COVID-19 - How it Affects Your Payroll
COBRA Premium Subsidies under theAmerican Rescue Plan Act
On March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law, with many of its provisions set to take effect April 1, 2021. Here is a breakdown of the information that we have at this time:
1) Between April 1 and September 30, 2021, employers who offer group health insurance plans that are subject to Federal COBRA requirements or comparable state continuation programs will be required to offer 100% subsidized continuation coverage (free COBRA) to eligible employees. 2) Employees who ARE eligible for these free COBRA premiums are: a) Anyone who is a qualifying plan participant who loses health insurance coverage due to an involuntary termination or a reduction in hours worked, and who elects continuation coverage to be effective during the April 1 through September 30, 2021 timeframe.
* These individuals will be eligible for the full 6 months of subsidized COBRA coverage unless they become eligible for another employer plan or Medicare b) Anyone who was a qualifying plan participant who did not elect COBRA coverage or who elected but discontinued COBRA coverage before April 1, 2021
* These individuals must still be within their maximum 18-month COBRA coverage period to be eligible. Given this, it is possible some individuals may qualify for subsidized COBRA coverage for a portion, but not all of, the 6-month period. It will be up to employers to flag these people and notify them accordingly. 3) Employees are NOT eligible if: a) They voluntary terminated their employment b) They are eligible or become eligible for another employer plan or Medicare * It will be up to the employee to notify the employer if they are no longer eligible 4) Employers who are required to comply with this provision must provide notice to their eligible employees as follows:
Special Election Notice: This notice must be provided to eligible individuals who previously elected but discontinued their COBRA coverage prior to April 1, 2021, or who declined COBRA previously but are still within their COBRA coverage eligibility period. Notice must be provided no later than May 30, 2021 and eligible individuals will have 60 days from receipt of the notice to elect subsidized COBRA coverage.
General Election Notice: This notice must go to employees who first become eligible for subsidized coverage during the period between April 1 and September 30, 2021. It must generally notify eligible individuals about the availability of premium assistance and include other details about how this subsidized coverage will be administered.
Expiration of Subsidy Notice: This notice requirement will alert eligible individuals that their subsidized coverage will expire on a particular date. It must be provided no earlier than 45 days before the expiration and no later than 15 days before the subsidy is set to expire.
* The Department of Labor is expected to issue model notices by April 10, 2021. When these are available, Easytrack will send an email with further details. 5) Payment of Premiums and Reimbursement: a) Employers will assume the responsibility of paying full COBRA premiums for eligible individuals during the 6-month subsidized period b) Employers who provide this subsidized coverage will be reimbursed for the costs of the coverage (during the period April 1 through September 30, 2021) through tax credits against their payroll taxes * The IRS is expected to provide further guidance on this, which Easytrack will pass along as we get it. ** IMPORTANT: Until we have further guidance, if you provide subsidized coverage any time from April 1 through September 30, 2021, please keep a record of all costs associated with this coverage so that Easytrack can include these costs when applying the credit against your payroll taxes. 6) In preparation, you can do the following:
a) Contact your Health Insurance Broker or Third Party Administrator to discuss how they may be able to assist you with compliance b) Start identifying employees who are or may become eligible for this subsidy c) Review your company's COBRA communications that you provide to employees upon termination and begin coordinating updated notices per the ARPA requirements * Any HR-related questions should go through your Health Insurance Broker, Third Party Administrator, and/or HR Advisor. Easytrack will only be able to assist with the payroll tax credits associated with this provision. We will post further information as soon as it becomes available.
PPP Round 2 and Simplified Forgiveness Application
The Consolidated Appropriations Act that was recently signed into law includes a second round of the Paycheck Protection Program (PPP) and a simplified forgiveness application process for the first round of PPP loans.
Updates from what we have learned since our original article on December 30th are underlined.
Paycheck Protection Program Round 2
1) A PPP loan is available to eligible first-time qualified borrowers and borrowers who previously received a PPP loan
2) Eligible businesses who are applying for a 2nd round of funding must meet the following standards:
a) Employ no more than 300 employees
b) Have used the entire amount of their first PPP loan or will use such amounts prior to receiving the funds for the 2nd round
- An application for a second loan can be submitted in advance of all of the funds from the first loan being used
c) Had gross receipts during any quarter of 2020 that were at least 25% less than the gross receipts from the same quarter in 2019
- Businesses that were in operation for the entirety of 2019 can simply compare their entire year gross receipts to the gross receipts for 2020 rather than breaking them down for an individual quarter
- Gross receipts do not need to be provided at the time of the application but they will need to be provided before a business receives the loan funds
d) Businesses that were not in operation on February 15, 2020 are not eligible
3) Businesses that are applying for the first time are not required to meet the above eligibility standards
a) Talk to your CPA and/or visit the SBA’s website dedicated to the PPP for more information on applying for a first-time loan
4) Covered Period
a) Borrowers will be able to choose the length of their covered period as long as it is at least 8 weeks and no longer than 24 weeks
5) Use of Funds
a) The bill expands the types of expenses for which PPP funds can be used. This expansion applies to existing PPP loans (except if a business has already obtained forgiveness) AND new loans.
b) In addition to the payroll, rent, covered mortgage interest, and utilities expenses that were included in the original PPP, round 2 also allows loans to be used for the following expenses:
- Operations Expenditures
- Property Damage Costs
- Supplier Costs
- Worker Protection Expenditures
*Contact your CPA if you have questions on the specifics of the qualified expenses listed above
6) Maximum Loan Amounts
a) Borrowers applying for the second round of PPP loans have the option of how to calculate their 2.5x average monthly payroll - Multiplying the average monthly payroll for the one-year period prior to the date on which the loan is made by 2.5 - Multiplying the average monthly payroll for calendar year 2019 by 2.5
b) Borrowers in the hospitality industry (NAICS code starting with 72 - typically restaurants and hotels) are permitted to use a 3.5x multiplier of their average monthly payroll when calculating their maximum loan amount
c) Businesses can determine their average monthly payroll costs based on any 365-day period between January 1, 2019 and December 31, 2020
7) Tax Treatment
a) PPP loans will NOT be treated as taxable income. Additionally, expenses paid with the proceeds of a PPP loan that is forgiven are now tax-deductible. This applies to existing loans AND new loans.
