2EHTC Communication Regarding COVID-19
Update: March 12, 2021
At EHTC, we know accounting. We also know that these are times of uncertainty and there is an abundance of resources to everyone. We plan to update this page with pertinent information on COVID-19’s impact on your taxes, accounting and business as it becomes available to us. Please bookmark this page and check back for updates as new information becomes available.
03/12/2021 - Schedule C borrowers can use gross income borrowing base
03/12/2021 - The SBA is offering PPP loans until March 31, 2021
02/25/2021 - Key facts regarding the Employee Retention Credit (ERC)
02/25/2021 - Paycheck Protection Program (PPP) first and second draw information and loan forgiveness
01/11/2021 - Dave Echelbarger and Mike Young spoke at the Grand Rapids Chamber regarding the federal stimulus and PPP Phase 2
01/04/2021 - There have been significant changes to the Employee Retention Credit based on the latest pandemic relief and economic stimulus bill
12/28/2020 - The Consolidated Appropriations Act of 2021 has been signed into law - key business provisions including PPP2
12/16/2020 - For PPP loans under $50,000, there is a simplified application under SBA Form 3508S
12/2/2020 - Applications will be accepted starting December 15 for the Pure Michigan Small Business Relief Initiative
11/30/2020 - The IRS issued additional guidance on PPP loan expenses and revenue
9/1/2020 - The Kent County Small Business Recovery Program still has grants available for 0-25 employee businesses
8/31/2020 - There are many reasons to wait to apply for PPP Forgiveness, and five important reasons can be found here
8/24/2020 - The SBA's list of FAQs for borrowers to rely on when applying for forgiveness can be found here
8/10/2020 - A payment relief program is available for SBA 7(a) and 504 loans. Learn about this great program here
8/6/2020 - Paycheck Protection Program updates, FAQs, and tools can be found here
7/6/2020 - The deadline to apply for the PPP loan is extended to August 8. Find out why you should apply if you have not yet here.
6/8/2020 - An update FAQ to the PPP Loan Forgiveness Application can be found here
5/29/2020 - PPP Loan Forgiveness Application FAQs can be found here
5/26/2020 - SBA updates for the Paycheck Protection Program, including the forgiveness loan instructions and application, can be found here
5/13/2020 - The Department of Treasury has released FAQs pertaining to the PPP Program here
5/7/2020 - Self-employed individuals and 1099 contractors are eligible to participate in the Payroll Protection Program
4/28/2020 - Highlights on the Payroll Protection Program Loan Forgiveness and other FAQs
4/17/2020 - EHTC has developed a tool to maximize loan forgiveness in the Paycheck Protection Program
4/17/2020 - The SBA Announced the Economic Injury Disaster Loan is only accepting agriculture applications
4/15/2020 - Information with respect to payroll tax deferral and how it intersects with the Paycheck Protection Program (PPP) here
4/9/2020 - Financial Statement and Reporting Impacts
4/8/2020 - Employee Retention Credit information
4/6/2020 - Questions and answers regarding Economic Injury Disaster Loan (EIDL) Emergency Advance
4/6/2020 - Information regarding Coronavirus Relief Options has been updated by the Small Business Administration
4/2/2020 - CARES Act Update
4/1/2020 - Stimulus Checks and Tax Credit Update
3/31/2020 - CARES Act Stimulus Package
3/30/2020 - Gift Tax returns Form 709 have been extended to July 15, 2020
3/30/2020 - IRS posted information regarding the Families First Coronavirus Response Act (FFCRA)
3/28/2020 - Michigan pushes state and city income tax filings to July 2020
- Paycheck Protection Program - Loan Forgiveness instructions and application. Click here
- Coronavirus Relief Options - including a list of loan options available, a standard list of requirements and the application. Click here
- The IRS has created a Coronavirus Tax Relief Page that is updated frequently. Click here
- The US Department of Labor has created a COVID-19 and the American Workplace Page that is updated frequently. Click here
- The State of Michigan has created a Coronavirus page that is updated frequently. Click here
Sections (Click on the titles to go directly to the section):
The Paycheck Protection Program information
Do you need information on the CARES Act?
Are you an employer with fewer than 500 employees? If so, click on the Families First Coronavirus Response Act (FFCRA) section to see how the new expanded family and medical leave provisions apply to you.
Are you an employer that is faced with having to lay off your employees? If so, click on the Michigan Unemployment section to see how the unemployment rules apply to you.
Are you a business owner that is in need of a small business loan? If so, click on the Financial Update Section to see whether you may be eligible for a Small Business Administration or Michigan Economic Development Corporation disaster loan or grant.
Do you know the updated tax filing and payment due dates? For an update click on the Tax Filing/Payment Updates section.
Paycheck Protection Program
Information is continually changing in regard to governmental funding options available to business owners and individuals. The Paycheck Protection Program (PPP) was created by the Department of Treasury for businesses with less than 500 employees, including Sole Proprietors and Independent Contractors. More information regarding the PPP can be found here.
