With COVID-19 sadly on the increase, employers are asking us more questions than ever about their responsibilities to pay their staff who cannot come to work for COVID related reasons.
Basically, if you have an employee who cannot come in to work for COVID related reasons, the Federal Government has enacted the Families First Coronavirus Response Act (FFCRA) which is currently law through December 31, 2020. Please Note: FFCRA applies to businesses that are open and have staff not able to work for various COVID reasons. More info is available at: https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave.
If your practice pays FFCRA wages, you are eligible to receive an immediate dollar-for-dollar reimbursement of the FFCRA wages paid through payroll tax credits. Your payroll service should be able to help you with this.
If you have an employee who can’t work due to COVID reasons:
If the leave is for one of the following three reasons, then you are required to pay a full-time employee for up to 80 hours of leave and a part-time employee for the number of hours of leave that the employee works on average over a two-week period. Employees taking leave shall be paid at either their regular rate or the applicable minimum wage, whichever is higher, up to $511 per day and $5,110 in the aggregate (over a 2-week period). This provision applies if your employee:
- is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
- has been advised by a health care provider to self-quarantine related to COVID-19;
- is experiencing COVID-19 symptoms and is seeking a medical diagnosis.
If the leave is for one of the following two reasons, then a full-time employee is eligible for up to 80 hours of leave, and a part-time employee is eligible for the number of hours of leave that the employee works on average over a two-week period. Employees taking leave shall be paid at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $2,000 in the aggregate (over a 2-week period). This provision applies if your employee:
- is caring for an individual subject to order #1 or #2 above;
- is experiencing any other substantially-similar condition specified by the Secretary of Health and Human Services, in consultation with the Secretaries of Labor and Treasury.
If the leave is for the following reason, then a full-time employee is eligible for up to 10 weeks of additional leave at 40 hours a week, and a part-time employee is eligible for leave for the number of hours that the employee is normally scheduled to work over that period. Employees taking leave shall be paid at 2/3 their regular rate or 2/3 the applicable minimum wage, whichever is higher, up to $200 per day and $10,000 in the aggregate. This provision applies if your employee:
- is caring for a child whose school or place of care is closed (or childcare provider is unavailable) for reasons related to COVID-19.
Practices with fewer than 50 employees might be exempt from this provision of the FFCRA. More info is available at: https://schwartzaccountants.com/2020/10/are-you-required-to-pay-staff-who-cant-work.-due-to-childcare-issues/.
Please note that if a business is shut down, then employees will file for unemployment instead of having the business owners pay their wages under FFCRA.
On November 17th, the IRS issued guidance on how the PPP Loan forgiveness impacts how businesses will deduct expenses paid with the PPP funds. According to the IRS Bulletin at: https://content.govdelivery.com/accounts/USIRS/bulletins/2acfa3f:
Revenue Ruling 2020-27 provides guidance on whether a Paycheck Protection Program (PPP) loan participant that paid or incurred certain otherwise deductible expenses can deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan. The revenue ruling also provides guidance if, as of the end of the 2020 taxable year, the PPP loan participant has not applied for forgiveness, but intends to apply in the next taxable year.
Revenue Ruling 2020-27 available at: https://www.irs.gov/pub/irs-drop/rr-20-27.pdf provides a variety of examples, and comes to this conclusion:
HOLDING A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the CARES Act may not deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year.
There is still a chance that Congress will clarify their intent that the PPP should NOT be taxable to small businesses who received these loans. Even so, with the prospect that nothing will happen on this matter until after Biden takes office on January 20th, we’re assuming that expenses paid with the PPP loan that will be forgiven will essentially be non-deductible to practice owners in 2020.
Code Section 139 starts with this general rule: Gross income shall not include any amount received by an individual as a qualified disaster relief payment. In other words, your practice deducts any money paid out to you and selected staff under Section 139 while you and those staff members owe no taxes on amounts received.
