April 20, 2021

Restaurant Revitalization Fund Offers Grants for Food and Beverage Industry

In an effort to help restaurants and bars recover from the financial impacts of COVID-19, $28.6 billion of the American Rescue Plan is allocated for a Restaurant Revitalization Fund (RRF). Below we cover the basics of the RRF as outlined by the SBA, including eligibility requirements, covered expenses and how to apply for RRF grant funding.

Who is eligible for Restaurant Revitalization Funding?

The American Rescue Plan outlines that businesses in which the public assemble for the primary purpose of being served food and drink are eligible. The Plan indicates that the following food and beverage establishments are eligible:

  • Restaurants
  • Bars
  • Food stands
  • Food trucks and carts
  • Caterers
  • Saloons
  • Inns
  • Taverns
  • Lounges
  • Brewpubs, tasting rooms and taprooms
  • Other similar places of business in which the public or patrons assemble for the primary purpose of being served food or drink

Businesses that are state or local government-operated, publicly traded or have 20 locations or more are not eligible. Those who have already applied for the Shuttered Venue Operators Grant are also ineligible for RRF funding.

How much can I apply for out of the Restaurant Revitalization Fund?

Through the RRF, eligible establishments will be able to apply for a grant equal to their pandemic-related revenue loss, up to $10 million per entity or $5 million per location, limited to 20 locations. Grants will be calculated by subtracting 2020 revenue from 2019 revenue.

Those businesses that have received PPP (round 1 or 2) funding will be eligible for an RRF grant, but the RRF grant total will be reduced by the amount of the PPP loan(s). EIDL loans and Employee Retention Tax Credit funding does not impact RRF funding.

For those establishments not operating for all of 2019, the maximum grant is the average monthly gross receipts in 2020 minus the average monthly gross receipts in 2019. Similar to PPP loan forgiveness, the RRF grant will not be taxable income and all associated expenses will be tax-deductible.

What can an RRF grant be used for?

According to the SBA, grant funding does not have to be paid back if it is used for eligible expenses from February 15, 2020 until March 11, 2023, including:

  • Business payroll costs, including sick leave and costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premiums
  • Payments on any business mortgage obligation, both principal and interest. Note: this does not include any prepayment of principal on a mortgage obligation
  • Business rent payments, including rent under a lease agreement. Note: this does not include any prepayment of rent
  • Business debt service, both principal and interest. Note: this does not include any prepayment of principal or interest
  • Business utility payments for the distribution of electricity, gas, water, telephone, or internet access, or any other utility that is used in the ordinary course of business for which service began before March 11, 2021.
  • Business maintenance expenses including maintenance on walls, floors, deck surfaces, furniture, fixtures, and equipment
  • Construction of outdoor seating
  • Business supplies, including protective equipment and cleaning materials
  • Business food and beverage expenses, including raw materials for beer, wine, or spirits
  • Covered supplier costs, which is an expenditure made by the eligible entity to a supplier of goods for the supply of goods that:
    • Are essential to the operations of the entity at the time at which the expenditure is made; and
    • Is made pursuant to a contract, order, or purchase order in effect at any time before the receipt of Restaurant Revitalization funds; or
    • With respect to perishable goods, a contract, order, or purchase order in effect before or at any time during the covered period
  • Business operating expenses, which is defined as business expenses incurred through normal business operations that are necessary and mandatory for the business (e.g. rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, fees). Business operating expenses do not include expenses that occur outside of a company’s day-to-day activities.

How can I apply for the RRF?

The SBA offers three ways to apply for the RRF funding:

  1. Through a recognized SBA Restaurant Partner
  2. Through SBA directly at restaurants.sba.gov
  3. By calling (844) 279-8898

Download the latest SBA Restaurant Revitalization Funding Program Guide for more information on the RRF and documentation requirements. The application process is expected to open soon, with the first 21 days being prioritized for women-owned, minority-owned and veteran-owned businesses.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

All Insights

March 25, 2021

Should You Take Advantage of the Economic Injury Disaster Loan Increases?

The SBA recently announced an expansion to the Economic Injury Disaster Loan (EIDL) program for small businesses and not-for-profit organizations. Starting the week of April 6, organizations that received an EIDL that was capped at $150,000 will soon be notified that they may be eligible for an increase up to a total loan amount of $500,000.

What is changing with the EIDL program?