Generally, this loan may be forgiven if proceeds are used for the following expenses:
- Payroll costs (salaries, wages, vacation, severance, retirement benefits, state and local taxes and parental, family, medical or sick leave)
- Costs related to group health care benefits
- Employee commissions and tips
- Interest on mortgage payments
- Rent and utility costs
EHTC has developed a tool to qualify for the Maximum Loan Forgiveness. Contact your EHTC Tax Advisor, email@example.com or leave a message at (616) 575-3482 to receive a copy of this tool for tracking your expenses.
The Small Business Association (SBA) has released the details relating to loan forgiveness including the instructions and application here.
Employee Retention Credit
The IRS has released additional information on the Employee Retention Credit here. This is a refundable tax credit against certain employment taxes equal to 50% of the qualified wages an eligible employer pays to employees after March 12, 2020, and before January 1, 2021. Eligible employers can get immediate access to the credit by reducing tax deposits they are otherwise required to make. Also, if the employer's employment tax deposits are not sufficient to cover the credit, the employer may get an advance payment from the IRS. For all the details on this Credit please see the article here.
CARES Act Stimulus Package
The U.S. Department of the Treasury and the Internal Revenue Service today announced that Social Security beneficiaries who are not typically required to file tax returns will not need to file an abbreviated tax return to receive an Economic Impact Payment. Instead, payments will be automatically deposited into their bank accounts See the article on the Department of Labor Website here.
The IRS will use the information on the Form SSA-1099 or Form RRB-1099 to generate Economic Impact Payments to recipients of benefits reflected in the Form SSA-1099 or Form RRB-1099 who are not required to file a tax return and did not file a return for 2018 or 2019. This includes senior citizens, Social Security recipients and railroad retirees who are not otherwise required to file a tax return.
Since the IRS would not have information regarding any dependents for these people, each person would receive $1,200 per person, without the additional amount for any dependents at this time. See the article here for more information.
On March 27, 2020, Congress passed and the President signed into law the Coronavirus Aid, Relief and Economy Security Act (CARES Act) in response to the Global COVID-19 pandemic. This $2 trillion emergency funding package is designed to inject immediate liquidity into the economy on several fronts.
With all of the information included in this Act, EHTC will be sending out articles to highlight the hot topic items in an effort to help assist you with your immediate needs and questions. Below are the articles that have been released so far but please continue to return to this page for additional articles as they become available.
March 27, 2020 - Introduction to initial topics before release of the CARES Act.
March 31, 2020 Business Edition including Employee retention credit, delay of payroll taxes, and favorable tax considerations for businesses.
March 31, 2020 Individual Edition including Stimulus Checks, changes to retirement contributions and distributions, and charitable donations.
March 31, 2020 Unemployment Edition including updates on the new federal and Michigan laws as well as links to resources to use while applying for unemployment.
New - 4/1/2020
The IRS has released additional guidance on the tax credits for required paid leave provided by small and midsize businesses here.
The IRS has released additional guidance on the employee retention credit under the CARES Act here.
Family First Coronavirus Response Act (FFCRA):
The U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act).
For more detailed information, please use the Department of Labor Website here.
Key take-aways include:
- This act includes the Emergency Paid Sick Leave Act and the Emergency Family Medical Leave Expansion Act
- The paid leave provisions are effective on April 1, 2020 and apply to leave taken between April 1, 2020 and December 31, 2020.
- The expanded family and medical leave provisions of the FFCRA apply to certain public employers, and private employers with fewer than 500 employees.
- Small businesses with fewer than 50 employees may qualify for exemption from the requirement to provide leave due to school closings or child care unavailability if the leave requirements would jeopardize the viability of the business as a going concern.
- Complete Coverage as employers receive 100% reimbursement for paid leave pursuant to the Act. Health insurance costs are also included in the credit. Employers face no payroll tax liability. Self-employed individuals receive an equivalent credit. Currently awaiting further guidance for how to get and file these credits.
- Fast Funds as reimbursement will be quick and easy to obtain. An immediate dollar-for-dollar tax offset against payroll taxes will be provided. Where a refund is owed, the IRS will send the refund as quickly as possible.
- Easing Compliance as the requirements subject to 30-day non-enforcement period for good faith compliance efforts.
3/30/2020 - The IRS has posed a FAQ section that contains very helpful information. Check it out here.
Below is a chart that summarizes the duration of leave and the calculation of pay for those employees depending upon the reason for their leave:
Michigan Unemployment Updates:
The Governor's executive order has expanded unemployment benefits to:
- Sick workers - workers who are sick, quarantined, or immunocompromised and do not have access to paid family and medical leave or are laid off.
- Workers Caring for Loved Ones - including those who have childcare responsibilities due to school closures
- First responders working in the public health community who become ill or are quarantined due to exposure to COVID-19 and who do not have access to paid family and medical leave or are laid off.
The Governor's executive order also extends access to benefits or unemployed workers:
- Increased weeks - benefits will be increased from 20 to 26 weeks.
- Longer application time - the application eligibility period will be increased from 14 to 28 days.
- Fewer requirements - the in-person registration and work search requirements will be suspended.
If you are an employer/employee in Michigan and will need to file for unemployment insurance please use the link here.
