COVID-19

You could soon see another stimulus payment in your bank account with the recent passage of the Emergency Coronavirus Relief Act of 2020, which could mean more direct relief to you and your family. Here are some of the major points you need to know that are buried inside this 5,000+ page, $900 billion piece of legislation.

Direct payments to you. The legislation includes a $600 payment per person, including adults and your dependent children. Payments are based on your 2019 income tax and should start being distributed shortly after Christmas, per Treasury Secretary Mnuchin. As with the original payments, the payment amount phases out for incomes over $75,000 for single taxpayers and $150,000 for married couples.

Things to consider:

• If your income is too high in 2019, but you become eligible based on 2020 income, you will have an opportunity to request the funds on your tax return.
• Unlike the first round of stimulus payments in 2020, if you have someone in your household that is ineligible, you can still get payments for those individuals that are eligible. This was a problem with the first round of payments.
• If the number of adults or dependents in your household changed during the year, you will need to keep track of this and be prepared to issue corrections to ensure you receive the correct payment amount.
• While specifics are in flux, the payment mechanism in place for the initial payments in the spring should help facilitate distributions of this second round of direct stimulus payments.

Extension of unemployment benefits. Federal unemployment benefits of up to $300 per week will be extended through March 14. The benefits programs for self-employed and gig workers, which was set to expire at the end of 2020, was also extended.

Things to consider:

• If you have not already done so, you must file for unemployment with your state as soon as possible. State offices and websites are being slammed, so the sooner you get in the queue the better for you and your loved ones.
• Remember, these benefits also apply to self-employed and part-time employees. Many workers who were eligible for this unemployment earlier in 2020 did not file because this class of workers is typically not eligible for most state unemployment programs.

Deductibility of expenses paid with PPP loans. Businesses that received PPP loans and had them subsequently forgiven will be permitted to deduct the expenses covered by those loans on their federal tax returns. Much to the chagrin of the IRS, the recent bill clarifies that PPP loan forgiveness now means no tax impact due to the forgiveness. For example, if you used $100,000 of payroll in your application to get your loan forgiven, you can still deduct the payroll as an expense on your tax return.

New PPP loan funds. There is additional money available from the Small Business Association (SBA) for a new round of PPP loans. The new loan program is targeted to businesses that need the funds. To qualify, your business must have 300 or fewer employees and have seen a drop in revenue of 30% or more during any quarter in 2020. Some of the money is earmarked for very small borrowers, underserved communities, and small lenders. There are even simplified requirements for forgiveness if the loan amount being applied for is less than $150,000.

Eviction moratoriums and rent assistance. The bill extends until January 31, 2021 a moratorium on evictions that was scheduled to expire at the end of 2020. The bill also includes $25 billion in emergency assistance to renters.

There is much more in this huge bill, including relief for hard-hit industries, education, student loans, and vaccine assistance. Please keep up-to-date as more is learned after a full review of the bill is made available.

The Federal Reserve announced a Main Street New Loan Facility among several actions aimed at pumping in another $2.3 trillion of financing into U.S. businesses.

Here are the highlights of two lending programs aimed at small businesses:

1. Main Street New Loan Facility (MSNLF)

Eligibility

• Businesses with up to 10,000 employees or $2.5 billion in 2019 annual revenues
• The business must be created or organized in the United States with a majority of its employees based in the United States
• Eligible borrowers that participate in the program may not also participate in the Main Street Expanded Loan Facility lending option (see below)

Lending limit

• The minimum loan size is $1 million. The maximum loan size is the lesser of $25 million or a more complicated calculation using several of the business’s financial indicators
• Loan payments can be deferred for one year
• The loan must be repaid within 4 years

2. Main Street Expanded Loan Facility (MSELF)

The MSELF is essentially the same loan program as the MSNLF except for the maximum amount a business can borrow. Businesses in the MSELF program can borrow up to the lesser of $150 million or a more complicated calculation using several of the business’s financial indicators.

The application process is under development

The Federal Reserve is finalizing details of the program, which will be administered through banks and other lending institutions. Stay in touch with your banker to find out how to apply once the Fed makes the application form available.

Are you still waiting for your Economic Impact Payment? Did you get your payment but it was for the wrong amount?

