Manufacturers COVID-19 Webinar Tax Credits, Financing and HR Issues April 23 rd , 2020 www.mascpa.org (717) 843-3891
Mfgs. COVID-19 Update – HR and Legal Speakers Panel • Michael DePaul, Jr, Esq. - Partner, Tax Services Group, RKL LLP • John C. Porter, Esq. – Griffith, Lerman, Lutz & Scheib • Vicki Krotzer, PHR, SHRM-CP, HR Consultant – The Manufacturers' Association • Becky Stauffer, SPHR, SHRM-SCP, HR Consultant – The Manufacturers' Association Moderator: Tom Palisin, Executive Director www.mascpa.org (717) 843-3891
Mfgs. COVID-19 Update AGENDA Financing and Tax Credits • Payroll Reporting and Employer Tax Credits • Net Operating Loss Carrybacks • Tax Deadline Updates • Financing Programs – Paycheck Protection Program, Main Street HR Issues and Hot Topics • Facemasks Guidance – policies and practices Q&A www.mascpa.org (717) 843-3891
COVID-19 TAX CREDITS AND FINANCING UPDATES Presented by: MICHAEL R. DEPAUL, JR., ESQ. Partner, RKL Tax Services Group 4
Meet Your Presenter Michael R. DePaul, Jr, Esq. | Partner, Tax Services Group A Partner in RKL’s Tax Services Group and co- leader of the firm’s Estate and Trust Planning Group, Mike focuses on the needs of closely held businesses and high net worth individuals to deliver a comprehensive range of personalized services including estate and trust planning, business succession planning and tax compliance. With a specialization in multi-state and pass-through entity taxation, Mike has considerable experience representing clients before the IRS, various state revenue agencies and Pennsylvania administrative boards in matters relating to tax issues and controversies. mdepauljr@RKLcpa.com | RKLcpa.com 5
PAYROLL TAX REPORTING IN A POST-CORONAVIRUS WORLD & 6
Payroll Tax Credits Families First Coronavirus • Emergency Paid Family and Sick Leave (EPSL) Response Act (FFCRA) Coronavirus • Employee Retention Tax Credit (ERTC) Aid, Relief, and Economic • Payroll Tax Deferral Security Act • Payroll Protection Program (PPP) Loan (CARES ) 7
Families First Coronavirus Response Act (FFCRA) Track the Earnings Sample Earning Codes ▪ EPSL100: two-week period where they are paid $511/day or $5,110 in total ▪ FFCRA10: two-week period where they are paid 67% of their wages up to $200/day or $2,000 in total if they are quarantined or caring from someone with COVID-19 ▪ CHILDCARE10: two-week period where they are paid 67% of their wages up to $200/day or $2,000 in total for childcare issues related to COVID-19 ▪ CHILDCARE50: 10-week period where they are paid 67% of their wages up to $200/day or $10,000 in total for childcare issues related to COVID-19 Taxation Not subject to the Employer Social Security Match 8
Families First Coronavirus Response Act (FFCRA) Other considerations ▪ 401(k) eligible ▪ How is your payroll provider handling the credits? ▪ Going back and reclassify the payments: o Reclassify back to April 1 wages o Work with your payroll provider to make this adjustment ▪ Documentation 9
Who is impacted? • What does 500 employees really mean? • Full/part-time employees + employees on leave + temporary employees jointly employed by the employer and another employer + day laborers supplied by a temporary agency • Independent contractors NOT counted • Fluctuations in employee count • Aggregation rules • Who are considered eligible employees? • Paid sick 1. Quarantining order from government or physician 2. Having COVID-19 symptoms/diagnosed 3. Providing care for a family member who has been diagnosed or for a child whose school or day care has closed due to coronavirus • Paid family leave 1. Provide care for child younger than 18 whose school or day care has closed due to coronavirus 10
What counts towards the credits? = + + TOTAL CREDIT WAGES 1.45% ER MEDICARE HEALTH PLAN COSTS • Allocating Health Plan Costs • The credit offsets • 6.2% Employer Social Security Tax • Income Tax – Self-Employed 11
When should implementation take place? • Effective April 1 • Not retroactive • First 10 days of unpaid leave • Not required • EE allowed election to substitution of accrued vacation leave, personal leave, sick leave • Contact payroll providers immediately • Retirement plan implications 12
