Laws are being passed very quickly, are being interpreted by multiple agencies, and policies written by the Treasury Department and Department of Labor on an ongoing basis. Changes in the regulations will be frequent and PCS will attempt to keep the information updated as soon as it happens. This page covers:
The recently passed Coronavirus Aid, Relief and Economic Security (CARES) Act provides $2 trillion in emergency aid to businesses and individuals impacted by the COVID-19 crisis. The 880-page legislation is very complex. The content below is our best explanation and has been divided into the basic parts of the Act:
Each business owner should consider consultation with legal, human resource and accounting professionals before taking significant actions.
The programs are funded through private financial institutions that can pay directly to approved applicants. Approval is based almost entirely on documentation the business was operational on February 15, 2020 and had employee expenses but specific eligibility is noted for each program. Specific questions can be directed to your local SBA office
In general, this program is designed to help you retain your employees in the economic downturn related to the COVID-19 crisis by providing up to eight weeks of federally guaranteed loans that are forgiven, with stipulations, if you continue to pay your employees.
The key elements of this loan are as follows
The intent of this loan is to support ongoing operations including retention of employees and other business obligations but the emphasis is on keeping employees paid. At least during the eight week loan period, there is a major incentive to hire back any employee laid off. If employees are re-hired at initiation of loan, any reduction in forgiveness will be limited to how much your expenses were reduced compared to the prior year period. You may re-evaluate your business’ financial well-being at the end of the loan period and make any adjustments needed to maintain the viability of the practice. NOTE: According to the April 3, 2020 update, If you knowingly use PPP funds for any expense not stated as an applicable expense under this Act, SBA will consider this a fraudulent activity.
Application for an SBA loan is made through most any bank or lending institution. Current SBA lenders can be found here. Application preference will be given to SBA preferred lenders (ask the lender if they are or check them out on the SBA website). Forms for this loan can be found here You will need documentation of all payroll expenses you are claiming. Example calculations and a walk through can be found here.
On March 31, 2020, the Treasury Department issued directions to SBA lenders for CARES loan processing. The banks may begin taking application on April 3, 2020 for most businesses and April 10, 2020 for sole proprietors and independent contractors. On April 2, 2020, new directives were given that have resulted in potential hesitancy by the lender to continue processing loans until they are assured further changes will not be made.
NOTE: Part of the SBA update on April 3, 2020 allowed lenders up to sixty (60) days to process loans. There was also a statement that loans would be issued on a “first come first served” basis. While this implies to some that once the originally allocated $349 billion dollars is depleted, no more loans will be available. Both the Treasury Secretary and the President have been quoted saying the funds will be replenished but there is no Congressional action at this time. We can only apply logic that the obvious intent was not to serve up loans like a restaurant and when the food is gone everyone starves. Stay tuned
The latest guidance from the Treasury Department (https://home.treasury.gov/system/files/136/Interim-Final-Rule-Additional-Eligibility-Criteria-and-Requirements-for-Certain-Pledges-of-Loans.pdf provides additional insight into the mechanics of filing for a PPP loan if you are self-employed. The new guidance is relatively clear is you file your taxes using the standard IRS 1040 form with Schedule C describing the finances of your business. If you are an LLC, PLLC or other partnership, the guidance does not help. In order to apply for a PPP loan, you must have already completed or complete Schedule C of your 2019 tax return.
Calculating Your Loan Amount
If you are a sole proprietor or independent contractor who has no employees, you calculate the maximum amount of your PPP loan as follows:
If you are a sole proprietor or independent contractor who has employees, you calculate the maximum loan amount as follows:
The proceeds of a PPP loan are to be used for the following.
You must have claimed or be entitled to claim a deduction for such expenses on your 2019 Form 1040 Schedule C for them to be a permissible use during the eight-week period following the first disbursement of the loan (the “covered period”).
The “rules” of forgiveness are exactly the same as for other PPP loan applicants but there are some differences in what uses can count for forgiveness. These include:
This is simply a normal SBA loan with financial crisis amendments to allow accelerated turn-around time. The key elements are as follows:
Apply for an SBA Express loan in the same manner as the PPP instructions above.
This provision expands access to EIDL loans during the COVID-19 crisis. This is a repayable loan under the terms of the SBA but there is a provision for a grant amount of $1,000 for each employee up to a maximum of $10,000 that does not have to be repaid under any circumstances. The key elements of this loan include:
You can apply at most banks but also online at https://disasterloan.sba.gov/ela/
The Treasury Department is authorized to provide qualifying businesses with an advance tax credit equal to expenses paid to provide for sick time or leave time under FMLA extension in the Families First Coronavirus Protection Act. The Treasury Department is allowed to pay the credit directly to the employee in an expedited fashion but does not specify the details of the plan. How the advanced credit will work is not specified but the Secretary of HHS directed to provide instructions.