EIDL funding was designed to cover those organizations suffering COVID-19 related economic damage for six months. With new changes by the SBA, the program is now being extended to 24 months. This will potentially provide significant increases for many loan recipients as past financial information will still be used in determining qualification. It will also further defer payments out 18-24 months.

Should I increase my EIDL?

After the CARES Act was passed, some businesses applied to receive a substantial amount of EIDL funding early on because there was a great amount of uncertainty around future funding opportunities. This was a good opportunity for some businesses to keep their doors open, but the EIDL funding comes with some very restrictive loan covenants and terms on how the funding can be used. They are designed for disaster recovery, so if a company is back on solid footing, they may want to re-evaluate the opportunity before increasing the loan amount to make sure it fits long term.

How can I increase my EIDL?

According to the SBA, businesses that receive a loan subject to the current limits do not need to submit a request for an increase. The SBA will reach out directly via email and provide more details about how businesses can request an increase closer to the April 6 implementation date.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your EIDL funding or recovery options, contact an Anders advisor below.

All Insights

March 19, 2021

How Employers Can Take Advantage of the Expanded Employee Retention Tax Credit

On March 11, President Biden signed into law the American Rescue Plan Act of 2021 (ARPA). This relief bill comes in response to the continued COVID-19 pandemic and makes some changes to the Employee Retention Tax Credit (ERTC) that was originally part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and later expanded and extended under the Consolidated Appropriations Act (CAA) of 2020. Below we dig into the changes and expansions that were part of the CAA and the recently enacted ARPA.

QUICK REFRESHER ON THE ORIGINAL ERTC

Let’s first revisit the provisions of the ERTC in the original CARES Act. Enacted in the spring of 2020, the Act allowed businesses to take a credit against payroll taxes in order to help offset some of the business losses due to COVID-19. The law allowed eligible employers to take a credit of 50% of qualified wages up to $10,000 paid to employees between March 12, 2020 and January 1, 2021. Consequently, the maximum credit for each employee was $5,000 ($10,000 in wages X the 50% tax credit rate).

However, not every business was eligible for this credit. Businesses must have been significantly impacted by COVID-19 either by a shutdown order or by experiencing a significant reduction in revenue. There were also restrictions on which wages were “qualified” if an employer had more than 100 full-time employees. Businesses were also not allowed to take the credit if they used Paycheck Protection Program (PPP) loans to cover employee payroll costs.

UPDATES AND EXPANSIONS TO THE ERTC

The passage of both the CAA and the newly signed ARPA relief bill is good news to many businesses who continue to feel the economic impacts of the pandemic as the laws enhance and expand many provisions of the original ERTC. Under the CAA of 2020, the ERTC was extended until June 30, 2021 and increased the tax credit to 70% of qualified wages for each of the first two quarters of 2021.

With the newly enacted ARPA legislation, the ERTC has been extended again – this time through December 31, 2021. This means an employer eligible for the ERTC in all four quarters of 2021 could receive up to $28,000 in credits per employee ($10,000 quarterly wage cap x 70% x 4 quarters).

ERTC Eligibility

More businesses will be eligible for the ERTC in 2021. The original ERTC was only available for businesses who were forced to shut down or whose gross receipts in 2020 were 50% less than the same quarter in 2019. The CAA modified this reduction in revenue by 30%. Under the CAA guidelines, the test was satisfied for either of the first two quarters of 2021 if gross receipts were less than 80% of the gross receipts for same quarter in 2019. The ARPA extends the 80% gross receipts test for the third and fourth quarters of 2021 as well. 

ERTC Wage Threshold

A change in the threshold for determining which wages “qualify” for the tax credit will also benefit employers in 2021. Under the original CARES act, for businesses with less than 100 full-time employees, all wages qualified for the tax credit, regardless if the employee’s role changed or not due to the pandemic. Whereas businesses with over 100 employees could not claim the credit for employees that were still performing services for the business.

The CAA, effective January 1, 2021, raised the threshold number to 500 employees.  In addition, the ARPA, effective July 1, 2021, also includes a new provision for “severely financially distressed employers.” These employers are defined as those whose gross receipts are less than 10% of the gross receipts for the same quarter in 2019. If an employer meets this definition, they may treat all wages paid to employees as qualified wages regardless of the number of full-time employees. 