How can employers afford/implement this? • Retain taxes instead of depositing • Employee/Employer portion of Social Security (6.2%) • Employee/Employer portion of Medicare (1.45%) • Federal Income Taxes withheld • Accelerated IRS payment • Forms to be released • Small business exemption • Less than 50 employees • Only for school closings or childcare unavailability 13
Emergency Paid Sick Leave Provisions Employer’s Refundable Employment Who is Sick or Maximum Time Period Required Cap on Wages Eligible for Tax Refundable Tax Credit Status: Quarantined Covered Pay Rate Tax Credit Credit through 12/31/20 Offsets Employee Self FT = 2 weeks or 80 hours 100% of 100% of $511/day AND $5,111 in the Employer portion Regular "Qualified Paid aggregate plus a pro rata amount of Social Security tax PT = typical # hours Pay Rate Sick Leave Wages" of expenses paid in maintaining a worked in 2 week period qualified health plan related to sick leave payments Employee Family member FT = 2 weeks or 80 hours 67% of 100% of $200/day AND $2,000 in the Employer portion Regular "Qualified Paid aggregate plus a pro rata amount of Social Security tax PT = typical # hours Pay Rate Sick Leave Wages" of expenses paid in maintaining a worked in 2 week period qualified health plan related to sick leave payments Self-Employed Self FT = 2 weeks or 80 hours n/a 100% of Lesser of: Income Taxes "Qualified Sick Leave 1) $511/day, or PT = typical # hours Equivalent Amount" 2) Avg. daily S/E income for year worked in 2 week period Self-Employed Family member FT = 2 weeks or 80 hours n/a 67% of Lesser of: Income Taxes "Qualified Sick Leave 1) $200/day, or PT = typical # hours Equivalent Amount" 2) Avg. daily S/E income for year worked in 2 week period 14
Emergency Paid Family Leave Provisions Employer's Cap on Wages Eligible for Employment Who is Sick or Maximum Time Period Required Refundable Tax Credit Refundable Tax Credit through Status: Quarantined Covered Pay Rate Offsets Tax Credit 12/31/20 Employee Family member 12 weeks total No less than 67% 100% of Weeks 3-12: Employer portion (First 14 days could be of regular pay "Qualified Family $200/day/employee AND of Social Security tax unpaid or use accrued Leave Wages" $10,000 in the aggregate vacation) then up to 10 additional weeks Self-Employed Family member 12 weeks total n/a 67% of Up to 50 days at lesser of: Income Taxes "Family Leave Equivalent 1) $200/day, or (First 14 days could be unpaid or use accrued Amount" 2) Avg. daily S/E income for vacation) then up to 10 year additional weeks 15
Coronavirus Aid, Relief, and Economic Security Act (CARES) Employee Retention Tax Credit (ERTC) ▪ For qualified wages (including qualified health plan expenses) paid after March 12, 2020 and before January 1, 2021: 50% of the wages paid in a calendar quarter (maximum credit $5,000) Note on employee count: ▪ 100 or less employees in 2019, ALL WAGES (to include healthcare costs) are qualifying wages ▪ For employers with an average employee count of more than 100 full-time employees in 2019, qualified wages are the wages paid to an employee for time that the employee is not providing services due to COVID-19 EXCEPTION: If you received a PPP, you cannot also utilize the ERTC 16
Employee Retention Tax Credit (ERTC) • For any business closed or suspending operations due to coronavirus, if employer continues to pay employees • Eligible for credit via two ways: • Operation of business fully or partially suspended during any calendar quarter during 2020 due to orders from appropriate government authority resulting from COVID-19. • Business remained open, but during any quarter in 2020, gross receipts for that quarter were less than 50% of what they were for the same quarter in 2019. The business will then be entitled to a credit for each quarter, until the business has a quarter where it has recovered sufficiently that its receipts exceed 80% of what they were for the same quarter in the previous year. • Credit is reduced for other federal credits (WOTC, R&D, Families First payroll credits) • Credit potentially applies to wages paid between 3/13/20 and 12/31/20 17
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