8) 501(c)(6) Eligibility
a) 501(c)(6) not-for-profit organizations will be eligible to apply for and receive a loan
9) Treatment of Economic Injury Disaster Loans (EIDL) Advances
a) EIDL Advances will no longer reduce PPP loan forgiveness
b) The SBA has indicated that borrowers that already received forgiveness and had their EIDL Advance deducted from this forgiveness may be able to amend their forgiveness applications. Further guidance on this is expected.
c) This applies to existing loans AND new loans
10) Businesses that returned all or part of their initial loan or that did not accept the full amount may reapply or request an increase for their first-round loan
11) The deadline to apply for a loan is March 31, 2021
Forgiveness Applications for Loans Under $150,000
1) The forgiveness application for loans under $150,000 will be simplified to a one-page certification
2) This application is not yet available. Easytrack will continue to send updates as further details are released.
PPP Loan Forgiveness Update
Easytrack Payroll has been informed that some banks are now accepting PPP Loan Forgiveness applications. As such, we want to provide you with some details based on what we know right now.
Here are a few important updates:
1) New streamlined application specifically for companies who borrowed less than $50,000
a) Click hereto view the new application
b) Borrowers whose loans were less than $50,000 are no longer required to reduce the amount eligible for forgiveness if:
- They reduced the salary or hourly wages of employees who earned less than $100,000 in 2019during the covered period relative to the 1st quarter of 2020
- They reduced full-time equivalent employees during the covered period relative to the base period
In other words, for companies who borrowed less than $50,000, the total amount eligible for forgiveness is not subject to reduction if they reduced salaries/wages or headcount.
Full instructions for how to complete the application can be found on the form itself.
2) Companies with loans below $150K may want to WAIT to apply for forgiveness as Congress may pass legislation providing automatic forgiveness of these loans. This would likely reduce the amount of time and supporting documentation required to receive forgiveness.
3)Time is on your side: You have 10 months from the end of your PPP Covered Period to apply for forgiveness. Banks have 60 days to review and submit forgiveness recommendations to the SBA, and the SBA has 90 days to review and provide approval.
Reference our previous article here which includes links to the various PPP Loan Forgiveness Applications and information on qualified payroll costs, wage caps per covered period, etc.
Please note that this was published before the new rules for borrowers who received a loan of less than $50,000 so it's important to review the instructions on the actual application that you are completing.
In preparation, you may gather the following items:
(Contact your banker to confirm what will be required as this may vary.)
1) Payroll Details Report:
a) Loginto your payroll account and go to the Reports tab
b) Set the date Range per your PPP Loan Period (8- or 24-weeks - confirm this with CPA/banker if unsure)
c) Select Summary by Employee from the drop-down that defaults to All Checks
d) Click Update Report
e) Download as a PDF or Excel file by clicking on the applicable link
2) Forms 941 and State Unemployment Tax Reports:
a) PDF copies are available in ShareFile
b) Note that we are currently processing 3rd Quarter reports and will notify you via email when they are available
3) Health Insurance Invoices,if applicable:
a) Save a copy of your health insurance invoice for each month that fell within your loan period
b) Qualified payroll costs will be equal to invoice totals LESS any amount withheld from employee paychecks during the period
4) Retirement Plan Reports/Proof of Employer Contributions Paid, if applicable:
a) Pull these reports from your retirement plan administrator/online portal
5) Utilities/Rent/Mortgage Interest Invoices and Proof of Payment:
a) Consult your CPA with any questions related to these items
6) Bank Statements:
a) These may or may not be required, but you should have them ready to go as a precaution
If you are able to apply for forgiveness through your bank, and choose to do so, it is important that you work with your CPA to ensure you submit everything that is required, and the relevant application is completed correctly. Easytrack cannot advise clients how to complete the application. We have payroll reports available to you as supporting documentation and will do our best to answer any payroll-specific questions.
PPP Updates and New Loan Forgiveness Application(s)
Updated: Oct 9, 2020
UPDATED: OCTOBER 9, 2020
For companies who borrowed less than $50,000, click here for Form 3508S
Instructions are included on the form
The SBA and Treasury have released further guidance and updated loan forgiveness application(s) for the PPP
For the revised Loan Forgiveness Application, click here. For instructions on how to complete the revised application, click here. For the EZ PPP Loan Forgiveness Application, click here. For instructions on how to complete the EZ application, click here * More details regarding who is eligible to complete this application can be found in #5 below For the full text of the most recent Interim Final Rule, click here. Important updates are as follows: 1) Covered Period a) If the borrower received their loan BEFORE June 5, 2020, they may elect to use either the 8-week Covered Period (or Alternative Payroll Covered Period if applicable) or the 24-week Covered Period when seeking forgiveness b) Borrowers who received their loan AFTER June 5 MUST use the 24-week Covered Period (or Alternative Payroll Covered Period) 2) Prorated Wage Cap a) Annual salaries of $100,000 or greater will be prorated based on the Covered Period (8 weeks vs 24 weeks) b) 8-week Covered Period: the maximum wages that can be reported for any one individual are $15,385 * For this period, payments to owners (owner-employees, general partners) are capped at $15,385 or the 8-week equivalent of their applicable compensation in 2019, whichever is lower c) 24-week Covered Period: the maximum wages that can be reported for any one individual are $46,154 * For this period, payment to owners are capped at $20,833 or the 2.5 month equivalent of their applicable compensation in 2019, whichever is lower 3) Qualifying Payroll Costs a) Health insurance contributions paid by the company for owner-employees of S-corporations ARE NOT eligible b) Retirement plan contributions made by the company ARE eligible 4) FTE Reduction Safe Harbors a) To comply with the FTE reduction safe harbor, FTEs must be restored to February 15, 2020 levels by the EARLIER OF a) December 31, 2020 or b) the date the loan forgiveness application is submitted. - This means that borrowers who are utilizing these safe harbors - and who have met the requirements at the end of the 24-week period - don't have to wait until December 31 to apply for forgiveness. 5) EZ Loan Application a) Borrowers can apply for forgiveness using the EZ Loan Forgiveness Application if any one of the following applies: - The Borrower is a self-employed individual, independent contractor, or sole proprietor who had no employees at the time of the PPP loan application and did not include any employee salaries when applying - The Borrower did not reduce annual salary or hourly wages of any employee by more than 25% during the Covered Period (or Alternative Payroll Covered Period) compared to the period between January 1, 2020 and March 31, 2020 AND the borrower did not reduce the number of employees or the average paid hours of employees between January 1, 2020 and the end of the Covered Period* * You will still be allowed to complete this application, if you were/are unable to hire similarly qualified employees for unfilled positions on or before December 31st or you offered to bring an employee back to work and they refused. - The Borrower did not reduce annual salary or hourly wages of any employee by more than 25% during the Covered Period (or Alternative Payroll Covered Period) compared to the period between January 1, 2020 and March 31, 2020 AND the borrower was unable to operate during the Covered Period at the same level of business activity as before February 15, 2020 due to compliance with government regulations issued between March 1, 2020 and December 31, 2020 As further guidance/clarification is provided, we will continue to share this information. We recommend you work closely with your CPA and/or attorney throughout this process.
