COVID-19 Business Update
This update includes a summary of pressing topics to consider as you make business operation decisions resulting from the COVID-19 economic impacts and mandates. Please reach out to us for individualized support as it pertains to your company. Edelstein will monitor continued guidance from the IRS on enacted legislation as well as the progress of pending state and federal legislation. We will keep you up to date on these developments as they occur. We wish for all our clients and community to stay well and safe during this difficult time.
I. Understanding Termination vs. Furlough
a. Termination (“Lay Off”): Termination results in a permanent end to employment. Terminated employees are legally owed any wages for time worked and pay out of their vacation time accrued. While their termination includes loss of health insurance coverage, it does qualify them for COBRA insurance and unemployment benefits.
b. Furlough: Furloughs provide flexibility for employers who want to keep their staff employed during a temporary closure or reduced operations. Furloughs extend emotional assurance that employees will have a job after the mandated closures end. Benefits of a furlough include:
- Employees can be paid or unpaid
- Employees can stay on their employer health insurance plans
- Employees can still work, industry permitting, during a furlough
- Employees can apply for unemployment benefits during the furlough
- Employees may or may not accumulate PTO during a furlough, based on the specific policy plan.
- Employees can be mandated to exhaust their vacation time during a furlough. However, they cannot be mandated to use their sick time.
As an employer, you are not legally required to provide any written details of a furlough to staff but a memo is recommended provided the memo states details are subject to change.
II. Wage Relief Options
a. MA Unemployment during COVID-19
- Formerly, individuals were required to wait to apply for unemployment benefits until their first week of total unemployment. This waiting period is waived effective March 10, 2020 and will expire 90 days after the termination of the State of Emergency.
- The Executive Office of Labor and Workforce Development and Department of Unemployment Assistance filed emergency regulations that allow people impacted by COVID-19 to collect unemployment benefits if their workplace is shut down and expects to reopen within 4 weeks. This applies to all employees (full and part time) who are impacted by such shutdowns.
- Business owners who receive W-2 wages are also eligible to apply for unemployment benefits.
- Employers whose businesses are severely impacted by COVID-19 may request up to a 60-day grace period to file quarterly reports and pay contributions.
b. Massachusetts WorkShare Program:
WorkShare benefits are reduced Unemployment Benefits that are supplemented by reduced regular wages. The program helps employees retain their jobs and employers maintain productivity. However, there has been no COVID-19 leniency regarding the complicated application process. Please reach out to us if you would like to discuss further.
I. Available Opportunities
a. SBA Disaster Assistance Loans: The U.S. Small Business Administration (SBA) created a relief plan to help small businesses affected by Coronavirus by offering affordable loan options up to $2 million. The Disaster Assistance Loans for Small Businesses program (https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-provide-disaster-assistance-loans-small-businesses-impacted-coronavirus-covid-19) offers interest rates of 3.75% for small businesses without credit available elsewhere, and interest rates of 2.75% for nonprofits. The SBA offers long-term repayment options on these loans of up to 30 years. Businesses with credit available elsewhere are not eligible for these loans. To find out if these loan options are available in your region and your business is eligible, visit: https://disasterloan.sba.gov/ela/ for more information.
b. Facebook Small Business Grant Program: Facebook is making $100 million in cash grants and ad credits available to small businesses in over 30 countries. The grant money can be used to cover operational costs, take care of employees, pay rent, and more. Facebook says it will start taking applications in the coming weeks, and businesses can sign up for updates on their grant page. Visit https://www.facebook.com/business/boost/grants?ref=alias for more information.
II. Opportunities Pending Proposed Legislation
The Senate introduced the CARES Act (S. 3548) on March 19, 2020 and it is currently in negotiations. While the CARES Act covers several areas, provisions relevant to businesses include several options:
a. Forgivable loans for small businesses would potentially cover payroll, leave, mortgage, and other related expenses. The loans would only have to be repaid if funds are spent on other activities, and otherwise convert to grants if spent on the aforementioned expense categories.
b. Businesses would receive loan forgiveness in an amount equal to the expense categories mentioned above for the covered period of March 1, 2020 to June 30, 2020. This would be conditional upon the business retaining their employees and payroll levels during the covered period.
c. The amount of the loan eligible for forgiveness will be reduced proportionally by the number of employees terminated during this period relative to the borrower’s prior employment levels.
Tax Relief Enacted & Proposed
I. Income Tax Relief
a. The IRS has announced that the new income tax filing deadline for individual, trust, corporate, and other non-corporate filers is July 15, 2020. No forms need to be filed and no payments need to be made by April 15th to qualify for this automatic extension.
b. Additionally, there is currently a proposal in the CARES Act to postpone the need for businesses and individuals to make estimated tax payments for 2020 until October 15th, 2020.
c. Many states have already conformed to the new filing deadline as well, and the Massachusetts Department of Revenue (DOR) has indicated that it is prepared to follow the IRS in offering similar relief to taxpayers regarding tax filing and tax payment obligations.
d. As legislation is still in process, it should be noted that there are many other potential benefits and changes that Congress is considering. For example, One CARES Act proposal is to allow retirement funds to be distributed by up to $100,000, while waiving the 10% tax penalty, for anyone who is diagnosed with COVID-19, has a spouse or dependent diagnosed, or has suffered financial hardships due to the outbreak in general.
II. Payroll Tax Relief
a. The Family First Coronavirus Act approved provisions for businesses and tax-exempt organizations with fewer than 500 employees that are required to provide emergency paid sick leave and emergency paid family and medical leave. Through payroll tax credits, employers’ re-coup costs due to the emergency paid sick leave and family medical leave. Refundable sick leave credit caps at $5,111 per employee and refundable child-care leave credit caps at $10,000 per employee.
b. For self-employed individuals under similar circumstances, equivalent child-care leave and sick leave credits are also available.
c. The pending CARES Act includes provisions to delay due dates for employer payroll taxes. The employer portion of 2020 payroll taxes would be deferred and due incrementally: 50% on Dec 31, 2021 and 50% on Dec 31, 2022. The employer portion of 2021 quarterly payroll taxes would resume January 1, 2021.
III. Sales Tax Relief
a. For Massachusetts, businesses that paid less than $150,000 in regular sales plus meals taxes in the year ending February 29, 2020 will be eligible for sales and meals tax relief.
b. Business that paid less than $150,000 in room occupancy taxes in the year ending February 29, 2020 will be eligible for room occupancy tax relief. The DOR is currently drafting emergency regulations to implement these administrative relief measures.
c. Many states have also extended the deadline to file sales tax returns interest and penalty free. Please feel free to reach out to us for additional state relief guidance.
Please connect with us to discuss more information specific to your business. We’re here for you, as we always have been, to provide guidance based on your unique needs.