With the continued economic impacts COVID-19 is having on the U.S. economy, the government passed a series of relief packages aimed at helping the American economy, businesses, and individuals.
Worldwide ERC® is working hard to keep you informed and has been active on behalf of the membership. While negotiations were underway about what the Coronavirus Aid, Relief, and Economic Security act (CARES) should include, we wrote to members of Congress. We’ve also been posting frequent updates to worldwideerc.org/coronavirus.
Because individuals, business leaders, and mobility professionals need to look at their options and next steps holistically, Worldwide ERC® has prepared a comprehensive Summary of Coronavirus Relief Benefiting Mobility that explains the various relief measures enacted, along with helpful examples for decision-makers to consider as they evaluate the path forward. The summary explains, in detail, the following components of the relief that currently is available:
Tax Filing and Payment Deadline Extensions
Prior to its passage of the CARES act and in an effort to keep more money in taxpayers’ pockets, Congress passed (in two separate actions) extensions for the filing and payment of individual income taxes. According to IRS, the filing date for any federal income tax return due 15 April 2020 is automatically extended to 15 July 2020, and any payments due with such returns are also delayed till 15 July. It’s important to note that only the 15 April deadlines were extended. Other deadlines, such as those for filing quarterly estimated tax returns and paying them, remain unchanged. Most, but not all, states have conformed to the new deadlines, so it is important to check with state authorities where you may owe taxes.
Small Business Loans
CARES provides up to $349 billion in new loans to small businesses to help them retain employees and cover operating expenses (the Paycheck Protection Program). The loans are administered by the Small Business Administration (SBA) and are available through a network of lenders already in place through the SBA. Note that small businesses that take advantage of these loans become ineligible for the employee retention tax credit and the delay of payroll taxes described below.
Employee Retention Tax Credit (ERTC)
The ERTC included in the CARES act gives qualifying businesses a refundable tax credit for 50% of wages paid up to $10,000 for each employee. Eligible wages are those paid after 12 March 2020, and before 1 January 2021. Wages include all wages subject to reporting on the Form W-2, including relocation benefits, as well as employer provided health care. Businesses qualifying for the credit are those whose business is partially or fully suspended by government order during the calendar quarter, or those whose gross receipts are less than 50% of those in the comparable quarter of 2019. The amount of the credit differs based on the size of the employer.
Delay of Payroll Taxes
Employers may delay paying the employer share of 2020 Social Security Taxes. Half the 2020 taxes will be due by 31 December 2021, and the other half by 31 December 2022. Note that this relief apparently does not extend to Medicare and unemployment taxes.
Refundable Payroll Tax Credit for Sick and Family Leave
The Families First Coronavirus Response Act requires employers with fewer than 500 employees to provide 80 hours of paid sick leave under some circumstances. It also includes a payroll tax credit for 100% of the benefits paid. Eligible employees are full-time and part-time workers who have been employed for at least 30 days.
The conditions that qualify for paid leave are as follows:
- The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19.
- The employee has been advised by a healthcare provider to self-quarantine due to COVID-19 concerns.
- The employee is experiencing symptoms of COVID-19 and seeking a medical diagnosis.
- The employee is caring for an individual who is subject to an order as described in (1) above, or who has been advised as in (2).
- The employee is caring for a child of the employee if the school or place of care of the child has been closed, or the childcare provider is not available, because of COVID-19 precautions.
- The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretaries of Treasury and Labor.
For the first two weeks, paid sick leave is required at 100% of salary, capped at $511 per day, for absence under the first three conditions, and at 2/3 of pay, capped at $200 per day, for the other three conditions. Part-time employees are entitled to an equivalent amount calculated based on their weekly hours of work. The Act also spells out provisions for sick leave longer than two weeks and does not apply to companies with more than 500 employees, which generally already provide paid sick leave. It also includes language about returning employees to their previous positions depending on the size of the company.
Companies required to provide the relief are compensated for any relief provided through a 100% refundable tax credit for the sick and family leave pay against employment taxes.
Modified Limits on Companies’ Use of Net Operating Losses
Section 2303 of the CARES Act modifies or removes various limitations on the use of a company’s net operating losses. Under CARES, any loss from 2018 through 2020 can be carried back five years to produce a tax refund in those years. In addition, the taxable income limitation is removed so that the loss can fully offset income. Prior to this change, such losses were subject to a net income limitation, and could not be carried back to reduce tax in any prior year. Many Worldwide ERC® member companies whose operations are impacted in the current economic circumstances will be able to take advantage of this provision.
Recovery Rebates (Economic Impact Payments) for Individuals
The CARES Act includes one-time relief payments to every American with a Social Security number. However, limitations on who can qualify may, in some cases, affect recently relocated employees. The relief payments are $1,200 per adult ($2,400 for married couples), plus $500 for every child under the age of 17. However, full payments are limited to individuals with adjusted gross income less than $75,000 and married couples with adjusted gross income less than $150,000. The payments then phase out to zero over income levels up to $99,000 and $198,000.
Increase and Extension of Unemployment Benefits
The CARES Act includes several provisions that will help employees temporarily out of work. First, section 2104 of the act increases the amount of unemployment assistance by $600 per week over otherwise allowable assistance for a period of up to four months. Second, section 2107 provides an additional 13 weeks of unemployment benefits through 31 December 2020 for those whose state benefits have run out. Finally, section 2101 makes unemployment benefits available beyond those currently eligible, including the self-employed, independent contractors, and those with a limited work history.
Retirement Plan distributions
The CARES Act includes two relief provisions related to retirement plans, sections 2202 and 2203. First, under section 2202 the 10% penalty for early withdrawals from retirement plans such as 401(k)s and IRAs would be waived for withdrawals up to $100,000 by individuals affected by the coronavirus. The tax due to such withdrawals will be paid over three years, and recipients will be allowed to recontribute the funds over three years without regard to contributions caps. The limit on loans from such plans increased from $50,000 to $100,000. Note that eligibility for hardship distributions, loans, or other premature use of a 401(k) plan generally depends on the plan requirements. Consequently, in some cases, employers may have to change the plan terms in order for employees to be able to take advantage of the CARES Act provision.
Second, section 2203 would waive the required minimum distribution requirement for 2020. Generally, individuals must begin withdrawing funds from retirement plans and pay tax on the withdrawals when they reach age 72.
Employer Payment of Student Loans
Section 2206 of the CARES Act allows employers to make payments on student loans for employees, up to $5,250 per year, and exclude those payments from the employees’ incomes. This provision provides another means for employers to provide relief for employees financially impacted by the coronavirus.
Government officials are discussing whether a fourth package will be needed and what it should include. Today’s jobs report indicates that the U.S. economy lost 701,000 jobs in March, and there is no way to predict with any certainty when COVID-19 will abate enough for affected businesses to begin recovering. Worldwide ERC® will continue to advocate for the industry and provide frequent updates as events unfold.