Treasury and SBA Statement on PPP Flexibility Act
The Treasury issued a statement clarifying some points of the PPP Flexibility Act
For the full text of the statement, click here. The statement mostly reiterates the details of the new law but also includes two important clarifications: 1) 60% Requirement for Forgiveness a) In order to qualify for full forgiveness, the original bill states that borrowers must use at least 60% of their PPP funds on payroll costs. It also states that if a borrower did not use 60% of the funds on payroll costs, none of the loan would be forgiven. UPDATE: Yesterday's statement clarifies that if a borrower uses less than 60% of the loan on payroll costs, they will continue to be eligible for partial loan forgiveness. 2) 5-Year Payback Period Eligibility a) The original bill states that borrowers will have 5 years to repay any loan proceeds that are not forgiven. UPDATE: Yesterday's statement notes that only loans approved ON or AFTER June 5, 2020 can be paid back in 5 years instead of 2 years. Banks are permitted to extend the 5-year loan period to borrowers whose loans were approved prior to June 5th, but are not required to do so. A few other key points from the statement are: 1) The final date on which a PPP loan application can be approved is June 30, 2020. 2) The SBA and Treasury will be issuing further rules and guidance, a modified borrower application, and a modified loan forgiveness application promptly. As new rules and guidance are issued and when the updated forgiveness application is released, Easytrack will continue to share this information. Please don't hesitate to contact us.
The Easytrack Payroll Team
Paycheck Protection Program Flexibility Act
The PPP Flexibility Act includes some major changes to the PPP
For the full text of the bill, click here. This bill includes some significant changes to the original PPP; details of which are below. 1) Extension of the Covered Period a) Instead of the initial 8-week covered period, businesses can choose to extend this period to 24 weeks from the date of the loan's origination. b) The covered period cannot extend beyond December 31, 2020. c) If you were planning on using the original 8-week covered period (or alternative payroll covered period), this is still an option. The 24-week covered period is NOT a requirement. 2) Percentage Change for Payroll Costs vs Non-Payroll Costs a) Borrowers must spend at least 60% on payroll. This amount is down from the original requirement of 75%. b) This means that up to 40% of the loan proceeds can be used on non-payroll costs (e.g. rent, utilities, etc). IMPORTANT: Borrowers MUST spend at least 60% on payroll costs or NONE of the loan will be forgiven. 3) Extended Period to Restore FTEs/Salaries: a) The original June 30th deadline for restoring FTEs or salary/hourly wages has been extended through December 31, 2020 b) As long as FTEs or salary/hourly wages are restored to February 15, 2020 levels any time prior to December 31, 2020, no reduction in forgiveness will be required. 4) Exceptions for Not Restoring Your Workforce: a) In the period from February 15, 2020 through December 31, 2020, the amount of loan forgiveness will NOT be reduced when a borrower experiences a loss of FTEs if the borrower, in good faith, is able to document ANY of the below: i. There was an inability to rehire individuals who were employees on February 15, 2020 ii. There was an inability to hire similarly qualified employees for unfilled positions on or before December 31, 2020 iii. There was an inability to return to the same level of business activity that the business was operating at before February 15, 2020 due to compliance with government orders. - For example, if restaurants are unable to fully open by December 31, 2020 due to government orders, any loss in FTEs resulting from such restrictions should NOT be taken into account in computing a required reduction in the forgivable amount. 5) Deferral of Payroll Taxes Option Extended a) Businesses electing to defer the Employer portion of Social Security taxes can now opt to defer these taxes through the end of 2020. Originally, the law stated that they must stop deferring once the loan was forgiven. i. Payment of these taxes remains the same: 50% must be paid in 2021 and the remainder must be paid in 2022 6) Repayment and Deferral Period Adjustments a) Borrowers will have 5 years to repay any loan proceeds that are not forgiven. This is an increase from 2 years in the original bill. b) The original bill required lenders to defer the payment of principal and interest for 6 months. The new bill allows for deferral until the date the lender receives the forgiveness amount from the SBA. As with everything, these updates bring more uncertainty. It is expected that the SBA will issue further clarification on outstanding questions in the coming days/weeks. We will continue to keep you updated as more information is released. We recommend you work closely with your CPA and/or attorney throughout this process. Easytrack's team is here to help so please don't hesitate to contact us.
The Easytrack Payroll Team
PPP Loan Forgiveness Application
The SBA released the Paycheck Protection Program (PPP) Loan Forgiveness Application, including instructions for how to complete it.
The application clarifies some points which were previously unresolved, and we review those below. We expect additional guidance in the coming days/weeks and will continue to send updates as this information becomes available.
Click here to view the application. The application must be completed and submitted to the Lender servicing your loan. You may also be able to complete this application electronically through your Lender. We highly recommend that you work closely with your CPA and/or attorney throughout this process.
