PPP/PUA/MSLP/ERC and More...

Dear Friends:

We have been working round the clock responding to emails and telephone messages and of course continuing our normal (somewhat) process in preparing tax returns. I think the updates below will be critical to most effected business entities and individuals alike. Please feel free to share or forward.

Summary:

There has been so much focus and attention given to the PPP (Paycheck Protection Program) that some are missing other viable opportunities as a result. We know that next few days, it is expected that Congress will approve additional funds to fund the PPP program. This will help those who are eligible and in lenders’ queues. Remember this is intended to SAVE JOBS and KEEP Employees on payroll and off Unemployment. Self-Employed individuals (SCorps with no employees other than shareholders, Sch C, IC’s etc…) should not be disappointed or be upset at their lender or the government for being left out as this was never designed for those of us who have no impact on saving jobs. Programs below (Specially the PUA) is really designed for the self-employed with no employees. A prime example of a PPP we help fund this week kept 175 employees of this particular company on payroll and those employees taking a paycheck home. 

Here is our link again for the PPP (Currently on pause till additional funds become available. If already applied, you are still in the queue, no need to reapply): https://fountainheadppp.com/apply?partner_id=RA0082

• Main Street Lending Program: On April 8, 2020, the Board of Governors of the Federal Reserve System (the Board), by the unanimous vote of its five members and with the approval of the Secretary of the Treasury, authorized the establishment and operation of the Main Street New Loan Facility (MSNLF) under section 13(3) of the Federal Reserve Act (12 U.S.C. § 343(3)). The MSNLF is intended to facilitate lending to small and medium-sized businesses by eligible lenders. (Please see details below for the guidelines and eligible businesses). If eligible this is a real loan program which outdoes the PPP in many ways and its based on historical performance of the company and their EBITDA. Or the new terminology used by many EBITDAC (Earnings Before Interest Tax Depreciation Amortization and Coronavirus) ?? the latter is a joke of course. Laughter is still the best medicine…. Or a vaccine at this point will do.
• Pandemic Unemployment Assistance (PUA): This is the Self-Employed UI program which will qualify you for $167 (CA) PLUS $600 (Federal Govt)/Per Week. Details on eligibility and qualifications below including the links to apply when it goes live on April 28.
• Income Tax Filing and Payment Deadline: Reminder that this is pushed till July 15, 2020. See details below including Estimates for 2020
• Payroll Tax Deferment Program: This will free up cash flow. Please see the details below
• Employee Retention tax Credit (ERC): We have received MANY calls on this and the details are below, including qualification will help you receive a fully refundable tax credit of $5000/employee! This can mean a huge number for those who opted out of the PPP. Please see my qualification summary and examples below, including Q&A links.
• CA Sales Tax: Updated deferment and schedule is below including a payment plan. please see below.
• Los Angeles County Property Taxes: Yes…. It was due on April 10th BUT if you have not paid or hopefully paid a partial amount, you might qualify for a waiver of penalties. Please see below and use the link to submit the waiver request ASAP.

Pandemic Unemployment Assistance “PUA”

As part of the federal CARES Act, the new Pandemic Unemployment Assistance (PUA) program helps unemployed Californians who are business owners, self-employed, independent contractors, have limited work history, and others not usually eligible for regular state UI benefits who are out of business or services are significantly reduced as a direct result of the pandemic. The provisions of the program once operational include:

• Up to 39 weeks of benefits starting with weeks of unemployment beginning February 2, 2020, through the week ending December 26, 2020*, depending on when you became directly impacted by the pandemic.
• An additional $600 to each PUA weekly benefit amount you may be eligible to receive, as part of the separate CARES Act Pandemic Additional Compensation program. Only the weeks of a claim between March 29 and July 25* are eligible for the extra $600 payments.

* Under the CARES Act of 2020, the $600 additional benefits are available through 07/31/20. However, the U.S. Department of Labor has issued guidance to clarify that, for most Californians, the last full week of benefits will end on 07/25/20. Similarly, the PUA program has a legislative end date of 12/31/20, but for Californians the last full week of benefits will end on 12/26/20.

Benefits can be retroactive to weeks starting on or after February 2, 2020, depending on your last day of work due to COVID-19 and regardless of when you submitted your claim application. The effective date of your claim will begin the Sunday of the week when you last worked and became unemployed due to reasons directly related to COVID-19.

