The Coronavirus “Loan” Programs for Businesses and Self-Employed Individuals

The Coronavirus “Loan” Programs for Businesses and Self-Employed Individuals

The “Paycheck Protection Program” for Businesses and Self-Employed Individuals

Who Is Eligible for a Loan Under the Program?
  • Businesses with 500 or fewer employees are eligible to receive a loan.  A business in the food industry with more than 500 employees, but that employs 500 or fewer employees at each of their restaurants, can receive a loan for each of their restaurant locations.  If you are a franchisee that owns multiple franchise locations, you will be eligible for a loan for each of your locations, regardless of how many other franchise locations you may own
  • If your business is NOT in the food industry and you are NOT a franchisee, rules similar to the “controlled group” rules apply, meaning if multiple businesses are under “common ownership,” all of the employees of all of the businesses will be aggregated and counted together to determine whether this “controlled group” employs 500 or fewer employees (and thus, is eligible for a loan).
  •  Nonprofit 501(c)(3) and 501(c)(19) organizations are also eligible for the loan.
  • Note, any 501(c) organization that is NOT a 501(c)(3) or 501(c)(19) organization is NOT eligible for a loan (e.g., 501(c)(4) and 501(c)(6) organizations are NOT eligible)
  • Self-employed individuals are also eligible to for the loan.
What Is the Maximum Amount of the Loan for Most Businesses?
  • If you are a business, and you were operating during 2019, the maximum amount of your loan will likely equal the following amount:
  •    250% of your monthly “payroll costs” during February 15, 2019 and June 30, 2019.  So, for purposes of applying for the loan, you are going to need your payroll and other expense records from 2019.
  • If you are a business, and you were NOT operating during 2019, the maximum amount of your loan will likely equal the following amount:
  •    250% of your monthly “payroll costs” during January 1, 2020 and February 29, 2020.
  • “Payroll costs” for a business include (1) salaries, wages, or commissions paid to employees (but limited to the first $100,000 of amounts paid to each employee prorated over the February 15th to June 30th time period), (2) cash tip equivalents (if applicable), (3) your employer contributions for health benefits, (4) your employer contributions for retirement benefits, (5) the cost of leave (e.g., vacation, family, and sick leave), or (6) the payment of State or local taxes assessed on employee compensation.
  •    Again, you are going to need your payroll and other expense records from 2019 (or 2020 if you are a new business).
What Is the Maximum Amount of the Loan for Self-Employed Individuals?
  • If you are a self-employed individual, and you were operating during 2019, the maximum amount of your loan will equal the following amount:
  •    250% of the amount of your own compensation that you generated for yourself during February 15, 2019 and June 30, 2019 up to $100,000 (which would be a prorated over the February 15th to June 30th time period).
  • If you are a self-employed individual, and you were NOT operating during 2019, the maximum amount of your loan will equal the following amount:
  •    250% of the amount of your own compensation that you generated for yourself during January 1, 2020 and June 30, 2020 up to $100,000 (which would be a prorated over the February 15th to June 30th time period).
If You Are a Business, What Can You Use The Loan to Pay For?
  • You can use your loan to pay your business’s “payroll costs” (described above) during February 15th and June 30th.  The loan can also be used to pay your business’s mortgage interest, rent, utility bills, interest on other debt, and premiums for COBRA for the employees you terminated/laid off during February 15th and June 30th.
If You Are a Self-Employed Individual, What Can You Use The Loan to Pay For?
  • You can use your loan to cover your own compensation during February 15th and June 30th.  You can also use the loan to pay mortgage interest, rent, utility bills, or interest on other debt during February 15th and June 30th.
Are There Time Limits?
  • You may apply for a loan up until June 30th.  The loan amounts can be used to pay the above stated costs that started back on February 15th.  Remember, the loans can only be used to pay the above stated costs incurred during February 15th and June 30th.
What Else Should You Know?
  • To be eligible for the loan, you must certify, among other things, that “the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations,” and you must acknowledge that “funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.”
  • A bank making the loan is required to allow you to defer any loan repayments for up to 6 months, but not more than 1 year.  Interest on the loan cannot exceed 4% for the period of loan (which again, is February 15th to June 30th).
  • You do not have to show that you have credit elsewhere to be eligible for the loan, and there are no fees for applying for the loan.