Below are some important details outlined on the application. 1) Alternative Payroll Covered Period: a) If you have a biweekly (or more frequent) payroll schedule, you may elect to calculate eligible payrolls costs using the 8-week period that begins on the first day of your first pay period following the PPP Loan Disbursement Date. b) If you elect to use this Alternative Payroll Covered Period, you must apply this period where there is a reference on the application to "the Covered Period or the Alternative Payroll Covered Period." If there is a reference to the "Covered Period" only, you must apply the Covered Period - the 8-week period that began on the date funds were deposited in your account. c) Generally, only payroll related items will be allowed to use the Alternative Payroll Covered Period, while payments on other expenses will continue to refer to the normal 8-week Covered Period. 2) Payroll Costs Eligible for Forgiveness: a) Eligible payroll costs PAID during the 8-week Covered Period or Alternative Payroll Covered Period regardless of when they were INCURRED * NOTE: It is unclear how far in arrears you may pay wages with PPP funds and continue to count those wages towards forgiveness. Consult your CPA if this applies to you. b) Eligible payroll costs INCURRED during the 8-week Covered Period or Alternative Payroll Covered Period so long as they are PAID by a standard payment date defined for each cost type c) Payroll costs are considered PAID on the day that paychecks are distributed or the day the employer originates an ACH credit transaction (one banking day before the day the employees receive the money via Direct Deposit) d) Payroll costs INCURRED during your last pay period of the Covered Period (or Alternative Payroll Covered Period) are eligible for forgiveness if PAID on or before the next regular payroll date 3) Other Costs Eligible for Forgiveness: a) An eligible nonpayroll cost (e.g. covered mortgage and/or rent obligations and covered utility payments) must be PAID during the Covered Period or INCURRED during the Covered Period and PAID on or before the next regular billing date. 4) FTE Reduction Exception and Safe Harbor: a) The FTE Reduction Exception removes an employee from the FTE calculation on the application if they meet one of the following conditions AND the position was not filled by a new employee. - They refused a qualified offer of employment for the same hours at the same rate - They were fired for cause - They voluntarily resigned - They voluntarily requested and received a reduction of their hours b) The FTE Reduction Safe Harbor allows that an employer will not be penalized for an FTE reduction if the employer had reduced its FTEs for the period from February 15, 2020 through April 26, 2020 as compared to FTEs on February 15, 2020 and then later restores the FTE level back to the February 15 level by June 30th, 2020. Payroll Reports As outlined on the application, you will be required to provide documentation backing up all of the information you include on the application. Easytrack Payroll will send a separate email with instructions on how to get this information from your payroll account.
PPP Loan Forgiveness and Process Interim Final Rules
The SBA released new Interim Final Rules regarding PPP loan forgiveness and process.
As you may already know, the United States Congress is currently working on further legislation regarding the PPP loan. The below information is based on what we know right now and may change in the coming days/weeks. For the initial set of instructions issued, reference the PPP Loan Forgiveness Application. The details outlined below expand upon the instructions included on the application. We highly recommend that you work closely with your CPA and/or attorney throughout this process.
Below are some important details of the Interim Final Rules released on Friday, May 22nd. 1) Incurred vs Paid PAYROLL Costs and Covered Periods: a) Borrowers may seek forgiveness for payroll costs using one of two 8-week (56 days) covered period timelines: i. 8-weeks (56 days) from the date funds were received (covered period) ii. 8-weeks (56 days) from the first day of the first payroll cycle in the covered period (alternative payroll covered period) b) To use the alternative payroll covered period, you MUST have a bi-weekly or more frequent payroll cycle. EXAMPLE: A borrower has a bi-weekly payroll schedule and received the PPP funds on June 1st. Under the covered period, this means the 8-week period ends on July 26th. The first day of the borrower's first payroll cycle that starts in the covered period is June 7th. The borrower may elect an alternative payroll covered period for payroll cost purposes that starts on June 7th and ends 55 days later (for a total of 56 days) on August 1st. Payroll costs PAID during this alternative payroll covered period are eligible for forgiveness. In addition, payroll costs INCURRED during this alternative payroll covered period are eligible for forgiveness as long as they are PAID on or before the first regular payroll date occurring after August 1st (the last day of their alternative payroll covered period in this example.) 2) Bonuses, Hazard Pay, and Pay to Furloughed Employees: a) Payroll costs include: i. Compensation paid to furloughed employees ii. Bonuses and hazard pay NOTE: The above costs will be eligible for forgiveness as long as they do not exceed an annual salary of $100,000 3) FTE Reduction Exception: a) A borrower can exclude an individual employee from their FTE calculation if ALL of the following conditions are met: i. The borrower made a good faith, written offer to rehire the employee (or restore the reduced hours of such employee) during the covered period or alternative payroll covered period ii. The offer was for the same salary or wages and same number of hours as earned by such employee in the last pay period prior to the separation or reduction in hours iii. The offer was rejected by such employee iv. The borrower has maintained records documenting the offer and its rejection v. The borrower informed the applicable state unemployment insurance office of such employee's rejected offer of reemployment within 30 days of the employee's rejection of the offer - For Colorado, you can access the Refusal of Suitable Work Form via this link NOTE: Further guidance from the SBA on this last point is expected shortly b) Reminder: An employee who is "fired for cause, voluntarily resigns, or voluntarily requests a schedule reduction" will not be counted for the reduction test. The Rules add that "borrowers should not be penalized for changes in employee headcount that are the result of employee actions and requests". 