The recently passed Coronavirus Aid, Relief, and Economic Security (CARES) Act provides individuals and businesses significant financial relief from the financial strain caused by the coronavirus epidemic.
Here is a snapshot of the unemployment benefits section of the bill and how it affects individuals and businesses.
WHO QUALIFIES TO RECEIVE STATE UNEMPLOYMENT BENEFITS? In addition to full-time workers who are laid off or furloughed, the Act provides individuals who are not already eligible for state and federal unemployment programs, including self-employed individuals and part-time workers, a set amount of unemployment compensation.
HOW MUCH WILL I RECEIVE? There are two different components to the new law’s unemployment benefits:
Each worker will receive unemployment benefits based on the state in which they work, and
In addition to their state unemployment benefits, each worker will receive an additional $600 per week from the federal government.
HOW WILL BENEFITS FOR SELF-EMPLOYED WORKERS BE CALCULATED? Benefits for self-employed workers are be calculated based on previous income and are also eligible for up to an additional $600 per week. Part-time workers are also eligible.
HOW LONG WILL THE STATE UNEMPLOYMENT PAYMENTS LAST? The CARES Act provides eligible workers with an additional 13 weeks of unemployment benefits. Most states already provide 26 weeks of benefits, bringing the total number of weeks that someone is eligible for benefits to 39.
HOW LONG WILL THE FEDERAL PAYMENTS OF $600 LAST? The federal payment of $600 per week will continue through July 31, 2020.
HOW DO I APPLY FOR UNEMPLOYMENT BENEFITS? You must apply for unemployment benefits through your state unemployment office. Most state applications can now be filled out online. Workers who normally don’t qualify for unemployment benefits, such as self-employed individuals, need to monitor their state’s unemployment office website to find out when they can apply, as many states need to update their computer systems to reflect every type of worker who is eligible to collect unemployment benefits under the CARES Act.
What to do NOW!
If you have lost your job, you must file for unemployment with your state as soon as possible. State offices and websites are being slammed, so the sooner you get in the queue the better for you and your loved ones.
The Families First Coronavirus Response Act is a new program that offers COVID-19 assistance for both employees and employers.
This new law provides businesses with fewer than 500 employees the funds to provide employees with paid leave, either for the employee’s own health needs or to care for family members.
Here is a summary of the new law’s benefits for employees and employers:
Paid sick leave for workers. The new law provides employees of eligible employers two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay ($510 daily limit applies) where the employee can’t work because the employee is quarantined and/or experiencing COVID-19 symptoms and seeking a medical diagnosis.
Paid leave for workers. Employees can receive two weeks (up to 80 hours) of leave at two-thirds of the employee’s pay ($200 daily limit applies) if they need to care for someone in the following situations: The need to care for an individual subject to quarantine, to care for a child whose school is closed or childcare provider is unavailable for reasons related to COVID-19.
Extended leave. In some instances, an employee may receive up to an additional ten weeks of expanded paid family and medical leave at two-thirds the employee’s pay ($12,000 overall twelve week payment limit applies).
Companies will get paid back. Businesses who pay employees the mandatory sick and childcare leave according to the new law will get reimbursed through a payroll tax credit.
What it means for you
Employees can take the necessary time to recover from being infected with COVID-19, or to care for a loved one, without fear of losing their job or salary.
Employers can help their employees financially while navigating COVID-19 related shutdowns.
What you need to do now
EMPLOYEES. To take advantage of the Act’s paid leave provisions, you must provide your employer with documentation in support of your paid sick leave. There is yet no official application that needs to be completed. If you believe that your employer is required to provide paid leave but is not making paid leave available, or for other questions or concerns, you may call the Department of Labor’s Wage and Hour Division at 1-866-4US-WAGE or visit www.dol.gov/agencies/whd.
EMPLOYERS. While the details are being worked out on how to implement these new rules, here is what you need to do now:
Keep detailed records – Be prepared to defend your request for federal assistance. Keep good records of who’s asked for paid time off because of COVID-19 related circumstances. Ask your employee to provide a doctor’s note when appropriate, along with a narrative written by the employee describing who in their family is infected or suspected of being infected with COVID-19 along with symptoms. Make sure the note is dated and relates to an approved reason for leave.
Talk to your payroll provider – If you have someone doing your payroll, they are often the first ones who will know how you will receive reimbursement. This new law will take time to fully roll out. Payroll companies will eventually issue guidance on how to report paid leave provided under the Families First Act and which forms need to be completed to obtain the corresponding tax credits.
E-mail the notice! – An employer may satisfy the posting requirement by e-mailing or direct mailing the notice to employees, or by posting this notice on an employee information internal or external website. If your employees are working from home, this may be the only way to let them know the benefit exists.
Remember, there are upper limits to compensation that you may need to review and there are many other federal programs being rolled out. It will take time to implement them. Be patient, be safe and stay alert for any updates.
Washington – Following President Donald J. Trump’s
emergency declaration pursuant to the Stafford Act, the U.S. Treasury
Department and Internal Revenue Service (IRS) today issued guidance allowing
all individual and other non-corporate tax filers to defer up to $1 million of
federal income tax (including self-employment tax) payments due on April 15,
2020, until July 15, 2020, without penalties or interest. The guidance
also allows corporate taxpayers a similar deferment of up to $10 million of
federal income tax payments that would be due on April 15, 2020, until July 15,
2020, without penalties or interest. This guidance does not change
the April 15 filing deadline.