There you will find resources such as:
- Fact Sheet
- Employer/Employee Resources including webinars
- Link to filing for unemployment for both the employee and employer
- Guide to Michigan Employers Contemplating Potential Layoff Related to COVID-19
Financial Statement and Reporting
Nearly every small business has been impacted by the outbreak of COVID-19 in some way. Here is a summary of issues that a company might face, and the possible disclosures that would be required:
Asset Impairment: Due to the COVID-19 crisis, consideration of an impairment test may be required because of a decrease in financial performance or a change in the market.
- Indefinite-lived intangible assets
- Long-lived assets
- Should allowance for doubtful accounts or bad debt expense be increased?
Revenue: Companies may decide to offer discounts to their customers to provide relief from the COVID-19 crisis. Contracts with customers may need to be updated.
Debt Covenants: Due to the closure of many companies to help stop the spread of COVID-19, cash available to service debt may be at a shortage. Debt covenants may be based off total assets, net income, cash flow, or equity. COVID-19 may cause you to fall out of compliance with your debt covenant, which may cause the lender to require payment sooner than you expected. This would cause you to reclassify the debt to current instead of long-term. If you find yourself in this situation, we recommend you contact your lender to discuss what can be done. A list of possible solutions are as follows:
- Request for additional financing
- Restructure existing debt agreements
- Obtain a waiver
Subsequent Events: A disclosure may be necessary depending on the impact of COVID-19 to prevent financial statements from being misleading. Since the World Health Organization (WHO) did not announce COVID-19 a global health emergency until January 31, 2020, year-end financial statement amounts are not impacted except for maybe debt classifications stated above. The disclosure would include:
- The nature of the event
- An estimate on the impact it has on the financial statements
- If an estimate cannot be made, an assertion about that fact must be made
Small Business Administration (SBA)
The U.S. Small Business Administration is offering designated states and territories low-interest federal disaster loans for working capital to small businesses suffering substantial economic injury as a result of the Coronavirus (COVID-19). Upon a request received from a state’s or territory’s Governor, SBA will issue under its own authority, as provided by the Coronavirus Preparedness and Response Supplemental Appropriations Act that was recently signed by the President, an Economic Injury Disaster Loan declaration. To learn more about this please use the link here.
Michigan Economic Development Corporation (MEDC)
The Michigan Small Business Relief Program will provide up to $20 million in support for small businesses negatively impacted by COVID-19. The funding is divided between $10 million in small business grants and $10 million in small business loans to support businesses facing drastic reductions in cash flow and the continued support of their workforce. Funds for the program are expected to be available no later than April 1, 2020. For updates from the MEDC, use the link here.
Tax Filing/Payment Updates:
The Treasury Department and the Internal Revenue Service (IRS) announced special Federal income tax return filing and payment relief in response to the ongoing Coronavirus Disease 2019 (COVID-19) emergency. The link to frequently asked questions is here.
- The April 15, 2020 tax deadline has been moved to July 15, 2020.
- Taxpayers can defer federal income tax payments due on April 15, 2020 to July 15, 2020 with no penalties and interest, regardless of the amount owed. This date applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.
- Taxpayers do not need to file any additional forms with the IRS to qualify for this automatic federal tax filing and payment relief. For those who cannot file by July 15, 2020, an extension can be filed to extend the tax deadline beyond this date to the normal extended due date.
- The IRS is urging taxpayers who are anticipating refunds to file as soon as possible. Most refunds are being issued within 21 days.
- The relief does not apply to the normal filing, payment, and deposit due date for both payroll and excise taxes.
- The Secretary of Treasury has now determined that the automatic extension will apply to the filing and payment of taxes for Gift Tax returns Form 709. There is no requirement to file Form 8892 (Extension Form) to obtain the benefit of the extended due date of July 15th. There has still not been clarification on the automatic extension date for estates Form 706.
- Please note that the second quarter 2020 estimated income tax payments are still due on June 15, 2020.
At this time we are monitoring the state and local governments regarding the due dates of tax returns and payments here.
Governor Gretchen Whitmer signed Executive Order 2020-26, which pushes all April 2020 state and city income tax filing deadlines in Michigan to July 2020, as part of continued efforts to help Michiganders during the COVID-19 pandemic.
Michigan and Michigan City Tax Due Dates:
- Returns and payments due April 15 will be due July 15, 2020
- Returns and payments due April 30 will be due July 31, 2020
- This includes Quarterly tax estimates due in April
- The extensions are automatic, tax payers do not need to file any additional forms
At EHTC, we are constantly reviewing the evolving situation and restrictions that develop throughout the process. In order to be as caution as possible, we have closed our office and asked Team Members to work remotely until further notice. Rest assured knowing that EHTC is fully committed to delivering the outstanding services you’ve come to expect from EHTC. Thank you for choosing EHTC as your strategic partner and do not hesitate to reach out to us with any concerns or questions. Please call us at (616) 575-3482 or email firstname.lastname@example.org. Team members are available via email, phone and Microsoft Teams meetings.
All the best to each and every one of you and stay healthy!