4) FTE Employees: a) The Reference Period for comparing the number of FTEs in the covered period or alternative payroll covered period is one of the following: i. February 15, 2019 through June 30, 2019 ii. January 1, 2020 through February 29, 2020 iii. Seasonal Employer: Either of the two methods above or a consecutive 12-week period between May 1, 2019 and September 15, 2019 b) Borrowers must document their average number of FTE employees during the covered period (or alternative payroll covered period) and their selected reference period c) FTE means an employee who works 40 hours or more, on average, each week i. Divide the average number of hours paid for EACH employee per week by 40, capping this quotient at 1.0. EXAMPLE: An employee who was paid 48 hours per week during the covered period (or alternative payroll covered period) is considered to be an FTE employee of 1.0. d) For those who work less than 40 hours, you can calculate FTE in one of two ways: i. Calculate the average number of hours a part-time employee was paid per week during the covered period (or alternative payroll covered period) ii. Use a full-time equivalency of 0.5 for EACH part-time employee EXAMPLE: If an employee was paid for 30 hours per week on average, the employee could be considered to be an FTE employee of 0.75 (30/40) OR you may elect to use a full-time equivalency of 0.5. NOTE: You must apply whichever method you use consistently to ALL part-time employees for the covered period (or alternative payroll covered period) and the selected reference period e) After you have computed the FTE employees for each week, you can compute the reduction quotient: i. Calculate the aggregate total of FTE employees for both the selected reference period and the covered period (or the alternative payroll covered period) by adding together all of the employee-level FTE employee calculations. ii. Divide the average FTE employees during the covered period (or alternative payroll covered period) by the average FTE employees during the selected reference period, resulting in the reduction quotient. 5) Reduction in Employee's Salary or Wages Forgiveness Reduction: a) A reduction in an employee's salary or wages in excess of 25% may result in a reduction in the loan forgiveness amount if the employee continued to work on a full-time basis b) To ensure that borrowers are not doubly-penalized, the salary/wage reduction applies ONLY to the portion of the decline in employee salary and wages that is NOT attributable to the FTE reduction 6) June 30th Safe Harbor Test a) To meet the safe harbor test, the borrower must have had a reduction in employee or salary/hourly wages between February 15th, 2020 and April 26th, 2020. If this reduction did not take place, the borrower cannot use the safe harbor even though there may be a reduction that took place during the covered period (or alternative payroll covered period) when compared to the reference period. 7) Incurred vs Paid NON-PAYROLL Costs: a) A non-payroll cost is eligible for forgiveness if: i. It was PAID during the 8-week covered period (starting from the date the funds were received) ii. It was INCURRED during the covered period and PAID on or before the next regular billing date, even if the billing date is after the covered period. 8) Loan Forgiveness Process a) The borrower must complete and submit the Application to the lender servicing the loan b) The lender has 60 days after receipt of a completed application to review the application (and supporting documentation) and issue a "decision to SBA" as to how much is to be forgiven. At this time, the lender will also request payment from the SBA of such forgiven amounts. c) The SBA is to then remit the applicable amount to the lender no later than 90 days after the lender has issued its decision i. The SBA will deduct up to $10,000 of EIDL advance amounts that have been given to the borrower from the amount remitted to the lender NOTE: The SBA may review any PPP loan but is not required to do this and may rely upon the borrower and lender for this 9) Loan Repayment a) Any balance due on a PPP loan must be repaid by the borrower on or before the two year anniversary of when the loan was made 10) 6-Year Record Retention a) Borrowers MUST retain the PPP documentation in their files for at least 6 years after the date that the loan is forgiven or repaid in full.
PPP Loans - What's Next?
Updated: Apr 17, 2020
As PPP Loans are processed and approved, Easytrack Payroll would like to provide the below guidelines and recommendations as you use the funds and ultimately seek forgiveness of the loan.
1) A good audit trail in your accounting is paramount. Your CPA and/or bookkeeper can work with you to help you achieve this.
2) If you have a separate bank account for your PPP funds, we recommend you transfer funds from that account into your regular operating account as you incur qualifying loan expenses.
For important information about Accrued Costs vs Payments Made, reference the section of this post covering that topic.
1) The covered period for using these funds, if you're going to seek forgiveness of the loan, is 8 weeks beginning on the date of the origination of the loan. Per the SBA, this is the date the lender makes the first disbursement of the PPP loan to the borrower.
2) Determine the last date of this covered period
If your CPA or attorney has advised you to adjust your pay dates in order to use the funds within the covered period, contact Easytrack for further assistance.
1) Payroll Costs (minimum 75% of the loan proceeds must be used for these)
a) Gross Wages
To determine qualifying expenses for the above category, we recommend doing the following after each payroll in the covered period:
- Run the Payroll Details report (go to the Reports tab and click Payroll Details)
- Click the link for View in Excel to export the report to Excel
- Scroll to the bottom of the page to see the Totals for the payroll
- Sum up all Gross Wages paid
* Do NOT include non-taxable Pay Types such as Reimbursements. If you have various Pay Types, and are unsure which ones should be included, contact Easytrack.
** Any wages for Paid Leave under the FFCRA should NOT be included
*** Compensation in excess of an annual salary of $100,000 should NOT be included
PPP funds can be used for the Total amount of the above
b) State Unemployment Taxes
c) Local Employer Taxes
These tax amounts can be found in the far right column of the Payroll Details report.
- While these taxes are qualifying expenses, in many cases these specific tax liabilities will be ACCRUED but not PAID during the 8-week covered period. Reference the section of this post about Accrued Costs vs Payments Made.
d) Company Contributions to retirement plans
These amounts can be found under the respective column of the Payroll Details report.
- While these contributions are qualifying expenses, it is unclear if they qualify if the paychecks fall within the covered period but the contributions are funded after the period. Reference the section of this post about Accrued Costs vs Payments Made.
e) Health Insurance Premiums paid by the Employer
To determine qualifying expenses for this category, we recommend referencing your monthly health insurance invoice and subtracting the amount withheld from your employees' paychecks for the MONTH. If you have questions, contact your insurance broker.
- While these expenses are qualifying expenses, it is unclear if they qualify if the paychecks fall within the covered period but the premiums are paid after the period. Reference the section of this post about Accrued Costs vs Payments Made.
ACCRUED COSTS vs PAYMENTS MADE:
- The CARES Act states that forgiveness applies to “costs incurred and payments made” during the covered period.
- Additional guidance is needed to better understand how to compute “costs incurred and payments made”.
- Work with your CPA to determine qualified expenses particular to your business as they may vary depending on your accounting method (cash or accrual). Your CPA can help ensure consistency where it is either payroll costs paid or accrued during the covered period, but not both.
2) Other Authorized Expenses (maximum 25% of the loan proceeds can be used for these)
a) Payment of interest on a covered mortgage obligation
b) Payment on any covered rent obligation
c) Payment on any covered utility payment
Consult your CPA to determine qualifying amounts for the above categories.
Important Reminders to Maximize Your Loan Forgiveness
1) The goal is to spend at least 75% of the PPP funds on payroll costs in the 8-week covered period. Try to get to full employment as quickly as you can, and if any employee wages were reduced due to COVID-19, be sure to increase wage levels to their original state as quickly as you can.
