CARES Act FAQ: Retirement Plan Withdrawals

On March 27th, President Trump enacted the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The historic $2.2 trillion stimulus bill includes an allowance for penalty-free early withdrawals from retirement accounts.

Below, we address some of the common questions regarding this particular initiative. If you cannot find the answer to your question, please do not hesitate to reach out to your Slattery & Holman P.C. accounting advisor for further assistance.

What changes did the CARES Act make to retirement withdrawals?

For 2020, eligible plan participants can now receive coronavirus-related distributions from their retirement plans (401(k)-type defined contribution plans or individual retirement accounts (IRAs)).

Am I eligible to make a withdrawal from my retirement account?

To be eligible, you must fit at least one of the following criteria:

  1. You or your spouse or dependent has been diagnosed with COVID-19, or
  2. You have suffered adverse financial consequences due to COVID-19 (e.g., suffering loss of business, unable to work due to childcare, required to quarantine, put on furlough, etc.)

Plan participants will simply self-certify that they meet the conditions for a coronavirus-related distribution.

How much can I withdraw from my retirement account?

Eligible individuals can take out up to $100,000.

If I make early withdrawals, do I have to pay a penalty?

No, if you make an eligible withdrawal you are exempt from the 10 percent early withdrawal penalty. Additionally, the 10 percent penalty waiver applies retroactively to withdrawals beginning January 1, 2020.

When do I pay taxes on the money I withdraw?

Income taxes are still owed on withdrawn amounts. The CARES Act allows for tax payments to be spread over a three-year period.

Is there a way to re-invest the money that I take out?

Yes, individuals who make coronavirus-related withdrawals may replace the money within three years, regardless of the annual contribution level of their plan. Additionally, they may also be able to recover the federal and state income taxes that they paid.

 I already have one or more loans on my 401(k), can I still take a coronavirus-related distribution?

This depends on the particular rules of your plan—consult your plan sponsor.

Updated State of Affairs, Tax and Compliance Changes

To Our Clients,

It is our hope that you are healthy and safe as the Coronavirus continues to impact our lives in extraordinary ways.  We remain alert to news about the rapidly evolving state of affairs and any tax and compliance changes that affect you, your families and your businesses.  We are here to provide answers and advice to assist you in navigating this situation as it unfolds.

Key changes to tax filing and payment deadlines:

  • Both the federal and Indiana governments have extended filing and payment deadlines from April 15 to July 15.
  • All individual and business taxpayers have the additional 90 days to file income tax returns and make tax payments without interest or penalties.
  • First quarter federal and Indiana estimated tax payment deadlines for both individuals and corporations have also been extended to July 15.
  • Additionally, contributions to traditional, SEP and Roth IRAs, as well as HSAs, are also now due July 15.
  • Answers to frequently asked questions regarding this relief can be found here: https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers.
  • Other states are responding with similar filing and payment deadline changes and these vary by state. We will keep you apprised of those updates as they apply to your specific situation.

 Regardless of a change in deadline, our firm will continue to operate with the goal of completing tax filings without relying on extensions in an effort to provide you with information you may need for cash flow planning and financing.

Legislation / CARES Act 

  • A $2.2 trillion Coronavirus relief package. This is the largest rescue package in American history.
  • Key provisions include individual stimulus checks, unemployment insurance, employee retention credit and job loss prevention loans, emergency lending for industries, emergency aid to state, local and tribal governments and the American medical system, and several business and individual tax provisions.

We will continue to communicate the particulars of the CARES Act and what it may mean for you.  With the recent passing, the implementation details and specifics are still being interpreted.

Our website will address other issues and changes related to the COVID-19 pandemic.  Please visit our website over the coming days at www.slatterycpa.com and click the Coronavirus link where we will post helpful articles and links to keep you informed.

We have essentially transitioned to a remote work environment in order to do our part to reduce the risk of exposure.  We respectfully ask you take advantage of our electronic capabilities such as secure portal and email for document transfer, and SafeSend, our new delivery service for reviewing and signing tax returns.  Should you need to coordinate physical delivery of documentation that cannot be provided electronically, please contact us to make other arrangements since office visits are no longer practical at this time.  We are still readily available to you via phone and email as well as other electronic platforms.

