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COVID-19 economic relief

March 19 2020

The Senate Passes COVID-19 economic relief package to combat pandemic.

On Wednesday 18 March 2020, the US Senate passed an economic stimulus plan designed to help employers cushion the impact of the COVID-19 outbreak on themselves and their employees. The act expands the Family and Medical Leave Act and introduces specially designed paid sick leave, covering employees who are sick with the virus as well as those serving as caregivers for others with the virus. This act provides two payroll tax credits for businesses with fewer than 500 employees effective April 2, 2020. In addition to the credits described below, the act includes free virus testing, expands unemployment insurance and provides food assistance to those affected by the virus.

Sick Leave Credit – this credit is for eligible employees that are taking sick leave because the employee is:

  • Subject to a federal, state or local quarantine order related to COVID-19:
  • Advised by a health care provider to self-quarantine due to COVID-19;
  • Experiencing COVID-19 symptoms and seeking medical diagnosis;
  • Providing care for an individual subject to a federal, state or local quarantine order or advised by a health care provider to self-quarantine due to COVID-19 concerns;
  • Caring for the employee’s child if the child’s school or place of care is closed or the child’s care provider is unavailable due to public health emergency; or
  • Experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

The credit cannot exceed $511 per employee per day and is limited to 10 days or 80 hours of sick pay leave. It remains in effect for wages paid through December 2020. The employer cannot use this credit in connection with wages for which the employer is currently receiving the employer credit for paid family and medical leave enacted by the Tax Cuts and Jobs Act.

Self employed individuals also qualify for credit up to the lesser of the self-employment tax on their average daily self-employment income or $511 per day if caring for themselves and $200 if caring for a family member. This credit limit is also 10 days.

On a quarterly basis, the credit is limited to the total tax liability on the employer portion of the social security payroll tax. In certain circumstances the credit can be refundable.

Emergency Family & Medical Leave Expansion Act – The Act amends and expands the family and medical leave act (FMLA) temporarily. Currently only employers with 50 or more employees were covered under FMLA. This change now covers employers with less than 500 employees. Any individual employed by the employer for at least 30 days (before the first day of leave) may take up to 12 weeks of job-protected leave. Employees who meet any of the following circumstances qualify:

  • Quarantine because of exposure or symptoms related to COVID-19;
  • Provide care to a quarantined family member;
  • Provide care for child younger than 18 whose school or day care has closed due to COVID-19

We are making every effort to stay on top of this very fluid situation. Please call or email with questions you may have, info@wernercpa.net or 610.770.9236.

 

Striking Out on Your Own in 2014? Your New Tax Obligations

December 20 2013

Many newly self-employed individuals get quite a shock when they start planning for income taxes. Here’s what you need to know.

You probably remember your surprise when you got your first paycheck from your first job in high school or college. Who is this FICA, you may have thought, and where is all of my money going?

Taxes and other payroll deductions are just a part of your financial life now, and you understand where it all goes.

If you’re planning to be self-employed sometime in 2014, though, you have another IRS education coming your way. Here’s what you can expect.

An Annual Tax Return

You’re still required to file one of these every year, though you’ll have to get acquainted with some new forms and schedules, particularly the Schedule C. This is where you’ll account for your income and expenses and declare a profit or loss.

You may be able to complete a Schedule C-EZ instead of a Schedule C. This is a less complex form that you can submit if you:

  • Have expenses of $5,000 or less
  • Don’t have employees
  • Run a business that doesn’t have inventory, and
  • You’re not depreciating any property or deducting the cost of your home.

Estimated Taxes

As an employee of a company, you’ve already been paying estimated taxes, those deductions for Medicare, Social Security, federal and state income tax that come out of your check every payday. You’ve just been paying it a little at a time, so it doesn’t seem that overwhelming.

Your first estimated tax payment might. That’s a good thing – it means you’re already generating enough income to warrant a sizeable tax bill. But it also means that you have to come up with a chunk of money four times a year to pay your estimated taxes. You’re basically just keeping up with your counterparts in the full-time workforce.

The trick lies in figuring out how much of your income will be owed in taxes every three months. There’s no hard-and-fast rule – that’s why they’re called estimated taxes. We can help you devise a formula that will work for you.

The IRS offers a form that contains instructions for paying estimated taxes, worksheets, current rates schedules and vouchers for submitting your payments: the 1040-ES.

Self-employment Taxes

Often referred to as SE tax, this financial obligation meets your requirements for submitting Medicare and Social Security payments. When you were employed by a company, your employer contributed a portion of it. Now you must pay all of it.

Your Business Structure

A decision that will have tremendous bearing on your taxes is the type of business structure you choose. If you’re just going off on your own, this will most likely be a sole proprietorship. More complex business structures include partnerships, corporations and Limited Liability Companies (LLC).

If you’re at all uncertain about which is the best fit for your new venture, by all means contact us. We’ll help you sort it out and work with you on your new requirements for tax planning, preparation and filing.

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