Employee Retention Credit and More Options

Hello from the Bertz, Hess Professional Service Team! We are excited to reach out to you as we head into the summer months. The school year has ended for many of our children and Lancaster County is moving to Yellow!

This week we will cover the Employee Retention Credit, and many other significant updates and reminders.

Updates and Reminders

Paycheck Protection Plan Loans – Just last evening both the House and Senate signed off on several proposed changes to the PPP Loan program. Major changes include:

  1. Increasing the 8-week timeline to use the loan to 24 weeks
  2. Increasing the amount of allowable non-payroll expenses from 25% to 40%
  3. Increasing the term of the loan from 2 years to 5 years in certain cases

At this point, the President just needs to sign the bill. More to come on this once the President signs!

July 15th deadline – We covered this in our last communication, but it is worth mentioning again. The July 15th deadline is sneaking up on us. For many taxpayers that means as many as three different payments could be due (any amount due with the 2019 tax return, and first and second quarter estimated payments for 2020). If you include state and local estimates, it may be as many as nine different payments due on July 15th. These payments could have a significant impact on cash flow, and many times estimated payments are calculated based on prior year income. Given the impact of COVID-19 on many small businesses, take some time and consult with our Bertz, Hess & Company professional team on what makes sense for your 2020 estimated payments.

Also, keep in mind that not all states extended the second quarter estimated payment to July 15th like Pennsylvania. Among our neighboring states that did not extend the second quarter estimate due date are: New York, New Jersey, Delaware, District of Columbia, Virginia (in addition, Virginia first quarter 2020 estimate was due 6/1/20).

All of the states above have second quarter estimate due dates of June 15, 2020 and first quarter due dates of July 15th with the exception of Virginia as shown. There are many other states that did not extend the estimate dates at all. Again, be sure to consult with one of our professionals so nothing gets missed!

CHECK YOUR MAIL! – Many Economic Impact Payments are being issued on prepaid debit cards. The cards are being mailed in plain white envelopes from “Money Network Cardholder Services”, so be diligent in going through your mail. The envelope will also include instructions with a phone number to call where you establish a PIN and activate the card. If the card is not activated, you will not be able to use it.

Employee Retention Credit

One provision of the CARES Act that we have not spent much time on is the Employee Retention Credit. This credit is available to eligible employers and equals 50% of wages paid to employees during the period of March 13th, 2020 through December 31, 2020. The maximum amount available is capped at $10,000 of qualified wages per employee, which results in a credit of $5,000 per employee. The credit is then applied to the employer’s portion social security taxes. Eligible employers are required to meet the following two criteria.

  1. Operations must be fully or partially suspended during the calendar quarter as a result of orders from an appropriate government authority due to COVID 19; or
  2. Gross receipts for the quarter are 50% less than gross receipts for the same quarter in the prior year.

While the credit is available to employers of any size, it is not available to employers who receive Paycheck Protection Loan. For more detail on this credit, you can review the FAQs at https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

If you should have any questions, please reach out to your Bertz, Hess & Co. tax and business advisor and we will be happy to help.

Thank you and enjoy your weekend!

The Professional Service Team at Bertz, Hess & Co., LLP

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