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Tag: COVID-19 Relief

IRS Announces Rollover Relief for Required Minimum Distributions from Retirement Accounts Under the CARES Act

Posted on by RVG & Company

The IRS recently released Notice 2020-51. This notice provides that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has an additional amount of time to roll those funds back into a retirement account under the CARES Act RMD waiver for 2020.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans, such as pensions.

Initially, the IRS permitted a 60-day rollover period for any RMDs already taken this year. This 60-day period has been extended to August 31, 2020, to allow taxpayers additional time to take advantage of this opportunity.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

Under Notice 2020-51, the repayment of an IRA distribution by August 31, 2020 is a new method presented by the IRS for anyone to unwind the receipt of an RMD. This relief, however, only applies to IRAs and not 401(k) and 403(b) plans. Under this repayment option the IRA owner or beneficiary simply repays the amount to the distributing IRA.

Importantly, Notice 2020-51 extends the rollover date of all other 2020 RMDs to August 31, 2020.

If you have any questions or need guidance on either repaying or rolling-over a 2020 RMD, please contact us at RGV & Company.

President Takes Executive Action to Address Next COVID-19 Stimulus Package

Posted on by RVG & Company

On August 8, 2020, President Trump took executive action towards the next COVID-19 stimulus package. These executive actions address a moratorium on renter evictions, an extension of unemployment benefits, a payroll tax deferral and extended relief for student loan debt.

While Congress has indicated that it will continue ongoing negotiations regarding another stimulus package, the President signed one executive order and three executive memoranda. It should be noted that there is uncertainty regarding the application of these provisions. In addition, the President’s executive actions may be subject to legal challenge and subsequent legislation. As a result, taking action with respect to these provisions requires careful consideration and professional advice.

The executive order relates to an extension on the moratorium on renter evictions, the previous moratorium ended on July 24, 2020, under the CARES Act.

The executive memoranda are as follows:

  • Extension of federal unemployment – the new benefit will be $400 with 25% of it to be paid by the states while the federal government will pay $300.
  • Payroll tax deferral – the employee portion of payroll taxes will be deferred for taxpayers earning less than $100,000 annually. This deferral would apply for the period of September 1 – December 31, 2020. The President has asked the Secretary of the Treasury to seek to make the deferral permanent. Section 2302 of the CARES Act already allows employers and self-employed to defer their portion of the Social Security tax through the end of 2020.
  • Student loans – the interest on student loans would continue to accrue at 0% interest until December 31, 2020.

It appears that Congress will continue negotiations on the next stimulus package, which is expected to contain the following items:

  • IRS stimulus payments
  • Extension of the Paycheck Protection Program until December 31, 2020
  • Employer tax credits for job retention

IRS Issues Guidance on Presidential Memo Deferring Payroll Taxes

Posted on by RVG & Company

The IRS and Treasury Department issued Notice 2020-65 providing guidance on the employee payroll tax deferral contained in President Trump’s August 8 memorandum. Under this memo, the Secretary of the Treasury was directed to postpone the collection of the employee portion of the 6.2% Social Security tax for the period of September 1, 2020, through December 31, 2020.

According to Notice 2020-65, employees that earn less than $4,000 during a bi-weekly pay period (or the equivalent threshold amount with respect to other pay periods) are eligible for this deferral. It should be noted that this is a deferral of the tax, not a payroll tax cut. The deferred tax must be repaid by April 30, 2021. That means the deferred (uncollected) tax must be withheld from the employees’ wages ratably during January to April 30, 2021.

There are several items to consider regarding the impact of Notice 2020-65. While the list below is not exhaustive, it does illustrate that careful consideration is required.