2) When you applied for the loan, you determined your FTEs for a specified period, which set criteria that must be met for loan forgiveness.
- We recommend you track your FTE monthly average during the 8-week covered period. Your loan forgiveness may be reduced if you decrease your FTE count.
3) Determine the total base salary or wages of each employee for the last full quarter before the date you received the loan.
- For any employee who made less than $100,000 annualized in 2019, we recommend you review compensation to ensure that you do not reduce their pay beyond 25% of the base amount during the 8-week covered period.
Verrill Dana LLP put together a very helpful publication with further guidance on the math around FTEs and Wages. We highly recommend taking the time to read this and running the numbers as they outline.
4) If you are seeking loan forgiveness, you have until June 30, 2020 to restore your FTE and salary levels for any changes made between February 15, 2020 and April 26, 2020.
5) Payments to contractors are NOT considered qualified expenses and PPP proceeds should not be used for these if you're seeking to have the loan forgiven.
Consult your CPA to confirm you are meeting the requirements set forth in the CARES Act to maximize your loan forgiveness.
Employer Exemption from FFCRA Paid Leave
The Department of Labor has provided clarification on how small businesses
can apply for an exemption from the Paid Leave requirements under the
Families First Coronavirus Response Act (FFCRA).
Per the DOL, a small business may claim exemption from mandated paid leave ONLY if:
1) The employer employs fewer than 50 employees 2) Leave is requested because the child's school or place of care is closed, or child care provider is unavailable, due to COVID-19 related reasons AND 3) An authorized officer of the business has determined that at least one of the following three conditions is satisfied: > The provision of paid sick leave or expanded family and medical leave would result in the business's expenses and financial obligations exceeding available business revenues and cause the business to cease operating at a minimal capacity > The absence of the employee requesting paid sick leave or expanded family and medical leave would entail a substantial risk to the financial health or operational capabilities of the business because of their specialized skills, knowledge of the business, or responsibilities > There are not sufficient workers who are able, willing, and qualified, and who will be available at the time and place needed, to perform the labor or services provided by the employee requesting paid sick leave or expanded family and medical leave, and these labor or services are needed for the business to operate at a minimal capacity. Important Takeaways 1) Small businesses are ONLY exempt from providing leave requests due to school closures or child care unavailability 2) Small businesses are NOT exempt from providing leave for any of the other types of permissible uses under the Act (ie an employee is sick or quarantined due to COVID-19 or an employee is caring for an individual who is sick or quarantined due to COVID-19). To Do The DOL does not provide specific instructions as to how to claim exemption. We recommend that an authorized officer of the business makes a record of his or her conclusion that one or more of the three qualifying reasons apply and keep that record in your files, with the employee's Paid Leave Request Form, to use in case of an audit or challenge. For a full list of FAQs on the FFCRA from the DOL, visit this web page. Information specific to exemption is covered in Questions 58 and 59.
Deferral of the Employer Portion of Social Security Tax
- The deferral applies to deposits and payments of the employer's share of Social Security tax through December 31, 2020. - If/when the PPP Loan is forgiven (you will be notified by your banker of this decision), you can NO LONGER defer the tax. - The tax amount deferred would need to be 50% paid by 12/31/2021 and 50% paid by 12/31/2022. Notes and Recommendations - The deferral of Social Security taxes is not forgivable. This is in essence taking on debt; basically a loan that needs to be paid back. Make sure to consider these repayments in your budgets for 2021 and 2022. - We do not recommend deferring these taxes if you believe you may have trouble paying them back. Consult your attorney, but one cannot generally file bankruptcy against taxes owed. - If you take the deferment, we recommend stopping it once your business is back up and running, to keep debt to a minimum.
- If you would like to defer these taxes, please contact us and confirm the date you would like to begin deferring. - VERY IMPORTANT: Easytrack must be notified if/when the PPP Loan is forgiven so we STOP deferring the taxes. If we are not notified and given sufficient time to act on our end, and the IRS assesses penalties/interest on late payments as a result, you will be liable for any balance due. - If you would like to stop deferring the taxes prior to the PPP Loan being forgiven, you must contact us so we can stop the deferral. For a full list of FAQs from the IRS, visit this web page.
Unemployment - Colorado Dept of Labor
Updated: Apr 20, 2020
PLEASE READ ENTIRE PAGE SO YOU DON'T MISS ANYTHING IMPORTANT!
IMPORTANT NOTE: The information on this page is specific to unemployment as related to COVID-19. It does not necessarily include information for traditional employees filing regular unemployment claims.
Click here for the main unemployment page from the Colorado Department of Labor.
If you have lost your job or have reduced hours or wages due to COVID-19, you may be eligible for unemployment benefits. Click here for more information and to file a claim.
As of April 20th, the Colorado Department of Labor will begin including the additional $600 per week in unemployment benefits for those who are eligible for this benefit under the CARES Act. Note that as of right now, this additional $600 will be paid to you each week you receive unemployment for up to 4 months or until 7/31/2020, whichever comes first.
Worker Unemployment FAQs can be viewed here.
Tips from the Department of Labor:
- If possible, use a personal computer (PC) and Google Chrome as the browser. Using smartphones or tablets may cause difficulties in filing.
- If you receive errors, clear your browser history and cache
- While filing a claim, click the Save & Finish Later button often. If you exit, click File a Claim to return to the last page you saved.
- File during non-peak hours (evenings after 8 p.m., late nights, early mornings).
NOTE THAT THE SYSTEM IS DOWN FOR MAINTENANCE BETWEEN 6 and 8 P.M. NIGHTLY.
- You must provide information about the reason you are no longer working for all employers from the last 18 months. If you have a lot of information to include, it is best if you type up this information before you start, then copy/paste at the appropriate time.
- Once finished, click Submit one time. When the claim is successfully submitted, you will receive a confirmation page and number
To estimate the amount of benefits you will receive (not including the additional $600 per week), go here.
If you will have employees filing unemployment claims, the general web page regarding responding to job separations can be found here.
To expedite the process so that employees can begin receiving benefits as quickly as possible, we recommend registering for online access here.
