Tax Facts to Successfully Navigate the Families First Coronavirus Response Act
0 likes1,246 views
The document discusses key aspects of the Families First Coronavirus Response Act, including provisions for emergency paid sick leave and expanded family and medical leave, employer tax credits to help cover costs, and guidance for employers on implementing remote work arrangements and addressing workforce reductions during the COVID-19 pandemic. It also reviews Section 139 tax-free disaster relief payments that employers can provide employees.
Tax Facts to Successfully Navigate the Families First Coronavirus Response Act
- 1. TAX FACTS TO SUCCESSFULLY NAVIGATE THE FAMILIES FIRST CORONAVIRUS RESPONSE ACT CITRIN COOPERMAN WEBINAR evolutionMonday, March 30, 2020 actioninto PRESENTED BY: CITRIN COOPERMAN HODGSON RUSS
- 2. WELCOME / KEY REMINDERS / USING ZOOM into • The webinar is 1 hour and based on your participation, you can earn up to 1 CPE credit.. • You must reply to 3 polling questions to receive the full credit. • Please join the webinar using your computer audio. You will join in listening mode only. • You will have the opportunity to submit questions to our presenter by typing your questions into the Q&A icon on the Zoom panel. • Please complete the electronic course evaluation that will be launch at the conclusion of the webinar. • This session is being recorded and a link will be sent in a follow-up email. evolution actioninto
- 3. COVID -19 UPDATE TITLE • TBD Welcome & Introduction Joseph Bublé CPA, MBA PARTNER- TAX PRACTICE LEADER NEW YORK OFFICE evolution actioninto
- 4. evolution AGENDA • Families First Coronavirus Response Act • Sec. 139 Disaster Relief Payments • Other Leave Rights • Workforce Reduction and Closure Mandates • Wage and Hour Concerns for the Remote Workforce • WARN Act Issues • Coronavirus Aid, Relief, and Economic Security (CARES) Act actioninto
- 5. COVID -19 UPDATE TITLE • TBD FAMILIES FIRST, SEC 139, & FMLA Paul H. Dailey, CPA, MBA PARTNER NEW YORK OFFICE Michael Kline, CPA, MST PARTNER PHILADELPHIA OFFICE evolution actioninto
- 6. Charles H. Kaplan Partner COVID -19 UPDATE TITLE • TBD Peter C. Godfrey Partner evolution action Charles H. Kaplan Partner Kinsey A. O’Brien Sr. Associate into
- 7. evolution PRESIDENT TRUMP SIGNS FAMILES FIRST CORONAVIRUS RESPONSE ACT Congress has passed and the President has signed the first of several bills to come, covering the Federal Government’s response to the COVID-19 emergency. The law, which has an effective date of no later than 15 days from its signature (April 3) and expires December 31, 2020, contains the following three areas that most directly impact employees and their employers. A brief summary of the law is below, but there are many details and unanswered questions that need to be addressed as the law is rolled out. The provisions apply to all Covered Employers, defined as private sector employers with fewer than 500 workers as well as to governmental agencies. Emergency Sick Leave Covered Employers will have to provide employees who cannot work (on site or remotely) with paid sick time off (as described below) if an employee falls into one of the following categories: • Is subject to a Coronavirus quarantine or isolation order; • Has been advised by a health care provider to self-quarantine; • Is experiencing Coronavirus like symptoms and is seeking a diagnosis; • Is caring for an individual in the first two categories; • Is caring for a child whose school or place of care is closed or the regular child care provider is not available due to Coronavirus precautions; or • Is experiencing any other substantially similar conditions specified by Health and Human Services in coordination with the Treasury or Labor Departments. Full time employees are to receive 80 hours of sick leave and part timers are to receive leave equivalent to their average number of hours worked in a two-week period. This leave must be made available for immediate use regardless of the employee’s tenure with the employer. Workers taking leave in the first three categories will have to be paid their normal wages or the applicable minimum wage, whichever is greater and is capped at $511 per day and $5,110 in total. Workers taking time off for family reasons (the fourth through sixth categories) must receive two thirds of their wages or minimum wage, and is capped at $200 per day and $2,000 in total. actioninto