The provision would also limit employer liability to $5,110 in aggregate for sick leave, $2,000 in aggregate for each employee for leave related to:
The provision would limit employer liability to $200 per day, $10,000 aggregate for each employee for leave related to:
It appears the provision would also allow an employee who was laid off after March 1, 2020 but then rehired to have access to COVID-19 paid sick and family leave. If allowed, it is likely the layoff would have to been for one of the qualifying reasons. More guidance likely to follow.
This provision provides a payroll tax credit of 50% for wages paid to employees during the COVID-19 crisis. The key components of this benefit are as follows:
To be eligible to enter this tax credit program, your gross receipts must have declined by more than 50% comparing your current 2020 quarter to your 2019 quarter. Once you become eligible, your eligibility stays intact for each subsequent quarter through December 31, 2020 where your gross receipts decline by more than 20% compared to 2019. If you initially qualify, once you have less than a 20% reduction in gross receipts for any quarter, you no longer qualify. The following example demonstrates how this works.
PERIOD GROSS RECEIPTS PAYROLL EXPENSES APPLICATION TO ERTC
Q1 2019 $500,000 $100,000
Q1 2020 $475,000 $90,000 YOU DO NOT QUALIFY
Q2 2019 $500,000 $100,000
Q2 2020 $240,000 (>50%) $ 50,000 YOU QUALIFY FOR $50,000 TAX CREDIT
Q3 2019 $500,000 $100,000
Q3 2020 $350,000 (>20%) $ 70,000 YOU QUALIFY FOR $70,000 TAX CREDIT
Q4 2019 $500,000 $100,000
Q4 2020 $410,000 (<20%) $ 80,000 YOU NO LONGER QUALIFY
> How to obtain Credit: Credit will be applied to taxes you owe. Make sure your accountant is well versed in this program.
Under this provision, employers and self-employed individuals are allowed to defer payment of the employer share of the FICA tax they otherwise are responsible for paying. This is not tax obligation forgiveness, only a delay in payment if you choose to. Payment of delayed tax obligations will be required with half of the amount required by December 31, 2021 and the other half by December 31, 2022. This deferral is not an option if you are receiving assistance through a PPP loan.
> How to obtain Credit: Deferral may be applied to taxes you owe. Make sure your accountant is well versed in this program.
This is an HHS program for eligible health care providers, including optometrists. Funds will be made available for health care related expenses or lost revenues attributable to coronavirus that are not otherwise reimbursed under other programs in the Act. This benefit is only available to Medicare or Medicaid enrolled providers. Details of the plan will be developed by HHS.
Special classification and amounts of business loss due to adverse effects from the coronavirus crisis will be developed. There are also special provision related to advanced minimum tax calculations. The details of this should be discussed with your accountant.
This expansion would allow doctors, including optometrists, to provide telehealth services to both established and new patients. State laws may not allow optometrists or any physician to perform telehealth on patients without an established doctor/patient relationship so check with the State Board.
The Act also establishes grant programs and directives to Congress to gather reports on ways to improve and enhance telehealth services. It also specifically charges HHS to consider ways to increase use of telehealth services, especially for home health care.
This provision temporarily lifts the 2% Medicare sequester on all payments to doctors of optometry and other Medicare providers. The sequester will apply to the period May 1, 2020 to December 31, 2020.
This provision provides for optometrists access to grants designed to improve care in small health care practices. Grants would be funded to develop better ways for optometrists to increase communication and coordination of care with other health care providers with the ultimate goal of improving patient health outcomes. The grant period will be five years.
This provision is designed to develop ways to increase training of doctors including optometrists, nurses and allied health personnel to ensure an adequate access to care even during public health emergencies
The act eliminates claims of liability against health care professionals acting within scope of practice as a volunteer for care related to COVID-19.
The CARES Act provides $100 billion in relief funds to hospitals and other healthcare providers on the front lines of the coronavirus response. This funding will be used to support healthcare-related expenses or lost revenue attributable to COVID-19 and to ensure uninsured Americans can get testing and treatment for COVID-19. $100 billion was designated for this relief fund and only $30 billion was distributed in the first round. You are eligible if:
You do nothing to receive these funds. Disbursement of funds is being handled by UnitedHealth Group. If you participate in an auto-deposit program for Medicare reimbursement, the funds will be automatically deposited in your bank account - they are likely already there. If you do not, you will receive a check in the mail within a few weeks.
Funds are based on a formula that considers how much you were reimbursed by CMS in 2019. The funds are accounted to the TIN of the individual provider or group (groups will receive one amount that includes the relief funds for all the providers in the group including employed providers). Providers receiving relief funds will need to agree to the Relief Fund Payment Terms and Conditions https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/terms-conditions/index.html.
Providers will need to attestation and agree to the terms.
If you have direct deposit of reimbursement and have not received funds or if you do not receive a check in a few weeks, you can call 1-877-620-6194. Press one (1) when they start talking and you will be connected to an agent. You will need to provide your tax ID number for an agent to give you the status of your payment.
HHS will begin distribution of the remaining $20 billion of the general distribution to these providers on April 24 to augment their allocation so that the whole $50 billion general distribution is allocated proportional to providers' share of 2018 net patient revenue.