The “Loan” Forgiveness Program

What Is It?
  •  All or a portion of the loan provided through the Paycheck Protection Program may be 100% forgiven.  In other words, the business or the self-employed individual would NOT be required to repay the loan, instead, the Federal government would repay the bank the amount of the loan that is forgiven.
What Portions of the Loan Are Eligible for Being Forgiven?
  • The following portion of loan may be forgiven:  Amounts paid for (1) salaries, wages, or commissions paid to employees (but limited to the first $100,000 of amounts paid to each employee prorated over the February 15th to June 30th time period), (2) cash tip equivalents (if applicable), (3) your employer contributions for health benefits, (4) your employer contributions for retirement benefits, (5) the cost of leave (e.g., vacation, family, and sick leave), or (6) the payment of State or local taxes assessed on employee compensation.
  • Loan amounts used to pay for mortgage interest, rent, and/or utility payments may also be forgiven.
Are There Limitations on How Much of the Loan Can Be Forgiven?
  • The amount of the loan that may be forgiven will be reduced by the number of employees the business laid off during the period between February 15th and June 30th.
  • In addition, if the business reduces the wages of an employee who makes less than $100,000 by more than 25% during the period between February 15th and June 30th, the loan amount that may be forgiven will also be reduced.
  • If, however, the business re-hires the employees that were laid off prior to – or during – February 15th the June 30th and/or the business restores the salary for those employees that may have seen a wage reduction, the loan amount that is eligible to be forgiven would correspondingly be increased.
Are There Time Limits?
  • Remember, the loan can only be used to pay for the above described costs incurred during February 15th and June 30th.  Under the Loan Forgiveness Program, you can choose an 8-week period of the allowable costs – incurred between February 15th and June 30th – to be forgiven.  For example, you could choose to go back to February 15th as the starting point for the 8-week period even though you did not get your loan until some time in April or May.
How Can I Get My Loan Forgiven?
  • To be eligible for the loan forgiveness, the business must, among other things, (1) verify the number employees on payroll and the amount of salaries, wages, and commissions paid to these employees, (2) verify the mortgage interest, rent, and/or utility payments, and (3) certify that the documentation used to “verify” things is true and accurate.  Without this “verification,” the business would NOT be eligible for the loan forgiveness.
  • Presumably, a self-employed individual must make similar “verifications” about their compensation and the expenses like mortgage interest, rent, and/or utility payments to be eligible for the loan forgiveness.
  • For the loan to be forgiven, the business and self-employed individual must apply to the lending bank asking for all or a portion of the loan to be forgiven.  As a result, all of the above information must be presented to the lending bank with the application asking for the loan forgiveness.
  • Any portion of the loan that is NOT forgiven will be amortized over 10 years with a 4% interest rate.  Again, payments of principal and interest on the loan may be deferred by 6 months, but not more than a year.

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Massachusetts Announces State Income Tax Filing Deadline Being Extended to July 15

Massachusetts Announces State Income Tax Filing Deadline Being Extended to July 15

On March 27, 2020 Governor Charlie Baker, Lt. Governor Karyn Polito, Senate President Karen Spilka and House Speaker Robert DeLeo announced an agreement to extend the 2019 state individual income tax filing and payment deadline from April 15 to July 15 due to the ongoing COVID-19 outbreak. This income tax relief is automatic and taxpayers do not need to file any additional forms to qualify.

“Massachusetts will move the state personal income tax filing and payment deadline to July 15, consistent with the federal government, in order to provide additional flexibility to filers during this crisis,” said Governor Charlie Baker. “In partnership with our colleagues in the Legislature, we are committed to providing this flexibility to taxpayers in a way that protects the Commonwealth’s strong fiscal footing that we have all worked hard to develop over the past several years.”

“We are proud to work with the Legislature to provide meaningful relief to people throughout the Commonwealth during this public health emergency,” said Lt. Governor Karyn Polito. “This extension will afford taxpayers additional time to file their Massachusetts individual income tax returns as we carry out the historic response to the COVID-19 outbreak.”