- 8. evolution PRESIDENT TRUMP SIGNS FAMILES FIRST CORONAVIRUS RESPONSE ACT Emergency Family Leave Covered Employers must allow up to 12 weeks of Family Medical Leave Act leave for any employee who has been with the employer for at least 30 days and are unable to work because their minor child’s school or place of care has been closed or the regular child care provider is not available due to coronavirus precautions. The first two weeks of such leave can be unpaid (although an employee could opt to use PTO). After that time, the employee will receive at least two thirds of their wages, with the daily benefit after that capped at $200 per day and $10,000 in total. Generally speaking, the employee on leave must be restored to his or her prior position; however, this requirement does not apply to employers with fewer than 25 employees if the position held by the employee on leave no longer exists due to economic conditions or other changes in the employer’s operating conditions caused by the coronavirus pandemic, and the employer makes reasonable efforts to restore the employee to an equivalent position. Employees under a collective bargaining agreement and whose employers pay into a pension plan are eligible for the paid emergency leave. The Labor Department will issue regulations excluding certain healthcare providers and first responders and employers who have less than 50 workers, if these requirements would jeopardize the viability of the business as a going concern. actioninto
- 9. evolution PRESIDENT TRUMP SIGNS FAMILES FIRST CORONAVIRUS RESPONSE ACT Employer Tax Credit Provisions Wages paid under either of these leave requirements will not be subject to the 6.2% social security payroll tax paid by employers. The law is silent on the Medicare tax so it will continue to be imposed. For sick leave wages, the credit is limited to $511 per day if the employee is on leave for categories one to three above and limited to $200 per day for leave under categories four through six above. The credit is limited to 10 days of wages. For family leave wages, a separate credit limitation applies and the limitation is $200 per day, up to an aggregate of $10,000. For self-employed people, the credit is allowed against regular income tax. The limit on sick leave is determine by multiplying the number of days (subject to limitation) that a self-employed person is unable to perform services under categories one to three above, by the lesser of 100% of their average daily self-employment income or $511. The limitation is reduced to the lesser of 67% of their average daily self-employment income or $200, if they can’t render services under categories four through six above. There is a similar credit computation for family leave, wherein the number of days (limited to 50) that a self-employed person is unable to perform services is multiplied by the lesser of 67% of their average daily self-employment income or $200. Employers will receive refundable credits against their Social Security Tax liability to cover wages paid to employees under both these programs. Any credits granted in this program will be treated as taxable income to avoid a double tax benefit since the payment of the wages is a deductible expense. actioninto
- 11. FAMILIES FIRST CORONAVIRUS RESPONSE ACT - ROAD MAP FAMILIES FIRST CORONAVIRUS RESPONSE ACT (PL 116-127) (HR 6201) SELF EMPLOYED ROAD MAP Signed March 18, 2020 Emergency Paid Sick Leave Act Eligibility: All employees of employers with fewer than 500 employees, regardless of the length of their tenure with their employer, are eligible for paid sick leave under the Emergency Paid Sick Leave Act effective April 2,2020 through December 31, 2020. Facts: 1. Employers may not require eligible employees to first use other paid leave provided by the employer. Paid sick leave under the Act is in addition to any paid sick leave or PTO currently provided by the employer. 2. Employers may require employees to follow reasonable notice procedures to continue receiving paid sick time but may not require employees to provide advance notice prior to the first day which the employee takes paid sick leave under the Act. 3. Employers must post a notice that advises employees of their rights under the Act. Department of Labor will create notice by March 25th. QUALIFYING REASONS: ELIGIBLE EMPLOYEE BENEFITS: EMPLOYER REIMBURSEMENT: Employee subject to federal, state or local quarantine due to COVID-19. Full-time employees receive 80 hours of paid sick leave at the employee's regular rate, not to exceed $511/day, $5,110 total. Employers receive 100% reimbursement for paid sick leave and the additional child care leave pursuant to the Act including health insurance costs and no payroll tax liability on the sick pay. Employee was advised by health care provider to self- quarantine related to COVID-19. 1. Employers can retain payroll taxes in lieu of making tax deposits to help fund sick leave. Part-time employees receive equivalent of the no. of hours they would work on average at the employee's regular rate, not to exceed $511/day, $5,110 total. 2. If payroll taxes held back are not sufficient in covering qualified sick/child care leave paid, accelerated payment from the IRS can be requested. Employee is experiencing symptoms of COVID-19 and seeking medical diagnosis. 3. Tax credits equal to the eligible sick pay and pro rata health plan expenses can be claimed on Form 941 - Employer's Quarterly Federal Tax Return. Credits in excess of the employer's payroll tax will be refunded. Employee caring for individual subject to quarantine due to COVID-19 either by federal, state, local or a health care provider. Full and part-time employees receive 10 days of paid sick leave at two-thirds of the employee's regular rate, not to exceed $200/day, $2,000 total. 