Continue to reach out to us with any questions or concerns as we get through this together.

Warm regards and stay safe,

Slattery & Holman, P.C.

Do I Qualify for Paid Sick Leave Under the New Coronavirus Act?

On Wednesday, March 18, President Trump enacted a coronavirus emergency relief package, the Families First Coronavirus Response Act. The legislation includes relief for American workers required to take time off work because of the coronavirus, the Emergency Paid Leave Act of 2020.

The act includes both paid leave benefits for American workers and tax credits for American employers, to offset the financial burden. Additionally, self-employed taxpayers are eligible for the tax credit.

Paid Sick Leave Eligibility

The new legislation mandates paid leave for many American workers. Private employers with fewer than 500 workers and public employers are now required to provide paid sick leave to workers who are affected by the coronavirus. A worker must have been employed at the company for at least thirty days prior to being impacted by coronavirus in order to qualify.

To be eligible for paid sick leave under this act, a worker must meet one or more of the following criteria:

  1. They have been ordered to self-quarantine or isolate by a federal, state, or local authority.
  2. They have been warned to self-quarantine or isolate by a healthcare provider.
  3. They are currently seeking a medical diagnosis for coronavirus symptoms they are experiencing.
  4. They are caring for someone who qualifies under either criterion 1 or 2, above.
  5. They are caring for a child whose school, daycare, or other childcare provider is unavailable as a result of coronavirus concerns.

Additionally, to receive paid sick leave, an eligible worker must take 14 or more days of leave (due to one of the circumstances listed above) in a one-month period.

Paid Sick Leave Details

Full-time workers qualify for up to 80 hours (two weeks) of sick leave. Those who are sick or quarantined qualify for full pay, up to $511 per day (maxing out at $5,110). Those who are on leave to care for another person are eligible for two-thirds of their normal pay, up to $200 per day (maxing out at $2,000). Part-time employees are eligible for sick leave equal to the average number of hours they work in a two-week period.

Additionally, the new legislation enhances the Family and Medical Leave Act (FMLA) that governs employee absences in order to care for minor children. In the event that a worker’s child cannot go to school or daycare as a result of coronavirus closures, the worker qualifies to receive two-thirds of their regular salary, up to $200 per day (maxing out at $10,000). This aid only becomes available after the worker has already been on leave for 10 days.

Please note: these paid sick leave provisions are not permanent. This legislation expires on December 31, 2020.

Tax Credit Details

In order to help employers pay for the sick leave as outlined above, the legislation outlines a new payroll tax credit. Employers will be reimbursed for the full amount of sick leave coverage. The credit has the same limitations as the leave for workers: $511 per day for workers who take leave due to sickness or quarantine and $200 per day for workers who take leave to care for another person.

For full details, read the text of the Families First Coronavirus Response Act at congress.gov. Alternatively, click here for a detailed summary from the House Committee on Appropriations.

As always, please do not hesitate to reach out to your Slattery & Holman P.C. accounting advisor with any questions or concerns. We are here to help.

What Does Paid Sick Leave Mean for My Organization?

On Wednesday, March 18, President Trump enacted a coronavirus emergency relief package, the Families First Coronavirus Response Act. The legislation includes relief for American workers required to take time off work because of the coronavirus, the Emergency Paid Leave Act of 2020. In order to help employers manage the cost of paid sick leave, the aid package also includes new tax credits designed to offset the financial burden.

The bill establishes payroll tax credits that are refundable through 2020 for employers with workers who take leave under the new paid leave programs (sick leave and/or family leave). The credit is equal to up to 10 days of leave wages per employee who goes on leave. For reference, here are the limits on sick leave and family leave included in the legislation:

  • Sick leave guidelines:
    • Eligible full-time workers who are sick or quarantined can receive wages equaling their full pay, up to $511/day (with a maximum of $5,110).
    • Eligible full-time workers who are caring for an ill family member or child whose school or daycare has closed can receive wages equaling two-thirds of their regular pay, up to $200/day (with a maximum of $2,000).
    • Eligible part-time workers can receive sick leave equal to the average number of hours they work in a two-week period.
  • Family leave guidelines:
    • Eligible workers who are caring for a child whose school or daycare has closed can receive two-thirds of their regular salary, up to $200/ day (with a maximum of $10,000)

The new tax credit comes in the form of a refund on an employer’s Social Security payroll tax. The credit has the same limitations as the leave for workers: $511 per day for workers who take leave due to sickness (maximum of $5,110) or quarantine and $200 per day for workers who take leave to care for another person (maximum of $2,000). Like the number of sick leave days, the tax credit is limited to 10 sick days per worker.