Employers with PPP Loans

Initially, the CARES Act prohibited employers who had received a PPP loan from also utilizing the ERTC. The CAA allowed an employer to claim the credit for any wages paid beyond the proceeds of the PPP loan that have been forgiven. This change is retroactive to the effective date under the original law: March 12, 2020. A company that received a PPP loan in 2020 but paid qualified wages beyond the amount of the loan could benefit by filing an amended Form 941 and claiming the credit.

NEW ENHANCEMENTS TO THE ERTC

While many provisions of the CAA and the ARPA enhanced the CARES Act, they also include some brand-new provisions as well. Under the CAA, businesses can take an advanced payment on their credit even if those wages have not yet been paid. Additionally, some government entities not previously allowed to take the credit became eligible with the passage of the CAA, such as public universities, hospitals, federal credit unions, etc.

The ARPA also allows a startup business to take the ERTC even if the business does not meet the other ERTC eligibility tests. To qualify the business must have been established after February 15, 2020 and have annual gross receipts of no more than $1 million. The recovery startup credit is capped at $50,000 per quarter, per employer.

While the above highlights how changes in the recent COVID-19 relief bill have affected the ERTC, please contact an Anders advisor below to discuss your situation and recovery options. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources.

Find out if your business is eligible for the Employee Retention Tax Credit in 2020 or 2021.

All Insights

March 18, 2021

IRS Extends Federal Individual Income Tax Filing Deadline to May 17

The IRS has officially extended the federal individual income tax filing and payment deadline from April 15 to May 17, 2021 as part of relief efforts around the COVID-19 pandemic. All taxpayers will have an additional month to file their federal income tax returns and pay any taxes due for the 2020 tax year. Taxpayers who are ready to file are encouraged to still file by April 15, especially those anticipating refunds.

This IRS guidance only applies to federal individual income tax filings, not state tax filings or payments. In addition, gift tax returns, 2021 first quarter estimated tax payments, trust returns and IRA contributions currently appear to continue to be due on April 15. State filing and payment deadlines vary by state and may change based on federal guidance. We expect additional guidance to follow that may address these items.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your tax situation, please contact an Anders advisor below.

All Insights

December 28, 2020

New $900 Billion Pandemic Relief Package Includes Additional Stimulus Payments, PPP Loans and More

A new pandemic relief bill was recently passed by the House and Senate and signed into law by the President on December 27, 2020. The $900 billion COVID-19 relief package was part of a $2.4 trillion Consolidated Appropriations Act bill signed by President Trump.

As a follow up to the CARES Act, which was the largest federal stimulus package, the new bill will help fund several expiring CARES Act aid programs to help individuals, businesses and schools. While the bill does not allocate aid for state and local governments or provide for business liability protections, Congress expressed that this is a starting point and future bills will be introduced. Below we discuss the major provisions included in the relief package.

$600 individual stimulus payments

The criteria for the stimulus payments is similar to the first round, with full payments given to those making up to $75,000 for individuals and $150,000 for married filing jointly. Phaseouts equaling $5 for every $100 of Adjusted Gross Income (AGI) beginning at $75,000 for individuals and $150,000 for married filers. Individuals making $87,000 or more and $174,000 for those married filing jointly would not receive a payout. An additional $600 will be provided for each dependent child under the age of 17. This appears to still make college students ineligible for the stimulus payments if they are claimed as dependents.

The House has indicated they will be introducing a bill to potentially increase stimulus payments to as much as $2,000. Stay tuned on if and when the bill moves to the next level.

$284 billion for another round of PPP loans and small business funding

The package extends the Paycheck Protection Program (PPP), expanding eligibility for local newspapers, broadcasters and not-for-profit organizations. The extension allocates another $20 billion to small business grants and $15 billion to live event and cultural venues.

Highlights of the next round of PPP loans:

  • A second round of PPP loans are available for businesses that experienced 25% or more reduction of gross receipts in any 2020 calendar quarter compared to the same quarter of 2019. Companies with 300 or less employees will qualify.
  • Expanded eligible non-payroll costs to include:
    • Worker protection equipment
    • Supplier costs
    • Property damage
    • Operating expenses
  • Similar to the first round, the loan amount will equal 2.5x average monthly payroll costs, except for the restaurant and hospitality industries, which can apply for 3.5x average monthly payroll costs
  • Economic Injury Disaster Loan (EIDL) advances/grants are no longer subtracted from loan forgiveness amount and are no longer treated as taxable income
  • PPP loans up to $150,000 will be forgiven with a new one-page form including the loan amount, number of employees retained and payroll percentage.