4. Credits claimed under the Act are included in the Employer's gross income to offset the corresponding payroll and health plan expense deductions. Employee experiencing any other substantially similar condition specified by the Secretary of Health and Human Services. Employee caring for employee's child whose school or place of care is unavailable due to Covid-19. Child Care Leave -In addition to 10 days paid sick leave, up to an additional 10 weeks of paid leave is available at two- thirds of the employee's regular rate, not to exceed $200/day, $10,000 in total. Employers with fewer than 50 employees may be exempt from the child care leave. evolution actioninto
- 12. evolution FAMILIES FIRST CORONAVIRUS RESPONSE ACT (PL 116-127) (HR 6201) Signed March 18, 2020 EMPLOYER ROAD MAP actioninto Example: If an eligible employer paid $5,000 in sick leave and is otherwise required to deposit $8,000 in payroll taxes, including taxes withheld from all its employees, the employer could use up to $5,000 of the $8,000 of taxes it was going to deposit for making qualified leave payments. The employer would only be required under the law to deposit the remaining $3,000 on its next regular deposit date. If an eligible employer paid $10,000 in sick leave and was required to deposit $8,000 in taxes, the employer could use the entire $8,000 of taxes in order to make qualified leave payments and file a request for an accelerated credit for the remaining $2,000.
- 13. FAMILIES FIRST CORONAVIRUS RESPONSE ACT - ROAD MAP - CONTINUED into Self Employed Individuals QUALIFYING REASONS: Credit Against Self Employment Tax Self employed person subject to federal, state or local quarantine due to COVID-19. Self employed person was advised by health care provider to self-quarantine related to COVID-19. an amount equal to the number of days, up to 10 days, during the taxable year the individual is unable to perform services multiplied by $511 or 100% of average daily SE income for the taxable year, whichever is less. Self employed person is experiencing symptoms of COVID-19 and seeking medical diagnosis. Self employed person caring for individual subject to quarantine due to COVID-19 either by federal, state, local or a health care provider. Average daily self employment income is the amount equal to the net earnings of the self employment of the individual for the taxable year, divided by 260 Self employed person experiencing any other substantially similar condition specified by the Secretary of Health and Human Services. an amount equal to the number of days, up to 10 days, during the taxable year the individual is unable to perform services multiplied by $200 or 67% of average daily SE income for the taxable year, whichever is less. Self employed person caring for employee's child whose school or place of care is unavailable due to Covid-19. References: IRS News Release 3/20/20. evolution actioninto
- 14. evolution SECTION 139 – TAX-FREE BENEFITS to EMPLOYEES – COVID-19 Qualified Disaster Relief Payments Treated as a tax-free fringe benefit Not included as income by the employee And, tax deductible by employer Also, not treated as wages for purposes of employment taxes Applies to a Federally declared disaster as defined in Section 165(i)(5)(A) The President issued an “emergency declaration” under the Stafford Act as compared to a declaration of a disaster The IRS, in issuing Notices 2020-17 and 2020-18, extended tax return deadlines as relying on Sec. 7508A, which relates to a Federally declared disaster Examples of expenses that are covered Reasonable & necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster • Child care or tutoring • Over the counter medications • Telecommuting costs, including work-from-home expenses • Transportation and health related Examples of expenses that are not covered • Reimbursed through insurance • Wage replacement costs • Non-essential or luxury There is no cap on how much an employer can provide under Sec. 139 to employees • No written plan is required • Employees are not required to substantiate expenses actioninto
- 16. evolution OTHER POTENTIAL LEAVE RIGHTS actioninto Absences related to COVID-19 may also be covered by other laws: • Regular unpaid FMLA where the employee or a covered family member has a “serious health condition.” • State laws adopted in response to COVID-19 (e.g., New York COVID-19 Paid Sick Leave Law for employee quarantine/isolation orders). • State leave laws (e.g., New York Paid Family Leave, New Jersey Family Leave Act, Connecticut Family and Medical Leave Act). • State and local paid sick leave laws (e.g., New Jersey Paid Sick Leave Act, Connecticut Paid Sick Leave Law, NYC Earned Sick and Safe Time Act, Westchester County Paid Sick Leave). • Reasonable accommodations for employees with disabilities (e.g., underlying medical conditions that render them more susceptible). • Employer’s policies and collective bargaining agreements.