Additionally, the new legislation includes payroll tax credits for both the group health plan costs for workers on sick or family leave and the Medicare payroll tax on sick and family leave wages.

Employers who pay sick leave and family leave wages can expect to be reimbursed via a payroll tax credit for the entire amount. In the event that the tax credit exceeds what the employer owes in taxes, they will be given a refund for the remaining amount.

For full details, read the text of the Families First Coronavirus Response Act at congress.gov.

Alternatively, click here for a detailed summary from the House Committee on Appropriations.

As always, please do not hesitate to reach out to your Slattery & Holman P.C. accounting advisor with any questions or concerns. We are here to help.

8 Areas Where Small Businesses Should Anticipate Disruption

For more than six decades, the U.S. Small Business Administration (SBA) has been a resource for small business owners and entrepreneurs in the U.S. In response to the COVID-19 pandemic, the bureau created a resource page dedicated to helping small businesses learn to establish safe, secure, and healthy practices in the face of the outbreak.

The SBA enumerates areas in which small business owners should anticipate encountering difficulties during this time:

  1. Capital – Dealing with the COVID-19 outbreak will put a financial strain on small businesses. Shifting demand will have a big impact on revenue, inventory, and payroll. Business owners should strive to get out ahead by exploring various options for accessing capital.
  2. Workforce – The workforce will be impacted by both illness and business closures (both temporary and permanent). Workplace safety will be key for businesses that remain open.
  3. Inventory and Supply Chain – Rapidly changing demand will be difficult to meet. Suppliers’ inability to meet demand may impact your ability to keep inventory in stock.
  4. Cleanliness – In order to protect customers and employees alike, small businesses will need to implement new COVID-19 remediation and cleaning practices.
  5. Insurance Coverage – Businesses should review their insurance policies to determine coverage.
  6. Ability to Operate – It is possible that restrictions preventing some small businesses from operating will be imposed.
  7. Communication – Keeping open lines of communication with customers and clients is key during times of disaster.
  8. Preparedness – Small business owners should create contingency plans for dealing with the various possible scenarios.

For more details, visit the SBA website to view the list in full.

Charting New Territory: Business Strategy During the COVID-19 Outbreak

As the COVID-19 pandemic continues to unfold, business owners are facing a lot of uncertainty. It is not possible to know with confidence how events will continue to evolve over the next days, weeks, and months. However, there are some key steps that business owners can take to strive to mitigate damages and put themselves in the best possible position during this unprecedented time.

  1. Stay Home

Do your part to lessen the spread of COVID-19. This is nothing new, but it certainly bears repeating. As much as possible, limit contact with people outside of your home. If it is possible, work remotely, and have your employees do the same. Lead by example and encourage your team members to follow the COVID-19 protocols outlined by the Centers for Disease Control (CDC).

  1. Stay Informed

It might be tempting to shelter at home and check out of current events, but this is not a good strategy. Rather, you should try to review news on all levels—local, state, national, and world-wide. Compile a list of one or two reputable resources for each category and visit them online each day. Staying informed will help you as you consider what your strategy should be moving forward.

  1. Stay Alert

Focus your attention on developing strategies for maintaining the continuity of your business. Work with your teammates to develop plans for various contingencies that might play out over the next few weeks and months. Consider reaching out to your bank to establish or renew a line of credit to have available in the event that you might need it.

  1. Stay Focused on Your Clients

If your business can function with a remote team, then keep working! Be proactive about finding ways to go the extra mile for your clients. Put yourself in their shoes—what could you be doing for them that would be beneficial? How can you adjust your traditional practices to best meet the evolving needs of your customers and community?

