COVID, PPP and other news!

The COVID Sick leave credit that is a often overlooked item during this pandemic.

Employers can claim a credit for up to 80 hours of time while an employee is quarantined (100% of regular pay) or has a family member quarantined (2/3 of regular pay).  Included is gross payroll, the employers share of Medicare tax plus health insurance paid.  For more information about the credit, go to https://conta.cc/32YPxfy.

As businesses have more employees quarantined, we suggest using a form like THIS FORM to have the employees fill out as documentation.

If you have any questions, please feel free to contact one of our CPA's for more information.

Wednesday, June 17th, we aired a webinar to show you how to document forgiveness for the PPP loan.  To get a copy of the slides, click here.

Did you miss the webinar?  You can watch the webinar below.

The SBA just released today (June 16th) a new forgiveness application.  Click this link to get the new application!  

The forgiveness applications are in the middle of the page and include a full application plus an EZ application. 

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program

If you would like to watch the webinar regarding PPP 101 - including the changes as signed into law on June 5th, feel free to watch here!

Would you like to see how the PPP forgiveness application works?

Click here to download the spreadsheet.

*Note this spreadsheet is prepared with the SBA forgiveness application as released May 16, 2020.  No changes have been made for recent law changes.

In guidance issued May 3, 2020, the Treasury department posted FAQ 40 which states as follows:

40. Question: Will a borrower’s PPP loan forgiveness amount (pursuant to section 1106 of the CARES Act and SBA’s implementing rules and guidance) be reduced if the borrower laid off an employee, offered to rehire the same employee, but the employee declined the offer?

Answer: No. As an exercise of the Administrator’s and the Secretary’s authority under Section 1106(d)(6) of the CARES Act to prescribe regulations granting de minimis exemptions from the Act’s limits on loan forgiveness, SBA and Treasury intend to issue an interim final rule excluding laid-off employees whom the borrower offered to rehire (for the same salary/wages and same number of hours) from the CARES Act’s loan forgiveness reduction calculation. The interim final rule will specify that, to qualify for this exception, the borrower must have made a good faith, written offer of rehire, and the employee’s rejection of that offer must be documented by the borrower. Employees and employers should be aware that employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.

With this guidance, I believe the Treasury department mentioned a few things that need to be done.  

Offers to rehire employees should be done in writing - When an employer is ready to call an employee back to work, this should be done in writing either by email or formal letter.  The letter should include at a minimum the date of the rehire request, the date the employee is to start back to work, and the need to respond to the rehire request in writing.

In good faith - The employer doing the rehire request should make the request in good faith.  This likely means that rehire requests made at the last moment on the last day that rehires are allowed to be made, will not be allowed in good faith unless there is a valid business reason for doing so.

If you have any questions on this or other items related to PPP forgiveness, please see the FAQ's at https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Frequently-Asked-Questions.pdf or contact our office.

A charitable organization is having a fundraising event and your business wants to support it.  As has typically been the case, the business buys two tickets to the event for $100 each, attend the event and have a great time.  Prior to the recent tax reform, the business would typically expense the $200 tickets as meals and entertainment and the expense would be 50% deductible or would call the tickets charitable contributions and get the deduction for the charitable contribution and should have reduced the amount of the contribution by the value of any goods or services received. 

What would happen if the business thinks a lot of the charity and wants to sponsor the event?  So instead of buying tickets, they sponsor the event for $1,000.  In this case, if the business is listed on all tickets and the logo is included in printed material, the sponsorship is likely considered advertising (with an amount that should be allocated to meals).  However, if the $1,000 gets the business listed as a ‘Platinum Donor’ on the printed material and no other advertising was done, the IRS could consider this a charitable contribution and not advertising. 

If the business is a C corporation, the contributions are limited to 10% of taxable income, but advertising has no limitation.  Therefore, if the C corporation has no income, they do not get to deduct charitable contributions in the current tax year but would get to deduct advertising. 

If the business is a self-employed business or pass through entity, the income and deductions are picked up on the individual owner’s form 1040.  Starting in 2018, the Tax Cuts and Jobs Act doubled the amount of standard deductions to $12,000 for individuals and $24,000 for married couples.  With this increase, taxpayers are less likely to itemize and take deductions for charitable contributions starting in 2018 until the tax cuts expire in 2025.  Also, if the business is a self-employed business, the taxpayer would also save on FICA taxes (social security and Medicare) by the sponsorship being considered advertising.

So, with all this said, does it matter if the sponsorship is considered advertising or charitable contribution?  The answer is likely YES.  A taxpayer will likely receive more tax benefit for advertising dollars than charitable contribution dollars.

For more information, feel free to contact one of our offices for more information.