As we work to implement this new program, you can:

• Review the eligibility requirements the federal government has prescribed in order to receive these federally paid benefits.
• Visit the Labor Workforce Development Agency’s Pandemic Unemployment Assistance FAQs for more information.
• Contact your local America’s Job Center of CaliforniaSM where EDD staff work with local partners to provide employment assistance. You could be eligible for Supportive Services funding to help you with basic needs.

Eligibility

The PUA benefits are payable if you don’t qualify for regular UI benefits in California or another state and also do not qualify for State Disability Insurance or Paid Family Leave benefits. This includes:

• Business owners
• Self-employed individuals
• Independent contractors

You can also be eligible if you qualified for regular UI benefits, but have collected all benefits for which they are eligible. If you are not a citizen of the United States, you cannot be paid PUA benefits unless you were legally permitted to work in the United States at the time such services were performed. In addition, you must be authorized to work for any week of PUA benefits claimed to be eligible for payments.

You must also meet one of the following criteria:

• You have been diagnosed with COVID-19 or are experiencing symptoms of COVID-19 and are seeking a medical diagnosis.
• You are unable to work because a health care provider advised you to self-quarantine due to concerns related to COVID-19.
• A member of your household has been diagnosed with COVID-19.
• You are providing care for a family member or a member of your household who has been diagnosed with COVID-19.
• A child or other person in the household for whom you have primary caregiving responsibility is unable to attend school or another facility that is closed as a direct result of the COVID-19 and the school or facility care is required for you to work.
• You became the breadwinner or major support for a household because the head of the household has died as a direct result of COVID-19.
• You have to quit your job as a direct result of COVID-19.
• Your place of employment is closed as a direct result of COVID-19.
• You were scheduled to start a job that is now unavailable as a direct result of the COVID-19 public health emergency.
• You are unable to reach the place of employment as a direct result of the COVID-19 public health emergency.
• If you work as an independent contractor with reportable income, you may also qualify for PUA benefits if you are unemployed, partially employed, or unable or unavailable to work because the COVID-19 public health emergency has severely limited your ability to continue performing your customary work activities, and has thereby forced you to stop working.

Benefit Payments

In order to provide benefits as quickly as possible, payments will be issued in phases. If you qualify for PUA, and depending on the effective date of your PUA claim, the initial payments you will receive are as follows:

• Phase 1
• $167 per week for each week you were unemployed from February 2, 2020 to March 28, 2020 due to a COVID-19 related reason.
• Phase 2
• $167 plus $600 per week for each week you were unemployed from March 29, 2020 to July 25, 2020, due to a COVID-19 related reason.
• Phase 3
• $167 per week, for each week from July 26, 2020 to December 26, 2020, that you are unemployed due to a COVID-19 related reason, up to a total of 39 weeks (minus any weeks of regular UI and certain extended UI benefits that you have received).

Note: If you qualify for your claim to be backdated to an earlier PUA effective date based on your last day of work, you could receive payment for prior weeks you were unemployed due to COVID-19.

You will be required to “certify” for your benefit payment. Certifying is the process of answering basic questions every two weeks that tells us you’re still unemployed and otherwise eligible to continue receiving biweekly payments.

When to File a Claim

We have a dedicated team working around the clock with state partners to build this new program as quickly as possible. The EDD will begin accepting online applications for this program on Tuesday, April 28. This page will be updated with instructions for filing a claim for PUA benefits when details become available.

If you are unsure if you are an independent contractor or an employee who could be eligible for benefits, file for regular Unemployment Insurance benefits and we will determine your eligibility.

After you have filed, refer to our step-by-step UI claims process. You’ll learn what to expect and the actions you need to take through the course of your claim for receiving benefit payments as long as you’re eligible.

Main Street Lending Program “MSLP” “MSNLP”

Eligible Loans:

An Eligible Loan is an unsecured term loan made by an Eligible Lender(s) to an Eligible Borrower that was originated on or after April 8, 2020, provided that the loan has the following features:

1. 4 year maturity;

2. Amortization of principal and interest deferred for one year;

3. Adjustable rate of SOFR + 250-400 basis points;

4. Minimum loan size of $1 million;

5. Maximum loan size that is the lesser of (i) $25 million or (ii) an amount that, when added to the Eligible Borrower’s existing outstanding and committed but undrawn debt, does not exceed four times the Eligible Borrower’s 2019 earnings before interest, taxes, depreciation, and amortization (“EBITDA”); and

6. Prepayment permitted without penalty.

Eligible Lenders:

Eligible lenders are U.S. insured depository institutions, U.S. bank holding companies, and U.S. savings and loan holding companies.