  1. Stay in Contact with Your CPA

Now more than ever, you need good business advice. Do not hesitate to reach out to your accounting advisor in order to determine if they have any suggestions for you. We are partners in this together and our firm is committed to guiding you through these unprecedented times.

Coronavirus Disaster Assistance

The U.S. Small Business Administration (SBA), which has been a resource for small business owners and entrepreneurs in the U.S. since 1953, recently released a list of disaster-relief measures in response to the COVID-19 pandemic.

Per the Coronavirus Preparedness and Response Supplemental Appropriations Act, which was enacted by the President on March 6th, the SBA has the authority to issue Economic Injury Disaster Loan declarations for states and territories whose Governor requests it. This declaration makes loans available to small businesses and private non-profits in specific areas that are suffering substantial economic injury due to COVID-19. The goal of the loans is to help alleviate economic injury. The Governors of states and territories will need to coordinate with the SBA’s Office of Disaster Assistance in order to submit their requests.

Interest rates for the loans are as follows:

*Please note: Only small businesses without access to credit from any other source are eligible. Small businesses that have access to other sources of credit are not eligible.

Further details about the SBA’s Economic Injury Disaster Loan program include the following:

  • The program will offer up to $2 million in assistance.
  • The loans can be used to pay a variety of obligations, including fixed debts, payroll, accounts payable, and other bills.
  • The program offers long-term repayments with a maximum of 30 years.
  • Loan repayment terms will be determined on a case-by-case basis.

For more details, visit SBA.gov/disaster, call the SBA disaster assistance customer service center at 1-800-659-2955, or email disastercustomerservice@sba.gov.

A Letter to Our Clients

As we continue to monitor the ongoing developments of the Coronavirus (COVID-19), we want to reach out to you now that we have more information about the challenges facing us during this global pandemic.

First and foremost, for those who are impacted directly or indirectly by the virus, especially those who may be ill, our hearts go out to you and we wish a speedy and complete recovery.

Our primary focus remains balancing the health and safety of our clients, employees, families and communities while continuing to provide the creative, responsive and comprehensive services you are accustomed to experiencing.  To that end, we would like to update you on the initiatives we have implemented to be able to serve you with minimal disruption.

We have –

  • employed work from home capabilities for all employees to help ensure they have a higher likelihood of staying healthy and can continue to serve your individual and business needs.
  • taken measures to ensure that our employees, processes and technologies remain capable of providing reliable, uninterrupted service.
  • cross-trained key employees to provide continuity should anyone contract the virus.

Additionally, although our office remains open to date, we are limiting the number of employees and visitors on site in an effort to reduce the possibility of infection.  We respectfully ask you to take advantage of our electronic capabilities such as secure portal and email, and SafeSend, our new delivery service for reviewing and signing tax returns.  Should we need to close our physical location, we will still be readily available via email or phone.  Any office closure will be posted on our website:  www.slatterycpa.com

We will continue to assess any additional measures we can take to support you, our employees and our communities.  We will help you stay current with tax and compliance changes as well as assist you in navigating the new normal as it relates to your individual and business needs.

Please continue to reach out to us with any questions or concerns.

Warm regards,

Slattery & Holman, P.C.

Tax Payment Deadline Delayed by 90 Days

Tax Payment Deadline Delayed by 90 Days

There has been much speculation surrounding the impact of the Coronavirus (COVID-19) pandemic on the U.S. tax filing deadline. At a Tuesday White House briefing, Treasury Secretary Steven Mnuchin announced new relief measures that are effective immediately.

The Internal Revenue Services (IRS) has extended the tax payment deadline for 2019 income taxes for individuals who owe up to $1 million and corporations that owe up to $10 million. 

Eligible taxpayers can defer payment for up to 90 days without accruing interest or penalties. This puts the new tax payment deadline at July 15. As of now, the tax filing deadline remains April 15, though this could still change.  Regardless of a change in deadline, our firm will continue to operate with the goal of completing tax filings without relying on extensions.

We remain on alert to any news about this situation. If the IRS announces a filing extension, we will contact you as soon as possible. It is expected that many states will follow suit in granting similar payment relief. We will be sure to keep you apprised of any new updates at both the federal and state levels. 

In the meantime, please do not hesitate to contact us with any questions you have regarding these circumstances.