“The top priority during this public health crisis is to address the immediate needs facing our residents,” said Senate President Karen E. Spilka. “Our message is clear: residents should stay home and avoid social contact to be safe. Extending the tax deadline helps us accomplish that goal and provides peace of mind. I want to thank Chair Rodrigues, as well as our partners in the House and the Administration for their continued collaboration in confronting the challenges facing our Commonwealth.”

“The House, in partnership with the Senate and the Administration, agreed to an extension of the state tax filing deadline to ease the burden on individuals while agreeing to borrowing measures that would protect the Commonwealth’s revenue stream,” said House Speaker Robert A. DeLeo. “Thank you to Chair Michlewitz for his leadership in ensuring the Commonwealth’s fiscal viability while providing tax relief to those unduly effected by this crisis.”

Today’s announcement will move the state income tax filing deadline to match the July 15 deadline for filing federal individual income taxes. Legislation will be filed in the near future to finance the extension, and accompanying administrative changes will be implemented through the Department of Revenue. Specifically, the legislation will authorize the Commonwealth borrowing flexibility to manage deferred revenue this fiscal year and repay it in the next fiscal year, which starts July 1, 2020.

Individuals with questions or concerns regarding taxes can contact the Massachusetts Department of Revenue at (617) 887-6367 or send a secure e-message through MassTaxConnect.

The Commonwealth will continue to update the public on further developments and individuals are encouraged to consult both the Department of Public Health and the US Centers for Disease Control and Prevention websites for the most up to date information.

The latest information and guidance regarding COVID-19 is always available at mass.gov/COVID19.

 

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COVID-19 Unemployment, as it Relates to Massachusetts Filers

COVID-19 Unemployment, as it Relates to Massachusetts Filers

There is lots of information is swirling around on filing for unemployment during the COVID-19 pandemic. The latest news reports put last week’s national unemployment clams at over 3.3 million new claims, the most since the 2008 recession.

We are fielding questions hourly on unemployment from our clients – here are some answers to frequently asked questions about filing for unemployment during the COVID-19 emergency from both an Employer and Employee standpoint in Massachusetts –

 

Employer Unemployment FAQ: COVID-19

 

Employee Unemployment FAQ: COVID-19

 

One thing to note if you are an employee filing, make sure that the name of your employer matches the exact name on the W2 you received from your employer. If these names do not match, the DUA will be unable to match up the records and your claim will be delayed.

In addition to the state unemployment, the new $2 trillion stimulus package passed in the Senate Wednesday evening would allow people to receive an extra $600 a week in unemployment benefits for up to four months — on top of the amount they get from the state.

Please contact our office if you have any further questions.

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IRS unveils new People First Initiative; COVID-19 effort temporarily adjusts, suspends key compliance programs

IRS unveils new People First Initiative; COVID-19 effort temporarily adjusts, suspends key compliance programs

WASHINGTON – To help people facing the challenges of COVID-19 issues, the Internal Revenue Service announced today a sweeping series of steps to assist taxpayers by providing relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions.

“The IRS is taking extraordinary steps to help the people of our country,” said IRS Commissioner Chuck Rettig. “In addition to extending tax deadlines and working on new legislation, the IRS is pursuing unprecedented actions to ease the burden on people facing tax issues. During this difficult time, we want people working together, focused on their well-being, helping each other and others less fortunate.”

“The new IRS People First Initiative provides immediate relief to help people facing uncertainty over taxes,” Rettig added “We are temporarily adjusting our processes to help people and businesses during these uncertain times. We are facing this together, and we want to be part of the solution to improve the lives of all people in our country.”

These new changes include issues ranging from postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions. The IRS will be temporarily modifying the following activities as soon as possible; the projected start date will be April 1 and the effort will initially run through July 15. During this period, to the maximum extent possible, the IRS will avoid in-person contacts. However, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations.

“IRS employees care about our people and our country, and they have a strong desire to help improve this situation,” Rettig said. “These new actions reflect just one of many ways our employees are working hard every day to assist the nation. We care, a lot. IRS employees are actively engaged, and they have always delivered for their communities and our country. The People First Initiative is designed to help people take care of themselves and is a key part of our ongoing response to the coronavirus effort.”

More specifics about the implementation of these provisions will be shared soon. Highlights of the key actions in the IRS People First Initiative include:

Existing Installment Agreements –For taxpayers under an existing Installment Agreement, payments due between April 1 and July 15, 2020 are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Deposit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period.  By law, interest will continue to accrue on any unpaid balances.

