on Early Distributions
The 10% tax that generally applies to distributions prior to age 59-1/2 from tax qualified retirement plans will not apply to any Coronavirus-related distribution, assuming this does not exceed $100,000. Amounts can be re-contributed back to the qualified plan within a three year time frame.
Qualified Plan Loans
A participant who would be eligible to receive a Coronavirus-related distribution from a tax qualified plan may receive plan loans in an amount not to exceed the lesser of $100,000 100% of the participant’s vested account balance. Also, a participant who has an outstanding plan loan or obtains a plan loan may defer any payments otherwise until December 31, 2020.
Temporary Waiver of Required Minimum Distributions
The required minimum distribution requirements for individuals over 70 ½ will not apply to qualified retirement plans for 2020.
Plan Amendments
Employers are not required to adopt plan amendments prior to making these changes, rather they will have at least through the last day of the plan year ending 2022.
Delay in Payment of Required Contributions to Single-Employer Pension Plans
The due date for minimum required contributions to single-employer defined benefit pension plans that would be due during calendar year 2020 is now January 1, 2021.
For more information, contact Paul Esche, CPA, CCIFP CCA at pesche@hsccpa.com.
Hosted by the Community Foundation of Southern Indiana, the Disaster Relief – COVID-19 Response Fund will award one-time grants on a rolling basis to non-profits whose operations in support of seniors, children, immigrants, workers and other vulnerable populations have been stressed by the outbreak. The Fund is designed to be adaptable in its goals and focus, which will evolve as community members and nonprofits in our region share their needs.
For more information and to register click here.