The IRS initially said you needed to wait until filing your 2020 tax return to resolve any issues with missing or incorrect Economic Impact Payments. Thanks to the prodding of the Taxpayer Advocate Service, the IRS has established procedures to help correct payment issues in the following scenarios:

• Missing dependent. The IRS will issue supplemental payments in the coming weeks to eligible individuals who normally do not have to file a tax return and claimed at least one qualifying child but did not receive the qualifying child portion of the payment.
• Injured spouse. Eligible individuals who filed for or can file for Injured Spouse Allocation (Form 8379) and did not receive their Economic Impact Payment will receive their payment in the coming weeks.
• Math error. Eligible individuals whose payment was based on a 2018 or 2019 tax return where the IRS adjusted the return for a math error that negatively impacted the original amount of the payment will now receive a payment for an approved adjusted amount. The IRS will work with the taxpayer to resolve the math error and, if appropriate, issue a payment for the additional amount.
• Victims of identity theft. Eligible individuals who were victims of identity theft have often not received a payment or the amount received is incorrect. The IRS will adjust the payment amount once the identity theft issue is resolved.
• Deceased or incarcerated spouse. Eligible individuals often have not received an Economic Impact Payment because they filed a joint return with a deceased or incarcerated spouse. The IRS will recalculate the payment and issue it only to the non-deceased/non-incarcerated spouse.

What you need to do

Contact the Taxpayer Advocate Service to determine if your Economic Impact Payment will either be corrected now or in 2021 when you file your tax return. The Advocate Service will be providing more details in the coming weeks about how to reach out to them for assistance.

With millions of Americans working remotely for the first time this year, the Federal Trade Commission is warning people about work-from-home scams.

Here are some common work-from-home offers to be careful of according to the FTC:

At-Home Medical Billing Businesses. Many medical billing business opportunities are worthless. Their promoters don’t tell the truth about earnings potential and fail to provide key information.

Envelope-Stuffing Schemes. Offers that promise quick and easy income from stuffing envelopes at home virtually never pay off.

Telemarketing Resale Scams. Selling brand-name merchandise from home can be a great way to work-at-home making some extra money. But fraudsters sometimes call to lure you into a resale proposition. They’re the ones who make the money – and they make it from you.

Work-at-Home Businesses. Many work-at-home opportunities are promoted by scam artists. If you pay in, it’s likely that you will spend more than you can earn.

How to Protect Yourself

• Do your research. Talk to other people and read reviews about the work-from-home opportunity you are considering. Also consider checking out a company with your local consumer protection agency, your state’s Attorney General or the Better Business Bureau.
• Request the FTC’s one-page disclosure document. Sellers of work-from-home opportunities are required by the FTC to give you a one-page disclosure document that offers key pieces of information about the opportunity. Click here to see what the document looks like.
• Ask follow-up questions. In addition to reviewing the disclosure document, ask the sellers follow-up questions such as the following: What tasks will you have to perform? Will you be paid a salary or be on commission? What is the basis for the company’s claims about what you can earn? When will you get your first paycheck?

Reporting a Scam

If you have spent time and money on a work-at-home program and now believe it may not be legitimate, contact the company and ask for a refund. If you can’t resolve any disputes with the company, file a complaint with the FTC at ftc.gov/complaint or call 877-FTC-HELP.

Also file a complaint with your state’s Attorney General’s office or the state where the company is located.

Thieves are getting creative with different ways to gain access to your checking account and personal information during the COVID-19 pandemic. Here are some of the reported schemes:

Mandatory online COVID-19 Test

Individuals posing as workers from the U.S. Department of Health and Human Services or other federal departments use text messages to instruct you to click on a link to complete a mandatory online COVID-19 test. However, there is currently no way of conducting a COVID-19 test online.

You’ve been in contact with COVID-19

This scam sends an e-mail to warn you that you came into contact with a colleague/friend/family member who has COVID-19. The e-mail instructs you to download and print an Excel spreadsheet and bring it to the nearest COVID-19 testing site. After opening the spreadsheet, you are told they need to enable the content in order to view the spreadsheet’s details. Malicious macros are then activated when you click on the Enable Content button, infecting your computer.

SBA loan applications

Fraudulent e-mails were sent out as correspondence from the U.S. Small Business Administration telling you that you could apply for a small business disaster assistance grant. You are instructed to sign an attached document and upload it to the SBA’s website. When the attachment is downloaded, a remote access trojan was installed on your computer or other electronic device.

COVID-19 malware

Online fraud and schemes wouldn’t be complete without coronavirus-themed malware. There are multiple variants of a master boot record (MBR) locker, including one called coronavirus.bat. The malware replaces the MBR of a computer, preventing the operating system from starting and instead displays a ransom note or other message.