- 17. evolution WORKFORCE REDUCTION AND CLOSURE MANDATES actioninto In response to the COVID-19 pandemic, Governors of several states have mandated workforce reductions and business shutdowns: • New York: Executive Order required a 100% reduction of the in-person workforce as of March 22, 2020. The only exclusion is for “essential business or entity providing essential services or functions.” • Connecticut: Executive Order requires all “non-essential” businesses to shut down or have workers their employees to work from home, effective March 23, 2020 through April 22, 2020. • New Jersey: Executive Orders require residents to stay home except for certain necessary travel, for all non-essential retail businesses in the state to close until further notice, and for other employers to allow as many people as possible to work from home. • Pennsylvania: Executive Order requires all “non-life sustaining businesses” to close effective March 21, 2020.
- 18. evolution THE REMOTE WORKFORCE actioninto Exempt employees • Generally must be paid their full salary in any week in which they perform any work. • If exempt employees are permitted or required to work from home, the employer can institute protocols to monitor productivity (e.g., work logs, timesheets) and discipline for lack of productivity. • Employers generally may require exempt staff to use available PTO benefits (assuming there is a bona fide plan) in the case of an office closure or other COVID-19 related absence, whether full or partial day. • Deductions may be made for absences of one or more full days due to sickness or disability, if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness. • After an exempt employee exhausts PTO, partial-week absences occasioned by an office closure may not be deducted from salary.
- 19. evolution THE REMOTE WORKFORCE actioninto • Non-exempt employees • Must be paid at least the minimum wage for all hours worked, plus overtime for all hours worked in excess of 40, in a workweek. • Employers should be particularly cautious about allowing non-exempt employees to work from home. • If working from home, non-exempt employees must accurately track and report all hours worked. • As with exempt employees, employers generally may require non-exempt staff to use available vacation or other PTO benefits during COVID-19 related absences. • If a non-exempt employee takes time off related to COVID-19, does not work from home, and has exhausted all paid time off and paid leave, the time off can generally be unpaid. • Compliance with required meal and rest break laws.
- 20. evolution THE REMOTE WORKFORCE actioninto During closure or shortage, employers may be inclined to look for “volunteers” to help out. • Under New York law, private for-profit employers generally cannot have uncompensated volunteers. • Non-profits and public agencies can use bona-fide volunteers – but not to replace or augment paid staff to do the work of paid staff or do anything but tasks traditionally reserved for volunteers (among other restrictions). • Any “volunteers” will likely need to be compensated in accordance with federal and state law.
- 21. evolution FEDERAL WARN ACT actioninto Applies to employers with 100 or more employees (excluding employees who have worked less than 6 months in the last 12 months and not counting employees who work an average of less than 20 hours a week). Requires 60 days’ notice be given to employees before ordering a “mass layoff” or “plant closing” • A “mass layoff” is an employment loss during any 30-day period for either: (a) at least 50 employees constituting 33% or more of the employer’s active workforce or (b) at least 500 employees.. • A “plant closing” is a shutdown of an employment site or facility that results in an employment loss for 50 or more employees during any 30-day period. • Employment loss includes a layoff that exceeds 6 months in duration.
- 22. evolution WARN ACT- POTENTIAL EXCEPTIONS actioninto Unforeseeable Business Circumstances Exception • To qualify, business circumstances must not have been reasonably foreseeable when notice would have been required. May be established by the occurrence of some sudden, dramatic and unexpected action or condition outside the employer's control • The employer must exercise commercially reasonable business judgment in determining whether a business circumstance is reasonably foreseeable, and provide as much notice as is practicable. Natural Disaster Exception • To qualify for this exception, the employer must establish that the reduction was a direct result of a natural disaster (e.g., floods, earthquakes, droughts, storms, tidal waves, tsunamis, or similar effects of nature). • The employer must provide as much notice as is practicable and available under the circumstances.