Deductible expenses for payment of covered costs

The Act allows business owners to deduct expenses paid with forgiven PPP loan funding. This would give small business a much-needed tax break, overriding an IRS decision so businesses can claim 100% of deductions on rent, wages and more. The deduction applies to all PPP loans, regardless of if the loan has already been forgiven.

Extension of credits for paid sick leave

Families First Coronavirus Response Act (FFCRA) paid sick leave and family leave tax credits are extended through March 31.

$30 billion for vaccine distribution 

With the vaccine ready for distribution, the aid package directs $30 billion for procurement and distribution throughout the country.

$300 weekly federal unemployment assistance 

An expansion of federal unemployment assistance was included, providing an additional $300 per week for those on unemployment. This amount is down from the $600 passed by the CARES Act and would span for 11 weeks, from the end of December through mid-March. This relief is not retroactive.

Extension of rental assistance and eviction moratoriums

The bill allocates $25 billion in emergency rental assistance for those who lost their source of income due to COVID-19. It also extends the eviction protection another month to January 31.

Additional school funding

$82 billion is laid out for K-12 schools and colleges for heating and cooling system upgrades to fight against virus transmission. An additional $10 billion is allocated for childcare assistance.

These funding categories are just a few of the provisions included in the stimulus bill. There are many smaller provisions, including a new “three martini” tax deduction for business meal expenses, a U.S. Postal Service grant and more.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

All Insights

November 10, 2020

Flexible, Secure and Cost-Effective Strategies to Build into Your IT Budget

Budgeting looks a lot different this year in the midst of a global pandemic. Business objectives have undoubtedly changed over the past year and innovation is more important than ever to address these changes and recover from the effects of COVID-19. Making the case for flexible, secure and cost-effective technology platforms will be vital going into the next quarter and beyond.

Flexibility

Remote work was forced upon many companies this year, and if virtual work options were not already part of the company’s technology strategy, it caused a lot of time, money and frustration to implement quickly. Being flexible became the name of the game, and the need to be agile is here to stay. In the coming year, businesses will want to build their technology strategy with a focus on flexibility, so as business goals or environmental factors evolve, they can easily adjust using technology. Going forward, three flexible strategies to consider are:

Along with having a flexible IT strategy, keeping it secure should also be top-of-mind.

Security

Continuing to maintain and build a robust cybersecurity strategy is another vital focus moving forward. Cybercriminals are getting more and more sophisticated, and breaches are getting larger and more costly. Now is the time to review your cybersecurity architecture and develop a road map going into the new year that includes:

  • Governance, Risk and Compliance Measures
  • Vulnerability Management
  • Information Protection and Privacy
  • Cybersecurity Training and Testing

Even with the best cybersecurity safeguards in place including backups, firewalls and software patches, it takes one click by an unknowing employee to cost your business a lot of time, money and important data. Employee cybersecurity training can equip everyone in the company with the tools and knowledge needed to do their part in avoiding a data breach.

Flexibility and security are important pieces of every technology strategy for 2021 but coming out of a pandemic, companies also need to be mindful of budgets.

Cost-Effectiveness

With cost-cutting being a reality amidst a global pandemic, business owners and CIOs need to decide which parts of their IT strategy need to be done in-house, and where they can find cost efficiencies by outsourcing.

Anders Technology specializes in bridging the gap in technology needs, from co-managing alongside internal IT staff to supplement expertise, to being the entire IT team, we can step in as much or as little as needed. Below is an example of ways we partner with our clients.

Bridging the Gap in Your Technology Needs | Anders Technology

Anders Technology can help be flexible by taking on more when needed and pivoting the strategy with supplemental resources. With a team of advisors with in-depth knowledge in several areas, we can help you develop a technology strategy that helps you meet business goals while staying secure and cost-conscious. Learn more about Anders Technology or contact an Anders advisor below to get started.

All Insights

September 16, 2020

PPP Loan FAQ: Forgiveness Timing and Year-End Tax Planning

With the end of the year looming closer, many businesses are focused on ensuring they receive forgiveness for their Paycheck Protection Program (PPP) loan. Business owners are wondering if and when they should apply for loan forgiveness, and what changes are coming from Congress, the SBA and banks. Below we answer common questions around PPP loan forgiveness timing, year-end tax planning and talks of another stimulus package.