New Installment Agreements – The IRS reminds people unable to fully pay their federal taxes that they can resolve outstanding liabilities by entering into a monthly payment agreement with the IRS. See IRS.gov for further information. 

Offers in Compromise (OIC) – The IRS is taking several steps to assist taxpayers in various stages of the OIC process:

  • Pending OIC applications – The IRS will allow taxpayers until July 15 to provide requested additional information to support a pending OIC. In addition, the IRS will not close any pending OIC request before July 15, 2020, without the taxpayer’s consent.
  • OIC Payments – Taxpayers have the option of suspending all payments on accepted OICs until July 15, 2020, although by law interest will continue to accrue on any unpaid balances.
  • Delinquent Return Filings – The IRS will not default an OIC for those taxpayers who are delinquent in filing their tax return for tax year 2018. However, taxpayers should file any delinquent 2018 return (and their 2019 return) on or before July 15, 2020.
  • New OIC Applications – The IRS reminds people facing a liability exceeding their net worth that the OIC process is designed to resolve outstanding tax liabilities by providing a “Fresh Start.” Further information is available at IRS.gov

Non-Filers –The IRS reminds people who have not filed their return for tax years before 2019 that they should file their delinquent returns. More than 1 million households that haven’t filed tax returns during the last three years are actually owed refunds; they still have time to claim these refunds. Many should consider contacting a tax professional to consider various available options since the time to receive such refunds is limited by statute. Once delinquent returns have been filed, taxpayers with a tax liability should consider taking the opportunity to resolve any outstanding liabilities by entering into an Installment Agreement or an Offer in Compromise with the IRS to obtain a “Fresh Start.” See IRS.gov for further information. 

Field Collection Activities – Liens and levies (including any seizures of a personal residence) initiated by field revenue officers will be suspended during this period. However, field revenue officers will continue to pursue high-income non-filers and perform other similar activities where warranted.

Automated Liens and Levies – New automatic, systemic liens and levies will be suspended during this period.

Passport Certifications to the State Department – IRS will suspend new certifications to the Department of State for taxpayers who are “seriously delinquent” during this period. These taxpayers are encouraged to submit a request for an Installment Agreement or, if applicable, an OIC during this period. Certification prevents taxpayers from receiving or renewing passports.

Private Debt Collection – New delinquent accounts will not be forwarded by the IRS to private collection agencies to work during this period.

Field, Office and Correspondence Audits – During this period, the IRS will generally not start new field, office and correspondence examinations. We will continue to work refund claims where possible, without in-person contact. However, the IRS may start new examinations where deemed necessary to protect the government’s interest in preserving the applicable statute of limitations.

  • In-Person Meetings – In-person meetings regarding current field, office and correspondence examinations will be suspended. Even though IRS examiners will not hold in-person meetings, they will continue their examinations remotely, where possible. To facilitate the progress of open examinations, taxpayers are encouraged to respond to any requests for information they already have received – or may receive – on all examination activity during this period if they are able to do so.
  • Unique Situations – Particularly for some corporate and business taxpayers, the IRS understands that there may be instances where the taxpayers desire to begin an examination while people and records are available and respective staffs have capacity. In those instances when it’s in the best interest of both parties and appropriate personnel are available, the IRS may initiate activities to move forward with an examination — understanding that COVID-19 developments could later reduce activities for an agreed period.
  • General Requests for Information – In addition to compliance activities and examinations, the IRS encourages taxpayers to respond to any other IRS correspondence requesting additional information during this time if possible.

Earned Income Tax Credit and Wage Verification Reviews – Taxpayers have until July 15, 2020, to respond to the IRS to verify that they qualify for the Earned Income Tax Credit or to verify their income. These taxpayers are encouraged to exercise their best efforts to obtain and submit all requested information, and if unable to do so, please reach out to the IRS indicating the reason such information is not available. Until July 15, 2020, the IRS will not deny these credits for a failure to provide requested information.

Independent Office of Appeals – Appeals employees will continue to work their cases. Although Appeals is not currently holding in-person conferences with taxpayers, conferences may be held over the telephone or by videoconference. Taxpayers are encouraged to promptly respond to any outstanding requests for information for all cases in the Independent Office of Appeals.