- 23. evolution WARN ACT- STATE & LOCAL IMPLICATIONS actioninto A number of states and localities around the nation have enacted their own mini- WARN statutes, including New York, New Jersey, California, and Philadelphia. Connecticut also has a Plant Closing Law that creates certain health insurance obligations when closing a plant. Some state mini-Warn Acts track the federal WARN Act’s requirements, while others: • Extend coverage to smaller employers not covered by the federal WARN Act • Lengthen the notice period • Remove exemptions available under the federal WARN Act • Impose additional penalties for non-compliance • Require notice to additional local authorities
- 24. evolution COMPARISON OF FEDERAL WARN ACT AND NEW YORK STATE WARN ACT actioninto • Covered Employers: Federal - 100 or more employees; NYS - 50 or more employees • Notice: Federal - 60 days; NYS - 90 days • Mass Layoff: Federal – 500 or more employees, or at least 33% of workforce and 50 – 499 employees lose employment • NYS – 250 or more employees, or at least 33% of workforce and 25-249 employees lose employment • Plant Closing: Federal: 50 or more employees lose employment over a 30-day period • NYS: 25 or more employees lose employment over a 30-day period
- 25. evolution CARES ACT actioninto President Trump signed the Coronavirus Aid, Relief, and Economic Security (CARES) Act into law on March 27, 2020. Components include: • Corporate tax provisions. • Individual tax provisions, including creation and advanced payments of refundable tax credits to certain individuals. • Suspension of student loan payments. • Substantial increase to unemployment insurance benefits (state benefits plus $600 per week). • Small business loans useable for payroll support, salaries, rent and mortgages, utilities, etc. oAvailable to employers with up to 500 employees (or larger depending on industry). oLoan forgiveness if used to maintain payroll continuity during the covered period of March 1, 2020 to June 30, 2020. Loans also available to larger employers, with conditions.
- 26. evolution CARES ACT actioninto Corporate Tax Issues • Modifications for net operating losses – CARES Section 2303 • Deductibility of interest expense temporarily increased – CARES Section 2306 • Modification of limitation on losses for non-corporate taxpayers – CARES Section 2304 • Acceleration of corporate alternative minimum tax credit – CARES Section 2305 • Bonus depreciation technical correction for qualified improvement property – CARES Section 2307 • Temporary exception from excise tax for alcohol used to produce hand sanitizer – CARES Section 2308 • Exclusion for certain employer payments of student loans – CARES Section 2206 • Employee retention credit for employers subject to closure due to COVID-19 – CARES Section 2301 • Delay of payment of employer payroll taxes – CARES Section 2302
- 27. evolution CARES ACT actioninto Individual Tax Issues • Advance Payments of Refundable Tax Credits to Certain Individuals – CARES Section 2201 • Removal of Early Retirement Plan Distribution Penalty for COVID-19 Related Payments – CARES Section 2202 • Waiver of Certain Retirement Plan Minimum Distribution Rules – CARES Section 2203 • New Above-the-Line Charitable Contribution Deduction for Non-Itemizers – CARES Section 2204 • Increased Charitable Contribution Deduction for Individual Itemizers and Corporations – CARES Section 2205
- 28. evolution CARES ACT actioninto • Suspension of student loan payments • Unemployment insurance increase • SBA Loans • Larger employer loans
- 30. evolution Q & A actioninto
- 31. evolution CONTACT INFO actioninto Citrin Cooperman: Joe Bublé | CPA, MBA, Partner| (212) 697-1000 | [email protected] Paul H. Dailey, CPA, MBA Partner | (212) 697-1000 | [email protected] Michael Kline, CPA, MST, Partner | (212) 697-1000 | [email protected] Hodgson Russ LLP: Peter C. Godfrey, Partner | 716.848.1246 | [email protected] Charles H. Kaplan, Partner | 646.218.7513 | [email protected] Kinsey A. O’Brien, Senior Associate | 716.848.1287 | [email protected]