  • Notice 2020-65 provides that implementation by an employer is optional and is not required. The notice is silent regarding employee choice.
  • If an employer implements the deferral, the employer and the employee will have to agree upon a repayment method if the employee is no longer employed during the tax repayment period of January 1, 2021, through April 30, 2021.
  • Notice 2020-65 provides for a four-month deferral – not forgiveness – so the benefit to the employee, absent further legislation, is the time value of money. This is a critical aspect that must be communicated to and understood by eligible employees.
  • For employers that implement the deferral, employees need to be aware of the additional payroll tax deductions that will start in January 2021 and run through April 30, 2021.
  • From a practical standpoint, payroll systems will need to be adjusted to accommodate the deferral and subsequent collection of the tax.
  • It is anticipated that Form 941 will need to be revised for the third and fourth quarters of 2020 as well as the first and second quarters of 2021 to properly report the deferral and repayment.
  • Employers will be subject to penalties and interest if the deferred taxes are not paid by April 30, 2021.

If you have any questions regarding IRS Notice 2020-65, please contact Larry Rice, Joao Gomes, or Paul Buchman at RVG & Company.

President Biden Signs $1.9 Trillion American Rescue Plan – Impacts on Individuals & Businesses

Posted on by RVG & Company

President Biden signed the American Rescue Plan Act of 2021 (ARP). ARP provides $1.9 trillion in additional relief for the COVID-19 pandemic. This law adds to the nearly $4 trillion in relief enacted in 2020. In total, the government’s relief measures are almost $6 trillion, during 2020 and 2021.

ARP will expand unemployment relief, increase funding for the COVID-19 testing and vaccination programs, help financially support state and local governments, provide additional funding for the Paycheck Protection Program (PPP) and assist schools to help get students back in classrooms. The ARP also includes several tax provisions, the third round of direct stimulus payments, enhancements of many personal tax credits meant to benefit people with lower incomes and children, and extensions of payroll tax credits for employers. This summary will address some of the key features of ARP for individuals and businesses.

Relief to Individuals

Individual Recovery Rebate: For individuals, the package includes an additional $1,400 in recovery rebates – also known as stimulus payments. This payment will supplement the $600 provided in December and fulfill the government’s promise to provide $2,000 in economic impact payments for taxpayers. The individual will receive $1,400 – plus an additional $1,400 for each dependent. The credit is completely phased out for joint returns over $160,000 and $80,000 for individual returns. If individuals did not receive a stimulus check, they can claim the credit on their 2021 tax return. As a reminder, the first round of stimulus under the CARES Act in March of 2020 provided $1,200 per individual, and the Consolidated Appropriations Act in December of 2020 provided $600. Under the three programs, the maximum amount received by an individual is $3,200.
Child Tax Credit: The measure includes an expansion of the Child Tax Credit (CTC) and Earned Income Tax Credit (EITC), nearly tripling the maximum EITC for childless workers. The package increases the amount of the CTC, from $2,000 to $3,000, with a higher $3,600 credit for children under the age of 6, also allowing the CTC to be fully refundable. This increase in the credit only applies to 2021.
Unemployment Relief: The law also includes an extension of enhanced unemployment benefits of $300 per week. This enhanced benefit was set to run out at the end of March, the program will now run through the end of September. A notable tax change related to the unemployment benefit is that the first $10,200 of unemployment relief received in 2020 is exempt from tax for households that have up to $150,000 of income.