PPP Loan Forgiveness Timing

Q: Should I submit my application now? Why or why not?

A: Anders is advising clients to wait until further guidance is released by the SBA and IRS. We do not see any benefits to applying early, and we see more changes as Congress gets closer to passing another stimulus package.

Q: Can I submit my application now?

A: The short answer is yes you can submit. But not all banks are accepting applications.

Q: Can I get PPP loan forgiveness in 2020?

A: Forgiveness timing is still up in the air, but it will most likely be in 2021 based on the bank’s and SBA’s timelines. Certain banks are taking forgiveness applications now, but unless your company has already applied it’s unlikely that forgiveness will happen in 2020. When we have more information Anders will advise clients on best timing to apply, but for now, patience is key as businesses have 10 months to apply after their covered period.

Q: Is there automatic forgiveness for PPP loans under $150,000?

A: No, but there has been language in each bill surrounding automatic forgiveness for smaller loans. Unfortunately, nothing has been passed at this time.


Year-end Planning Related to PPP Funds

Q: Are expenses paid with PPP funds deductible?

A: The IRS’s current position is that expenses paid with PPP funds are not deductible if your loan is forgiven. What is unclear is if the expenses paid with PPP funds are nondeductible for 2020 tax returns or not until 2021 when the loan is forgiven.

Q: Is there anything I should be doing for year-end tax planning regarding my PPP loan?

A: At this time, with so much uncertainty, year-end tax planning related to PPP funds will remain fluid.


Rumors of Another Stimulus Package

Q: Will there be a CARES Act 2.0?

A: It appears likely. The timing and dollar amount are the two largest unknowns. What seems to be important aspects of any bill could include:

  • Second round of stimulus checks for individuals
  • Reallocation of funds between different CARES Act 1.0 programs
  • Adjustments to the Paycheck Protection Program, including a potential second round of funding and clarification of ambiguous guidance
  • IRS corrections and guidance regarding deductibility of expenses paid for with forgiven PPP funds
  • State and local government funding
  • Liability protections
  • Unemployment assistance

Q: When could the next stimulus package be coming?

A: Timing is unclear and ever-changing. Stay tuned for more updates.

Legislation is continuing to evolve and it’s important to keep up with the latest rules and regulations to make sure you’re making decisions based on accurate data. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

All Insights

August 27, 2020

How COVID-19 Has Impacted Rental Income for Landlords and Strategies to Recover

The U.S. unemployment rate spiked to 14.7% in April; the highest it has been since the Great Depression. High unemployment has caused landlords to be creative on how to solve issues arising from tenants that are unable to meet their rental agreement obligations. Landlords are using different techniques to keep vacancy rates down and rental income coming in. Some solutions landlords are considering include rental forgiveness, postponement or seeking outside short-term financing. 

Protection from Evictions Under the CARES Act

Previous to COVID-19, if tenants failed to meet rental obligations landlords had the option to terminate the tenancy by filing an eviction lawsuit to have the tenant physically removed. Health and safety concerns related to COVID-19 have halted evictions in some areas which has led landlords to think of other ways to cope with the lack of rental income. One of the ways landlords are managing their tenants’ inability to pay rent is by allowing postponement of their payments with an agreement that it will be repaid at a later date, either in a lump sum or spread out. Some have done this by agreeing to allow tenants to repay their missed payments when they receive government stimulus funds or by extending lease agreements and allowing payments to be made at the end of the lease. 

Every landlord strives to generate profits after covering any debt servicing with their rental property. However, with the affects of COVID-19, cutting losses has been the best option for some landlords. Temporarily lowering rent rates for tenants has allowed landlords with mortgages to retain tenants along with having the ability to meet their short-term financial obligations and not default on their loan.

How Landlords Can Recover

Having a financial safety cushion is important for landlords in times like these. Seeking a line of credit or having the assurance of being able to obtain a loan from a private lender is important as part of a disaster recovery plan. Many landlords have taken these measures to protect themselves and be better prepared in case of emergency.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below. Learn how Anders works with the real estate and construction industries.

All Insights

August 13, 2020

My Employee Tested Positive for Coronavirus, What Should I Do?

As the pandemic continues, employers are asking a lot of questions around what they need to do when an employee tests positive or is unable to work due to COVID-19. Is the employer required to pay the employee? Is there assistance available to businesses paying for sick leave when an employee tests positive? While some of the nuances should be advised by a lawyer or HR representative, below we dive into what types of relief are available for employers from an accounting perspective.