Eligible Borrowers:

Eligible borrowers are businesses with up to 10,000 employees or up to $2.5 billion in 2019 annual revenues. Each eligible borrower must be a business that is created or organized in the United States or under the laws of the United States with significant operations in and a majority of its employees based in the United States. Eligible borrowers that participate in the MSNLF may not also participate in the MSELF or the Primary Market Corporate Credit Facility.

Income Tax Deadlines

All Federal and California income tax filing and payment deadlines originally due between March 16, 2020, and June 15, 2020, are automatically extended to July 15, 2020, for businesses and individuals.

This includes quarterly estimated tax payments. Many states are following this process. There is no need to file an election for this extension.

Deferment of Payment of Payroll Taxes (OPTIONAL):

The CARES Act allows employers to delay the payment of the employer’s share of Social Security payroll tax:

>> 6.2% of wages up to the annual wage base ($137,700 in 2020).

>> It also applies to 50% of the equivalent taxes incurred by self-employed individuals. 

>> This is only applicable to taxes incurred from March 27, 2020, through December 31, 2020.

Employers who opt to delay payment would need to deposit half of that delayed amount by December 31, 2021, and the other half by December 31, 2022.

Does not apply to the employee’s share of Social Security tax, the employee or employer’s share of Medicare tax, or to the Additional Medicare tax imposed on employees with Medicare wages in excess of $200K.

Filing Deadlines for Payroll Taxes are NOT delayed or changed.

IMPORTANT: An employer is ineligible for this payment deferral if it acquires a loan through the Paycheck Protection Program, for which all or part of the loan was or will be forgiven.

Employee Retention Credit: “ERC”

• The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. This Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000.
• Eligible Employers for the purposes of the Employee Retention Credit are those that carry on a trade or business during calendar year 2020, including a tax-exempt organization, that either:
• Fully or partially suspends operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
• Experiences a significant decline in gross receipts during the calendar quarter.

Note: Governmental employers are not Eligible Employers for the Employee Retention Credit. Also, Self-employed individuals are not eligible for this credit for their self-employment services or earnings.

• The credit equals 50 percent of the qualified wages (including qualified health plan expenses) that an Eligible Employer pays in a calendar quarter. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for qualified wages paid to any employee is $5,000.

Example 1: Eligible Employer pays $10,000 in qualified wages to Employee A in Q2 2020. The Employee Retention Credit available to the Eligible Employer for the qualified wages paid to Employee A is $5,000.

Example 2: Eligible Employer pays Employee B $8,000 in qualified wages in Q2 2020 and $8,000 in qualified wages in Q3 2020. The credit available to the Eligible Employer for the qualified wages paid to Employee B is equal to $4,000 in Q2 and $1,000 in Q3 due to the overall limit of $10,000 on qualified wages per employee for all calendar quarters.

Please note that the credit is not available to employers receiving Paycheck Protection Program Loans, and an employer’s eligibility to claim the credit may be impacted by participation in other COVID-19 credit and relief provisions.

https://www.irs.gov/newsroom/faqs-employee-retention-credit-under-the-cares-act

https://communications.adpinfo.com/taxcreditsfaq

California Sales and Use Tax

>> Automatic extensions to file and pay. (No Need to File and Extension for 1st Quarter 2020 Sales Tax Returns)

>> Any business with sales tax liability under $1,000,000 has until July 31, 2020, to file the first quarter 2020 sales tax returns and pay the sales tax. 

>> Small business taxpayers with less than $5,000,000 in taxable annual sales can request a 12-month, interest-free payment plan for up to $50,000 of sales and use tax liability. The request need to be made online when available: https://www.cdtfa.ca.gov/services/

Los Angeles County Secured Property Taxes

>> Required to be paid by April 10. If you were unable to pay or paid a partial property tax payment, according to the Los Angeles County Assessor’s office, property owners affected by the COVID-19 virus may have the late penalties canceled if they are unable to pay their property taxes by the April 10 deadline.

>> Please use this link to ask for waiver of penalties asap: https://ttc.lacounty.gov/penalty-cancellation-request-2/

Best Regards, George Meguerian