If you are only reducing hours, you may be eligible for the Work-Share program. Information on this program can be found here.
Employer Unemployment FAQs can be viewed here.
* PER THE FAQs – If you pay premiums based on your employee wages and the reason the employee filed the claim is the result of the COVID-19 pandemic, benefits will not be charged to your account.
Payroll Protection Program Loan
Updated: Apr 20, 2020
COVID-19 Legislation - What's Next?
Updated: Apr 20, 2020
Easytrack Payroll knows there is an immense amount of information coming at you in regard to legislation surrounding COVID-19 and that it can be a major challenge trying to determine the best course of action for your business. We also know that you have a lot of questions. So do we. Easytrack Payroll's team is here for you and your business. Along with our partners - CPAs, bankers, financial advisers, and health and retirement brokers - we have been working around the clock to digest all the legislation. The passing of the bills is only the first step; implementing them will require more time. We ask for your patience as we await further guidance from the various State and Federal tax agencies as to how to execute upon the bills to ensure proper reporting and compliance. We also think it is helpful to clarify how best to seek assistance as you wade through all of this information. While much of the legislation impacts or touches payroll in some way, Easytrack Payroll often times cannot advise on the full scope of the legislation.
We are providing the following as guidelines for what we can help you with versus when you need to also include one or more of your specialized advisers:
Easytrack CAN: - Provide updates regarding legislation that is passed. Please know that we are only sharing confirmed information, not possibilities. - Set up your payroll account to track wages that are eligible for the various payroll tax credits as directed by you and your advisers - Apply any applicable tax credits to tax balances due * Note - We will require that our clients provide documentation supporting eligibility for specific credits - Work with you to generate the applicable reports in the payroll software that contain the information needed for loan applications Easytrack CANNOT: - Provide legal advice surrounding paid leave requirements, especially those specific to your particular employees and situation - contact your attorney and/or CPA - Advise which tax credits your business is eligible for - contact your CPA and/or attorney - Help complete and/or review a loan application - contact your banker, financial adviser, CPA, and/or resources available from the SBA Given all of this, here is the information we have as of today that we think is most important to share: 1. If you meet the criteria and follow the guidance, the PPP - Paycheck Protection Program - loan with forgiveness, generally looks to be the way to go over other methods of economic relief. Consult your banker, CPA, and attorney (if necessary) in regards to your specific situation.
For specific information regarding the PPP Loan and utilizing the funds, reference Easytrack's blog post by Clicking Here. 2. The IRS has confirmed that businesses can defer the employer portion of Social Security taxes EVEN IF they have applied for the PPP loan. Consult your banker and/or CPA for guidance on any payroll-related credits and deferrals. 3. The PPP loan application is now available. Contact your banker for more information. There is also speculation surrounding the likelihood of a second round of funding for the PPP loan. 4. Keep very good records of where any funds are spent in order to qualify for any loans or credits. Additionally, you will need your financial reports in order. Work with your bookkeeper and/or CPA on this. If you do not have a bookkeeper and/or CPA, we can gladly recommend one of our partners. Easytrack Payroll will continue to send regular email blasts and update our website as information becomes available. Our team is here to answer your questions and/or point you in the right direction and we will take care of whatever payroll needs you have. We will get through this together!
Families First Coronavirus Response Act
Updated: Apr 20, 2020
Applies to all companies with fewer than 500 employees
* Employers with fewer than 50 workers may be able to apply for an exemption from providing paid family and medical leave and paid sick leave if it would jeopardize the viability of the business.
Becomes effective April 1, 2020 and is set to automatically expire on December 31st, 2020
EMERGENCY PAID SICK LEAVE ACT
Employers are required to provide full-time employees (regardless of how long the employee has been employed) with 80 hours of paid sick leave if they are absent from work for reasons related to Coronavirus (see details below)
Part time employees receive only the number of hours they have worked over an average two-week period.
Healthcare providers and emergency responders may be excluded from the definition of employee who are allowed to take this leave
An employee's leave must be for one of the following purposes:
The employee is subject to a government quarantine/isolation order related to Coronavirus
The employee has been advised by a health care provider to quarantine for Coronavirus concerns
The employee is experiencing symptoms of Coronavirus and seeking a medical diagnosis
The employee is caring for an individual who is subject to an order as described above or has been advised by a health care provider as described above
The employee is caring for a child if the child's school or place of care has been closed or the child's childcare provider is unavailable due to Coronavirus precautions
The employee is experiencing any other substantially similar conditions specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor
FAQs from the Department of Labor regarding the FFCRA can be viewed here:
- Employees who need leave to care for themselves are entitled to their full regular rate of pay for the number of hours they would work per day.
* Employers are allowed to cap this amount of paid benefits at $511 per day ($5,110 aggregate) per employee
- Employees who need leave to care for others - including children home from school or without childcare - are entitled to 2/3 of their regular rate of pay (or the applicable minimum wage, if greater).
* The amount of paid sick leave for this leave is capped at $200 per day ($2000 aggregate) per employee
- Employers must provide these benefits IN ADDITION TO any existing paid leave benefits.
EMERGENCY FAMILY MEDICAL LEAVE ACT
- This is available to eligible employees to care for the employee's child (under 18 years old) if the child's school or place of care is closed, or the child's childcare provider is unavailable, due to Coronavirus.
* Employees must have worked for the employer for at least 30 days
- Employers may provide the first 10 days of this leave without pay, however, employees can elect to substitute or use otherwise accrued paid leave during this time or their paid sick leave provided by the Emergency Paid Sick Leave Act.
- After this initial 10 day period, employers must provide additional paid leave to their employees for the remaining 10 weeks, but only at 2/3 of the employee's regular rate of pay for the number of hours the employee would normally be scheduled to work.
* The amount of pay during these 10 weeks is capped at $200 per day ($10,000 aggregate) per employee.
- Employees are required to give their employers as much notice as practicable when this type of leave is foreseeable.
EMPLOYER EXEMPTION FROM PAID LEAVE REQUIREMENTS More information on how small businesses can apply for an exemption from the Paid Leave requirements can be found by Clicking Here
EMPLOYER TAX CREDITS
- This act provides for a refundable tax credit to employers for 100% of the qualified sick leave wages paid to their employees.