Statute of Limitations – The IRS will continue to take steps where necessary to protect all applicable statutes of limitations. In instances where statute expirations might be jeopardized during this period, taxpayers are encouraged to cooperate in extending such statutes. Otherwise, the IRS will issue Notices of Deficiency and pursue other similar actions to protect the interests of the government in preserving such statutes. Where a statutory period is not set to expire during 2020, the IRS is unlikely to pursue the foregoing actions until at least July 15, 2020.

Practitioner Priority Service – Practitioners are reminded that, depending on staffing levels and allocations going forward, there may be more significant wait times for the PPS. The IRS will continue to monitor this as situations develop.

“The IRS will continue to review and, where appropriate, modify or expand the People First Initiative as we continue reviewing our programs and receive feedback from others,” Rettig said. “We are committed to helping people get through this period, and our employees will remain focused on these and other helpful efforts in the days and weeks ahead. I ask for your personal support, your understanding – and your patience – as we navigate our way forward together. Stay safe and take care of your families, friends and others.”

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NFS URGENT COVID-19 UPDATE

  • Our staff will continue to operate as normal during regular business hours, but our office is closed to our clients and the public.

  • We will continue to be available by phone 800-560-4637, e-mail jeff@nfsnet.com or text 781-406-4070.

  • You may send us your tax documents by uploading to our secure client portal, by mail  or simply putting your tax information in through the mail slot in our front door.

  • Once we receive your information, we will contact you if we have any questions, then call or email you once your tax returns are complete.

  • Rather than physically coming to our office to pick up your tax returns, we will finalize them (signatures, payment for our fee, providing copies to you, etc.) via our secure portal or shipping by UPS or USPS.

As you are aware, life as we know it is rather challenging for the short term. We will keep you updated as we may need to adjust our plans.

HERE IS THE SCOOP ON THE OFFICIAL IRS ANNOUNCEMENT regarding 2019 Tax Filing:

  • The 2019 Tax Filing Due Date HAS BEEN extended 90 days. This means tax returns are due 7/15/2020 without an extension needed. However, we are making every attempt to get returns filed for the normal 04/15/2020 due date.

  • 2019 Tax Payments can also be deferred 90 days. This means you can wait to pay your tax due without penalty or interest. From our understanding, The Massachusetts Department of Revenue will follow suit in this ruling.

  • 2019 Refunds WILL NOT be delayed. This means refunds will be issued as normal.

As always, we are here to help you navigate through the 2019 Tax Season.  Don’t hesitate to call or email, but please be patient as we attempt to respond to your questions and concerns.

We encourage you to stay as safe as possible and wish you continued health during this difficult time in our country.

Jeff

Coronavirus Related Tax Relief

Coronavirus Related Tax Relief

The IRS has officially released relief information related to the payment of taxes due April 15, 2020.  Here is a brief summary of Notice 2020-17.

The Secretary of the Treasury has determined ANY person with a Federal income tax payment due April 15, 2020, is considered affected by the Coronavirus for purposes of this relief.

The due date for making Federal income tax payments due April 15, 2020, is postponed to July 15, 2020.  This relief is limited to up to $10,000,000 for each consolidated group of corporations or for each C corporation that does not join in filing a consolidated return.  This relief is limited to up to $1,000,000 for all other taxpayers.

This relief is available solely with respect to:

  1. Federal income tax payments (including SE tax) due on April 15, 2020, and
  2. Federal estimated income tax payments (including estimated SE tax).

No extension or postponement is provided in this notice for any payment or deposit of any other type of Federal tax, or FOR THE FILING OF ANY TAX RETURN or information return.

As a result of this postponement, the period from April 15, 2020, to July 15, 2020, will be disregarded in the calculation of any interest, penalties, and failure-to-pay penalty.  Interest, penalties, and failure-to-pay penalties will be imposed on any tax above the limits given above.

According to the Commonwealth of Massachusetts Department of Revenue website, the DOR is prepared to follow the IRS in offering similar relief for taxpayers with Massachusetts tax filing obligations. The situation is fluid and things are changing almost daily. Please reach out to the office for further clarification or check out our online updates relating to COVID-19.

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