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.

We would first like to extend our heartfelt wishes that you and your families are as well as can be expected in these times.

To our clients and friends —

Our hearts especially go out to anyone directly impacted by the virus and all healthcare professionals who are battling on the front lines.

At Werner & Co CPAs we are doing our part to help “flatten the curve” and are looking out for our employees and the general well-being of our nation. We are assessing the situation daily, remaining vigilant, and following all recommendations from the World Health Organization (WHO), U.S. Centers for Disease Control and Prevention (CDC), and local authorities.

On Tuesday March 17, 2020, Treasury Secretary Steven Mnuchin announced taxpayers and businesses will have until July 15, 2020 to pay any unpaid 2019 taxes. All estimated taxes for first quarter 2020 are also delayed until July 15, 2020. All individual U.S taxpayers and businesses qualify for this extension to pay.

What does this mean for you and your tax return – Tax Day remains at April 15^th, 2020. To serve you and make sure we continue to deliver the quality, excellence and timeliness you expect from us. If you have a balance due, we will file for an extension by April 15, 2020. You will then have until 7/15/2020 to make your tax payment. If you are due a refund, we are working vigorously on completing your tax return by the 4/15 deadline. This extension to pay does not impact refunds, refunds are still being paid.

If you are receiving this message and your return has been completed with a balance due, you need not send the payment until 7/15/2020. Nothing needs to be changed on the return or the voucher you have in hand. Simply write the check and mail it by July 15.

If you have specific questions, please feel free to call or email our office. This environment is changing quickly. Next up will be the stimulus package being discussed in the Senate. That will look to provide employers and taxpayers with aid in the form of SBA financing, payroll tax reductions, and direct stimulus payments among other things.

We thank you for your patience and continued trust while we adapt to this everchanging landscape. This pandemic will challenge us all but working together I know we will be successful in navigating this crisis.

We will keep you apprised as things change, in the interim please stay safe.

— Kris DePaolo, CEO

Here are important links regarding the impact of coronavirus:

PICPA Information
https://www.picpa.org/attend-cpe-events/coronavirus-updates-resources

Unemployment Questions
https://www.uc.pa.gov/COVID-19/Pages/Employer-COVID19-FAQs.aspx

AICPA Information
https://www.aicpa.org/content/aicpa/news/aicpa-coronavirus-resource-center.html

What do we know now?

Treasury Secretary Mnuchin announced a 90-day extension on tax payments due April 15^th, 2020. The deferral allows taxpayers to pay any tax due on 4/15 without penalty or interest until 7/15/2020 – up to $1 million for an individual and $10 million for a corporation.

What do you as a taxpayer need to do?

Nothing, as Secretary Mnuchin announced “all you have to do is file your taxes. You’ll automatically not get charged interest and penalties.” If your return has already been filed and the balance not paid – you can plan on making payment July 15^th without penalty or interest.

What has NOT happened?

The announcement did not change the April 15^th filing due date. Only the payments were delayed to July 15, 2020. Many professionals expect the filing deadline to be changed but that has not yet been confirmed. There was also no mention of first quarter estimated tax payments being delayed. These payments are typically due on 4/15.

The stimulus bill is still sitting with the Senate, no passage had taken place as of 9am on March 18, 2020.

So, we wait for further clarity in this rapidly changing environment. In the interim, stay safe and look out for one another.  

Questions or concerns, contact us at info@wernercpa.net or 610.770.9236.

As the dust settles on the tax reform bill signed into law on December 22, 2017, there are a number of new provisions small business owners need to incorporate into their 2018 tax planning. A few deductions have been removed and new ones added.

One of those shiny new items is the 20% deduction of qualified business income (QBI). This deduction is aimed at giving business owners an incentive to hire new workers. Who can deduct how much depends on the type of business you have, the assets in the business, your business income, your total income and the wages you pay. You might have guessed that the formula for this is quite complex. Which politician was touting you could file your taxes on a postcard?

The 20% QBI deduction only applies to passthrough entities such as proprietorships, partnerships and S corporations. For owners of passthrough personal service companies, including accountants, attorneys, financial advisors, realtors and medical services to name a few, this deduction applies if your total income is less than $315,000, assuming you file jointly with a spouse. All other filers are capped at $157,500 of total income. If you exceed those thresholds as a personal service business owner your 20% QBI deduction is zero.

If your business is not a personal service entity, the principal limits (there are other details, of course) on the QBI deduction are 20% of your passthrough income or 50% of your payroll. For example, take a manufacturing company with $3 million in revenue, $2.3 million in expenses and an owner’s salary of $200,000, net income of $500,000. Let’s consider they paid $800,000 in payroll expenses, the deduction is 20% of $500,000 and limited to 50% of total payroll, in this case the deduction would be $100,000 and no greater than $400,000.

C corporations will benefit from the corporate income tax rate reduction to a flat 21%, down from a high of 35%, or up from a low of 15% if profit was less than $50,000. Many large corporations have already started giving out bonuses to employees as a way of passing on the tax savings. With all the good news there were a few deductions that have been eliminated with the passage.

Business will no longer have the domestic production deduction, so manufacturers will feel the most pain with this change. In addition, the Act limits the amount of prior year Net Operating Losses (NOLs) that companies can deduct in a single year. In 2018 and beyond, the NOL deduction can be no more than 80% of taxable income and new NOLs cannot be carried back at all, compared with the prior law two-year carryback. While the carryback rule has been removed, companies can carry the loss forward indefinitely.

These are just a few of the changes and we are learning more and more details each day. Many of the regulations in this Act have not yet been written. It will be imperative for business owners to work closely with their tax teams and plan how best to take advantage of the new law to help their businesses prosper.