FAQs from the IRS regarding these tax credits are available by Clicking Here Contact Easytrack Payroll if you need to set up paid leave for any your employees. We will work with you to ensure everything is recorded and tracked properly.
SBA Economic Injury Disaster Loans NOW OPEN
Below you can find more information on the loans available to small businesses affected by COVID-19 and a link to apply. Colorado small businesses impacted by COVID-19 can seek individual small business loans up to $2M as part of the Small Business Administration’s Economic Injury Disaster Loan program. Small businesses throughout all 64 counties may seek SBA Economic Injury Disaster Loans.
- Applicants must meet the SBA requirements of a small business (500 employees or fewer)
- Businesses directly affected by COVID-19
- Businesses that offer services directly related to the businesses in the declaration
- Other businesses indirectly related the industry that are likely to be harmed by losses in their community (Example: Manufacturer of widgets may be eligible as well as the wholesaler and retailer of the product)
- Agricultural Enterprises: If the primary activity of the business (including its affiliates) is as defined in Section 18(b)(1) of the Small Business Act, neither the business nor its affiliates are eligible for EIDL assistance.
- Religious Organizations
- Charitable Organizations
- Gambling Concerns (Ex: Concerns that derive more that 1/3 of their annual gross revenue from legal gambling activities)
- Casinos & Racetracks (Ex: Businesses whose purpose for being is gambling (e.g., casinos, racetracks, poker parlors, etc.) are not eligible for EIDL assistance regardless of 1/3 criteria above.
- Cannabis Industry
LOAN APPROVAL CRITERIA:
- Credit History: Applicants must have a credit history acceptable to SBA.
- Repayment: SBA must determine that the applicant business has the ability to repay the SBA loan.
- Eligibility: The applicant business must be physically located in a declared county and suffered working capital losses due to the declared disaster, not due to a downturn in the economy or other reasons.
HOW MUCH YOU CAN BORROW:
- Eligible entities may qualify for loans up to $2 million.
- The interest rates for this disaster are 3.75 percent for small businesses and 2.75 percent for nonprofit organizations with terms up to 30 years.
- Eligibility for these working capital loans are based on the size (must be a small business) and type of business and its financial resources.
HOW THE FUNDS CAN BE USED:
These working capital loans may be used to pay fixed debts, payroll, accounts payable, and other bills that could have been paid had the disaster not occurred. The loans are not intended to replace lost sales or profits or for expansion. Funds cannot be used to pay down long-term debt.
WHAT IS NEEDED TO APPLY:
- Completed SBA loan application (SBA Form 5).
- Tax Information Authorization (IRS Form 4506T) for the applicant, principals and affiliates.
- Complete copies of the most recent Federal Income Tax Return.
- Schedule of Liabilities (SBA Form 2202).
- Personal Financial Statement (SBA Form 413).
- Income, balance sheet, and cash flow documents.
- Other Information may also be requested.
OTHER INFORMATION THAT MAY BE REQUESTED:
- Complete copy, including all schedules, of the most recent Federal income tax return for principals, general partners or managing members, and affiliates (see filing requirements for more information)
- If the most recent Federal income tax return has not been filed, a year-end profit-and-loss statement and balance sheet for that tax year
- A current year-to-date profit-and-loss statement
- Additional Filing Requirements (SBA Form 1368) providing monthly sales figures (This is especially important for Economic Injury Disaster Loans
HOW SOON WILL BUSINESSES RECEIVE MONEY:
- Small businesses that submit complete loan packages could receive the money within three (3) weeks
- Incomplete information and verification of collateral will delay the approval process
- Include the specific disaster in your application – specifically reference “COVID-19” or Coronavirus
- Apply online vs by mail
- Write your password down; neither the system nor any personnel are able to retrieve it
- Save your work at every prompt
- Do not rush through the application. Check and recheck the filing requirements to ensure that all the needed information is submitted. The biggest reason for delays in processing is due to missing information.
- Make sure to complete all filing requirements before submitting the application and forms
- Be sure to use the same contact information (business name and the name of all owners) that you use on your federal tax returns. Double-check that they match
- If your tax returns reference other businesses that you own, you must also submit those tax returns in order to avoid processing delays
- If more funds are needed, applicants can submit supporting documents and a request for an increase. If fewer funds are needed, applicants can request a reduction in the loan amount.
- If the loan request is denied, the applicant will be given up to six months in which to provide new information and submit a written request for reconsideration
You can apply here.
NOTE: This information came directly from the Colorado Small Business Association. Any additional guidance should be sought through your company's accounting and legal advisers.
Special Enrollment Period for Uninsured Coloradans
Updated: Apr 20, 2020
Connect for Health Colorado® announced a new Special Enrollment period from Friday, March 20, 2020 through Thursday, April 30, 2020.
Coloradans who are uninsured qualify to enroll in a health insurance plan for coverage that starts April 1, 2020.
To sign up for coverage through the Marketplace - the only place where residents can qualify for financial help to lower costs - Coloradans can complete an application and select a health insurance plan via one of the following means:
1) Online at connectforhealthco.com
2) Working with a certified enrollment expert - many local experts continue to provide virtual and/or phone appointments.
3) Over the phone at 855-752-6749, Monday through Friday from 8 a.m. to 6 p.m. and Saturday and Sunday 9 a.m. to 5 p.m. during the enrollment period.
Applicants should select the enrollment reason as, "Will lose or lost health insurance and/or have no other health coverage during the COVID-19 outbreak” and input the application date as the qualifying life change event date. Residents who take these steps will not be asked by health insurance companies to provide documentation to verify their eligibility for the Special Enrollment period. As always, Coloradans can sign up for a plan if they experience other qualifying life change events, including loss of job-based and Health First Colorado (Medicaid) coverage. Coloradans may be eligible to enroll in a new plan if they experience changes or losses in income, which should be reported to Connect for Health Colorado. Residents who qualify for Health First Colorado (Medicaid) or the Child Health Plan Plus program can enroll online through the PEAK application any time during the year.
For more information, visit Connect for Health Colorado's COVID-19 support page.
NOTE: This information came directly from Connect for Health Colorado. Any additional guidance should be sought by contacting them directly.