Relief to Businesses

Paid Sick and Family Leave Credits: One of the first relief measures provided by Congress under the CARES Act was the payroll tax credit for employers providing paid sick and family leave. Under the Consolidated Appropriations Act, the credit was extended until March 31, 2021. However, under ARP the credit has been extended until September 30, 2021. Also, the new law increases the applicable wages from $10,000 to $12,000.
Employee Retention Tax Credit: The ARP also extends the Employee Retention Tax credit to December 31, 2021. The Consolidated Appropriations Act enacted in December had the credit expiring on June 30, 2021. As a reminder, under this credit, the employer can claim the credit on 70% of the employee’s wages up to $10,000 per quarter. Therefore, the employer can take a $7,000 credit per quarter for each eligible employee. The credit is taken against federal withholding taxes.
Restaurant Revitalization Fund: The ARP includes an additional $28.6 billion for the SBA to administer grants through the Restaurant Revitalization Fund. This relief is for small and mid-sized restaurants. The restaurant must certify that the uncertainty of the economic conditions makes the grant necessary to support the ongoing operations of the restaurant. The ARP also added $1.25 billion in funding for the $15 billion Shuttered Venue Operator Grant to provide relief to independent live music venues, performing arts centers, movie theaters, and museums.
Paycheck Protection Program: The ARP provides an additional $7.25 billion available for PPP loans. The additional funding does not extend the current application period – which is scheduled to close on March 31, 2021. However, the ARP makes more non-for-profit businesses eligible for the PPP loan program. Our Team is in the process of reviewing the new bill in greater detail. We are hosting a Zoom Webinar on April 22, 2021, to discuss the impacts the American Rescue Plan will have on individuals and businesses, and to answer your questions live! Space is limited, so register for our Webinar today, to Learn how this COVID Relief bill may affect you. CLICK HERE TO REGISTER

PPP Just Got Easier – The SBA Provides a Simplified Online PPP Forgiveness Application for Loans up to $150K

Posted on by RVG & Company

On August 4, 2021, the SBA established a streamlined PPP forgiveness application portal for businesses that borrowed up to $150,000. This simplified application will be available to borrowers whose lenders agreed to use the new forgiveness process.

PPP Loans that are $150,000 or Less

According to a press release, the SBA acknowledged that the vast majority of businesses waiting for forgiveness have loans under $150,000. In addition, the SBA recognized that entrepreneurs are busy running their businesses and are challenged by an overly complicated forgiveness process.

The SBA noted that approximately 600 lenders have opted into the new forgiveness process, enabling over 2 million borrowers to apply through the portal. Currently, this represents about 30% of the loans issued by the SBA that are $150,000 or less.

As outlined in the SBA’s Interim Final Rule issued on July 30, 2021, since the enactment of the PPP program, the total number of PPP loans guaranteed by the SBA exceeds 11.8 million and the total dollar amount of PPP loans guaranteed by the SBA exceeds $806 billion. The IFR also indicated that loans of $150,000 or less represent 93% of the outstanding PPP loans.

Forgiveness Issues for Lenders & Borrowers

Even though the SBA implemented a streamlined forgiveness application for loans issued during 2020 that were $150,000 or less, lenders informed the SBA that they lacked the technology and staff resources to develop efficient electronic loan forgiveness platforms to process these applications. Lenders were overwhelmed by the volume of PPP forgiveness applications, and this delayed the review process. As a result, borrowers were uncertain if they should start making payments on their PPP loans while waiting for their lenders to process their forgiveness applications.

SBA Changes to the Forgiveness Process for Loans $150,000 or Less

The two significant modifications for loans that are $150,000 or less are: 1) The creation of the Direct Borrower Forgiveness Process; and 2) the COVID Reduction Revenue Score. Each of these revisions is discussed below.

Direct Borrower Forgiveness Process

The new process provides PPP lenders with an optional technology solution that allows borrowers to apply for loan forgiveness directly to the SBA through the new portal.

After a PPP lender opts into the Direct Borrower Forgiveness Process, the new portal will provide a single secure location that integrates with the SBA’s PPP platform and allows borrowers with loans of $150,000 or less to apply for loan forgiveness using an electronic equivalent of SBA Form 3508S.

Lenders will be notified that a borrower has applied for forgiveness through the platform. At that point, lenders will review the loan forgiveness application and issue a forgiveness decision to the SBA inside the platform. Borrowers can access the portal through the SBA at https://directforgiveness.sba.gov. In addition, borrowers will be required to go through a registration process in order to use the portal.