Fake pop-up testing sites

Hands down the most brazen attempt to steal personal information are pop-up COVID-19 testing sites. The thieves tell passersby that they can be tested for COVID-19 for a $240 fee. They then pocket the cash and use the personal information gathered from individuals to make fraudulent Medicare and Medicaid claims.

More of a business’s Paycheck Protection Program (PPP) loan used to pay certain owner-employee salaries can be forgiven under updated guidance from the Small Business Administration (SBA).

What Changed

The original PPP forgiveness rule stated that any employee who also had a stake in a company – regardless of how small the stake was – that received a PPP loan was eligible to have a maximum of $20,833 of proceeds used to pay the stakeholder’s salary forgiven.

Under the revised guidance, if an owner-employee has an equity stake under 5%, the owner-employee can get a maximum of $46,154 of their salary forgiven.

Forgiveness Limitation for Sub-Leased Spaces

The revised SBA guidance also clarified limitations on sub-leased spaces. While rent and lease payments are forgivable non-payroll expenses, businesses cannot receive forgiveness for the portion of the rent a sub-tenant pays you.

What you need to do. Only approved lenders can submit PPP loan forgiveness applications to the SBA, so stay in touch with your lender about how to fill out the loan forgiveness application.

Also stay in touch with your lender regarding the possibility of blanket forgiveness. There has been a push for blanket forgiveness for smaller loans, which comprise the majority of PPP loans granted. If blanket forgiveness under a certain threshold is granted, it could make most of the current loan forgiveness application process irrelevant in the future.

Suppose you’re switching jobs if you were furloughed because of the pandemic or you’re simply searching for greener pastures. If you have a 401(k) from your soon-to-be former employer, you must decide what to do with your retirement account when you leave. Here are your four options:

• Leave the money in your previous employer’s pension plan.
• Roll over the money to your new employer’s pension plan.
• Roll over the money into an IRA.
• Take the money and run.

So which of these options should you choose? Here are some things to consider as you think about what to do with your 401(k) account:

Borrow the money. If you want to borrow money from your retirement account in the future, you’ll want to roll the money into another 401(k). While you can borrow money out of your 401(k), that option is not allowed with an IRA.

Take the money. This year may be the best time to make a withdrawal from a retirement account. In a normal year, when you make an early withdrawal from a retirement account, you owe income taxes on the amount of the distribution plus a 10% early withdrawal penalty. In 2020, this 10% penalty has been suspended. So while you’ll still pay taxes on the distribution, you can avoid the early withdrawal penalty.

Invest the money. This is why you started contributing to a 401(k) account, right? While it might be tempting to borrow or take an early distribution from your retirement account, you’ll also be depleting future earnings. So you consider whether you truly need the money now to pay for an emergency or if you’re okay leaving it alone in your 401(k).

The Problem

A payroll tax deferral beginning September 1 was recently signed via a presidential executive order. This deferral of the employee’s portion of Social Security will raise your paycheck temporarily until January, 2021. Beginning in 2021, the deferred Social Security will then need to be paid.

This year’s tax deferral is NOT currently a tax holiday. So even if your employer removes your Social Security tax from your paycheck, there is a real possibility you will need to pay it back between January and April, 2021. That could mean a pretty large tax bill for you in early 2021!

What you need to know

• It is optional for most employers. Your employer is not required to defer your Social Security payments. However, federal employees will be seeing this tax reduction from September through December of this year.
• Compare paychecks. If you are unsure whether your employer is participating in the tax deferral, get your last paycheck from August and your first paycheck from September. Compare the amount of Social Security and other taxes withheld from your August paycheck to your September paycheck. If the amounts are the same, then your Social Security and other taxes are still being withheld.

If you notice that the amounts are different, or that no Social Security taxes are withheld from your September paycheck, then that’s a signal you may have a tax repayment bill in early 2021.

• Remember to keep checking each paycheck. Companies are struggling to figure out if they are required to comply with the presidential executive order, payroll providers are trying to figure out how to comply, and everyone is wondering whether the tax obligation will be permanently forgiven. So you will need to keep checking your paycheck throughout the balance of 2020.
• Be prepared to pay it back. If taxes have been deferred from your paycheck through the end of 2020, be prepared to have your paycheck withholdings increase substantially beginning in 2021. If possible, open a savings account to set aside the taxes that were not withheld from your paychecks. When it comes time to pay your taxes, you will have funds to weather the repayment storm.
• Check for updates. There’s a chance Congress passes a law that forgives the deferred taxes. If this happens, you will have a nice start on an emergency fund should you need it.

If you have any questions about how this payroll tax holiday affects you, please call.