Are employers required to pay sick leave for COVID-19?

The answer is yes. The Families First Coronavirus Response Act (FFCRA) requires certain employers to provide employees with paid sick leave or expanded family and medical leave for specified reasons related to COVID-19. Learn more about employee paid leave rights.

Is there assistance available for employers?

Yes. To help employers pay employees who are unable to work due to COVID-19, the FFCRA tax credit and disaster relief payments are available.

Families First Coronavirus Response Act (FFCRA)

When an employee is unable to work (including telework) due to COVID-19, the FFCRA provides a 100% credit against the company’s payroll tax liability. Companies and not-for-profits with less than 500 employees are eligible for FFCRA.

The credit is limited to the maximum amount that needs to be paid based on the sick leave cap of $511 per day for up to 10 days, or $5,110 per employee.

How does FFCRA work?

Employers pay the employee up front and take a dollar-for-dollar tax credit by reporting their total qualified leave wages and the related credits for each quarter on their federal employment tax returns.

The payroll taxes that are available for retention include withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.

FFCRA Example

An eligible employer paid $5,000 in sick leave for a quarantined employee and is otherwise required to deposit $8,000 in payroll taxes. The employer would only be required to deposit $3,000 on its next regular deposit date.

For more information about the FFCRA, refer to the U.S. Department of Labor or IRS.

Disaster Relief Payments

With COVID-19 being declared a national emergency by President Trump, employers can now take advantage of the Robert T. Stafford Disaster Relief and Emergency Assistance Act. The Act, also known as Section 139 of the Internal Revenue Code, allows employers to provide tax-free payments or reimbursements to affected employees as “qualified disaster payments”.

How do the disaster relief payments work?

Disaster relief payments must be to pay or reimburse an employee for reasonable and necessary personal, family, living or funeral expenses. This does NOT include payments that would be covered by insurance or other reimbursements and income replacement payments. Since this assistance Act has never been used during a global pandemic, it’s still open to interpretation on what expenses are qualified, but Section 139 “reasonably suggests” these expenses would qualify:

  • Over-the-counter medications, co-pays, deductibles and other medical expenses not covered by insurance
  • Funeral costs of an employee or family member of employee
  • Costs associated with enabling employees to work-from-home
  • Cost of employee’s childcare or tutoring for family members
  • Commuting expenses
  • Caregiver and domestic services
  • Legal and accounting expenses

Payments are tax-free to employees, but fully deductible to the employer. Employers may provide assistance directly to the employee or through a non-exempt fund established to receive contributions from the employer as well as employees.

What should employers document?

Documentation for payment is not required as long as it’s considered “reasonable and necessary”, but Section 139 recommends employers document:

  • Their intention for making the payments
  • The amounts paid and to whom
  • Start and end date of any Section 139 assistance
  • Listing of expenses paid or reimbursed
  • Any maximum amount per-employee or total combined amount employer will pay

Learn more about Section 139.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

Agnes M. Rybak, Associate + Outsourced Accounting and Ryan T. Knudsen, Senior Accountant + Outsourced Accounting were contributors to this post.

All Insights

August 10, 2020

How President Trump’s Executive Order Affects Payroll Taxes for Employees

On August 8, 2020, President Trump signed an executive order to defer certain payroll tax obligations to provide additional COVID-19 relief. The order directs the Secretary of the Treasury to “use his authority to defer certain payroll tax obligations with respect to the American workers most in need”.

Details of the Payroll Tax Deferral

This payroll tax deferral applies to employee wages paid between September 1, 2020 and December 31, 2020, to those generally making less than $4,000 biweekly. The deferral applies to the withholding, deposit and payment the 6.2% employee Social Security tax, not the Medicare tax. The CARES Act did have a payroll tax deferral, but it was for the employer, NOT the employee.

What You Should Do

It’s important to note that the President is calling for a payroll tax deferral, not forgiveness, at least at this time. The Treasury is exploring avenues to eliminate the obligation to pay the taxes deferred.

We advise taxpayers to wait for more guidance and/or CARES Act 2.0 to come out before making any plans related to the effective date.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed about potential impacts and benefits. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

All Insights

Keep up with Anders

Want to keep up with all the latest insights from Anders? Subscribe and receive the information that matters to you.

  • This field is for validation purposes and should be left unchanged.