After the launch of the direct borrower forgiveness process, borrowers should continue to submit loan forgiveness applications to their lenders, rather than through the platform, under the following circumstances:

  • The PPP lender does not opt into the direct borrower forgiveness process;
  • The borrower’s PPP loan amount is greater than $150,000;
  • The borrower does not agree with the data as provided by the SBA system of record, or cannot validate their identity in the platform; or
  • For any other reason where the platform rejects the borrower’s submission.

COVID Revenue Reduction Score

Among other conditions, to be eligible for a Second Draw PPP Loan, a borrower was required to have experienced a revenue reduction of at least 25% during one quarter of 2020 compared to that same quarter in 2019. Borrowers of Second Draw PPP Loans of $150,000 or less were permitted to submit documentation of the revenue reduction at the time of the loan application, or later on when loan forgiveness is sought.

For loans of $150,000 or less, where the borrower did not submit documentation of revenue reduction at the time of the loan application, the SBA is offering an alternative form of revenue reduction confirmation to streamline the process during the forgiveness process.

Each second-draw PPP loan of $150,000 or less will be assigned a COVID Revenue Reduction Score created by an independent, third-party SBA contractor, based on a variety of inputs, including industry, geography, and business size, and current economic data on the economic recovery and return of businesses to operational status.

The score will be maintained in the SBA’s loan forgiveness platform and will be visible to lenders to use as an alternative to document revenue reduction. Additionally, the score will be visible to those borrowers that submit their loan forgiveness applications through the platform.

When the score meets the value required for certification of the borrower’s revenue reduction, the use of the score will satisfy the revenue reduction requirement. When the score does not meet the value required, the borrower must provide additional documentation either directly to the lender or provide documentation by uploading it to the platform.

If you have any questions or need assistance with the new PPP loan forgiveness process, please contact RVG and Company at (954) 233 – 1767.

Employee Retention Tax Credit Limited by Senate’s Infrastructure Bill

Posted on by RVG & Company

On August 4, 2021, the SBA established a streamlined PPP forgiveness application portal for businesses that borrowed up to $150,000. This simplified application will be available to borrowers whose lenders agreed to use the new forgiveness process.

On August 4, 2021, the Senate passed President Biden’s bipartisan $1.2 trillion infrastructure bill. This bill places a limitation on the Employee Retention Tax Credit (“ERTC”) for 2021.

The Bill is titled the Infrastructure Investment and Jobs Act (“IIJA”) and requires the approval of the House of Representatives to be enacted. The bill contains measures to provide for the rebuilding of roads, bridges, railways, mass transit, broadband, the power grid, and other physical infrastructure items. The bill is intended to be paid for with unused COVID-19 funds and excise taxes.

As a side note, the proposed increase in tax rates for individuals, corporations and capital gains is part of a second infrastructure bill that awaits negotiation by the Senate and House. The cost of that bill is $3.5 trillion and has been subject to significant political debate.

While the IIJA was not intended to direc tly impact taxes for individuals and businesses, it does contain a limitation on the ERTC. The IJAA would move the wage eligibility date of the ERTC from January 1, 2021, to October 1, 2021. Thus, taxpayers could not claim the credit for wages paid after October 1, 2021. This would reduce the maximum credit from $28,000 to $21,000 for the year. Limiting the amount of the credit is a way to fund the bill.

Under the bill “startup recovery businesses”, which include any company that began operations after Feb. 15, 2020, and has average annual gross receipts of $1 million or less, would remain eligible for the full credit through the end of 2021.

As noted above, the IIJA bill requires House approval to become law. Also, several provisions, including the ERTC limitation, can be subject to revision. We will continue to monitor this legislation. However, in light of the bill, businesses seeking the credit should consider adjusting their forecast and cash-flow related to the credit for the remainder of the year.

The ERTC can still be claimed for 2020 and 2021 if it has not been requested on previously filed federal withholding tax returns – Federal Form 941.

If you have any questions on the impact of this proposed legislation on the ERTC, please contact RVG & Company at 954. 233.1767.