“Americans should file
their tax returns by April 15 because many will receive a refund. Those
filing will be able to take advantage of their refunds sooner,” said Treasury
Secretary Steven T. Mnuchin. “This deferment allows those who owe a
payment to the IRS to defer the payment until July 15 without interest or
penalties. Treasury and IRS are ensuring that hardworking Americans and
businesses have additional liquidity for the next several months.”
Today’s guidance will
result in about $300 billion of additional liquidity in the economy in the near
term. Treasury and IRS will issue additional guidance as needed and
continue working with Congress, on a bipartisan basis, on legislation to
provide further relief to the American people.
GA DOL Establishes Emergency Unemployment Claims
Process – Employers Must Take Action
The Georgia Department of Labor (GDOL) has adopted an emergency
Rule 300-2-4-0.5 Partial Claims, effective March 16, 2020. The rule
mandates all Georgia employers to file partial claims online on behalf of their
employees for any week during which an employee (full-time/part-time) works
less than full-time due to a partial or total company shutdown caused by the
COVID-19 public health emergency. Any employer found to be in violation of this
rule will be required to reimburse GDOL for the full amount of unemployment
insurance benefits paid to the employee. Download the How
Employers File Partial Claims Desk-Aid found on the GDOL Alert Page and
follow the step-by-step instructions.
Filing partial claims results in your employees
receiving unemployment insurance (UI) benefit payments faster, usually within
48 hours for claims filed electronically. Employees for whom you file a partial
claim are NOT required to report to a Georgia Department of Labor career
center, register for employment services, or look for other work.
Please continue to monitor the Georgia DOL website at gdol.ga.gov for any updates to these
guidelines.
Often if you are in dire need for money the most tempting area to look is your IRA, 401(k), and other qualified retirement accounts. These funds, set aside for your retirement, may seem to be the answer to your financial woes.
Should I take an early withdrawal?
Is it a good idea to tap into retirement account funds prior to reaching age 59½? Here are some things to consider:
The penalty. Retirement funds taken out for non-qualified use are not only subject to regular income tax, but are also subject to a 10% early withdrawal penalty.
Debt collectors love it. Debt collectors are commonly prohibited from access to your retirement accounts. So if you are using the funds to put off debt collectors, be aware that you may be using funds that might be protected if you became insolvent.
There is an opportunity cost. Currently the funds in your traditional IRA, 401(k), and similar retirement plans grow tax deferred. So a dollar today will compound until you withdraw the funds at retirement. This growth is lost with early withdrawals.
Not for your kids. It is usually not a good idea to use early withdrawals to help pay a child’s debt or school costs. There are better ways to help children financially than to pay the stiff penalty on your early withdrawal.
If you still need to make the early withdrawal
Withdraw “after-tax” contributions first. This can be Roth IRA contributions or other after-tax contributions. Why? Since these funds have already been taxed, there is often no additional tax burden or early withdrawal penalty.
Certain withdrawals from qualified plans are allowed. This includes hardship withdrawals for qualified medical expenses, qualified educational expenses, and up to $10,000 to purchase a first time home.
Consider taking out a loan from your employer-provided 401(k). You will then repay this loan to your retirement account with interest. But be careful, you are required to repay any outstanding balance when you leave your job.
Look into substantially equal payments. Look into taking the distributions as part of a series of substantially equal periodic payments over your life expectancy. If done right, this can help avoid the 10% early withdrawal penalty.
While it is never a great idea to tap into funds that are specifically set aside to make your retirement stress-free, if you must do so it is worth being thoughtful about how you go about the withdrawal.
Every year is an election year when it comes to making decisions on your annual income tax return. Here are four common examples that can create tax savings opportunities if you elect the correct option.
Tax filing status. Typically, filing a joint tax return instead of filing separately is beneficial to a married couple, but not always! For instance, if one spouse has a high amount of medical expenses and the other doesn’t, your total medical deduction may be greater filing separately due to the 7.5% of adjusted gross income (AGI) threshold before you can deduct these expenses.
Higher education expenses. Thanks to new legislation, many parents of college students again face a decision: Whether to take one of the two credits for higher education expenses or the tuition and fees deduction. The tuition and fees deduction, once expired, is now extended through 2020. To complicate matters, the credits and the deduction are all phased out based on different modified adjusted gross income (AGI) levels. Before you elect which tax benefit makes the most sense, you will need to evaluate all options.
Investment interest. Investment interest expenses can be deducted up to the amount of net investment income for the year. This income does not usually include capital gains, because of favorable tax treatment of this type of gain. However, you can elect to include capital gains to help you deduct your interest expense. You can even cherry-pick which capital gains to use for this deduction. If you take this election you forego the favorable tax rate for long-term gains.
Installment sales. If you sell real estate or other assets in installments over two or more years, the tax liability is spread over the years that payments are received. Thus, you may be able to postpone the tax due. This technique can reduce the total tax paid depending on your effective tax rate each year. However, you can also elect out of installment sale treatment by paying the entire tax in the year of the sale. You may wish to take this election if your income is lower in the year of the sale.
Thankfully there is help navigating these key tax elections. Simply call with any questions.