On April 24, a portion of providers will automatically be sent an advance payment based off the revenue data they submit in CMS cost reports. Providers without adequate cost report data on file will need to submit their revenue information to the General Distribution Portal for additional general distribution funds.
Requires the Federal Government to allow the following to assist those with student debt.
The CARES Act provides several benefits related to applicable individuals.
In addition to funds to assist in processing and payment of the increase in unemployment claims, the following changes are made.
Extends unemployment benefits for individuals (who are otherwise capable of working) for the following reasons:
Benefits under this Act are extended to most business owners as well as independent contractors (with a more complex compensation determination). The requirement that individuals approved for unemployment benefits be actively seeking employment is waived if unemployment compensation granted under this Act. Individuals who provide fraudulent information regarding their qualifications under this rule are subject to prosecution and removal from eligibility of unemployment compensation under this act. There are also options for emergency unemployment benefits for individuals who have otherwise exhausted all available unemployment compensation.
RECENT NEWS: The exemptions under this Pandemic Unemployment benefit under CARES is further defined to include almost any individual whose business is closed or has suffered significant reduction in income. This includes owners of corporations paid exclusively by distribution (K-1). Owners of corporations who classify themselves as employees and receive W-2 wages are already included. The manner in which the unemployment system will process these unique requests is unknown at this time.
Tax credits for the year 2019 for eligible individuals in the amount of:
The credit amount will be reduced (not below zero) by 5% of the amount for the following adjusted gross incomes:
This provision addresses special tax implications for withdrawals from and loans from retirement plans related to expenses from COVID-19. These would be allowed and subject to tax paid over a three year period unless funds are recontributed.
The law also allows waivers for mandatory disbursement from certain retirement plans.
Miscellaneous benefits include:
This expansive piece of legislation contains other provisions not related to the coronavirus crisis. Examples include:
The final bill can be found here: https://www.congress.gov/bill/116th-congress/house-bill/748/text#toc-HCCF2DA7CBD6341059EAB97C24489743B
Congress passed emergency legislation (HR 6021) that allows for additional benefits to employees in this crisis. Eligibility for these benefits is restricted to issues related to the COVID-19 crisis. We expect additional guidance and clarification on many issues related to FFCRA. There are three main elements related to most of you.
Funding was significantly increased for operations and benefits under the unemployment benefit program. Funding will be provided only to states that meet certain requirements. Employees who are laid off are definitely eligible for this benefit. Employees who have their hours reduced are also eligible – how much reduced and for how long are typically state specific rules each affected employee will have to deal with. Application and processing rules for these benefits are likely to be significantly reduced. Employers need to take no additional or different action related to these changes. For employee accessed unemployment benefits under this Act, the employer will not be levied any penalty of adjustment in their unemployment tax rate. See Employment Assistance under the CARES Act for information on how that legislation also effects unemployment benefits
This benefit is a ten (10) day paid sick leave benefit for employees for any one of the following reasons:
Payment of this benefit for reasons 1 and 2 are paid at the employee’s regular rate of pay with a cap of $511 per day or $5,110 for the entire ten days. Payment of this benefit for the third reason must be at a rate that is at least two-thirds of their usual rate of pay with a cap of $200 per day and a $2,000 aggregate. For salaried employees, you can calculate their applicable hourly rate of pay by dividing their salary by 2080 (ex. You pay your Administrator $70,000 a year - $70,000 / 2080 = applicable hourly rate of $33.65).
An extension to the Family Medical Leave Act allows for twelve (12) weeks of paid leave if the employee has to leave work in order to take care of a child due to the fact their child's school is closed or child care not available. The employee must have exhausted ALL their paid sick leave related to this Act before they can access the FMLA extension benefit. This means the FMLA extension is actually for only ten (10) weeks and could not be accessed prior to April 11, 2020. The actual number of hours that time represents is based on the employee’s usual work schedule prior to the crisis date of February 15, 2020. For example, if an employee normally works 40 hours a week, they would be entitled to the full 400 hours of paid leave. If they work less than that, it would be based on their average weekly hours worked times the ten weeks. In order to qualify for this benefit, the employee must have worked 30 days prior to April 1, 2020. This is paid at a minimum of 2/3 of the employee’s normal wages. Specific to the FMLA extension benefit, this extension only applies to the childcare/school reason and not just because you have to lessen an employee’s hours or lay them off completely due to the economic turndown. Employers may also exclude employed doctors from this benefit.
A clarification by the Department of Labor makes two points clear. First, a qualifying event must take place AFTER April 1 as the law is not in effect until then. Second, the original language states that health care providers could be excluded from the mandate to provide these benefits at their discretion. It was not clear who was included in the definition of health care provider but the recent update makes it clear optometrists are considered under this definition.
Exactly how this will work out is yet to be fully defined but remember these benefits have application limited to the COVID-19 crisis. The point is the choice of how you handle your employees is mostly still in your hands. Whatever you do, remember these actions can be a dangerous precedent and it must be clear the action is totally restricted to the current COVID-19 situation.