For purposes of this section, the term ‘‘qualified disaster relief payment’’ means any amount paid to or for the benefit of an individual—
- to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster,
- to reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster,
- by a person engaged in the furnishing or sale of transportation as a common carrier by reason of the death or personal physical injuries incurred as a result of a qualified disaster, or
- if such amount is paid by a Federal, State, or local government, or agency or instrumentality thereof, in connection with a qualified disaster in order to promote the general welfare,
but only to the extent any expense compensated by such payment is not otherwise compensated for by insurance or otherwise.
Bloomberg Tax posted a very informative article about Section 139, including expenses that your practice can pay to you and your employees as a tax-free benefit, at: https://news.bloombergtax.com/daily-tax-report/insight-disaster-relief-payments-tax-efficient-assistance-to-employees-impacted-by-covid-19.
Dental Economics also posted a very informative article, including a template of a form to use to document the reimbursements you make to yourself and your staff at: https://www.dentaleconomics.com/money/tax-strategies/article/14186221/utilize-taxfree-covid19-reimbursements-for-you-and-your-dental-office-staff
Please read through these two articles and consider having your practice issue checks prior to December 31st reimbursing you and selected staff for unreimbursed medical expenses, home office expenses, increased childcare expenses, and other expenses that are considered “Ordinary and Necessary” during these unprecedented times. Please note that you are not required to prepare a written plan for this valuable employee benefit and can choose which employees to include in this tax-free benefit.
As we posted last month, the HHS announced that additional Provider Relief Funds are available to healthcare professionals. You can read that post at: https://schwartzaccountants.com/2020/10/hhs-announces-additional-provider-relief-funds-application-due-11-6/.
Phase-3 has been expanded to include previously ineligible providers including behavioral health practitioners and also those healthcare providers that began practicing during the first quarter of 2020.
The deadline to file the online application is Friday November 6th. This is a great opportunity for eligible practices that haven’t submitted for this subsidy yet and should now receive a taxable grant equal to 2% of their 2019 patient revenue. To file, please first download a copy of your 2019 tax return that reflects your practice income. Next, generate two quarterly Profit and Loss reports either from your QuickBooks or using Excel – one for the first two quarters of 2019 and a second for the first two quarters of 2020. As part of competing the online application, you’ll upload PDFs of your tax return and both P&L reports.
More info is available at https://www.hhs.gov/sites/default/files/provider-distribution-instructions.pdf and https://www.hhs.gov/sites/default/files/terms-and-conditions-phase-3-general-distribution-relief-fund.pdf?language=en. As always, feel free to submit this online application on your own. Or we can submit the application on your behalf for a fee of $500 per application filed.
Please remember that according to the HHS at: https://www.hhs.gov/coronavirus/cares-act-provider-relief-fund/reporting-auditing/index.html, “All recipients of more than $10,000 of Provider Relief Fund (PRF) payments are required to comply with the reporting requirements described in the Terms and Conditions and specified in future directions issued by the Secretary.”
Required reporting includes lost revenues and/or expenses attributable to coronavirus, as well as other assistance and subsidies received during 2020.
- January 15, 2021: reporting system opens for providers
- February 15, 2021: first reporting deadline for all providers on use of funds
- July 31, 2021: final reporting deadline for providers who did not fully expend PRF funds prior to December 31, 2020
For more info about the HHS Provider Relief Fund subsidies, please view the summary of reporting guidelines for payments exceeding $10,000 – PDF or the Final Reporting Data Elements – PDF.
According to information available at: https://www.empoweringsmallbusiness.org/covid-19-response/covid-19-grants-massachusetts-small-businesses , the Commonwealth of Massachusetts has made $50.8 million in grants available to support small businesses, microenterprises, and their employees, families and communities. Massachusetts Growth Capital Corporation (MGCC) will be administering these funds to businesses experiencing economic hardship and a loss of income due to the COVID-19 pandemic.
No one is sure how much of this grant most dentists can expect to receive based on the following:
Grant funding is intended to help businesses adversely impacted by the pandemic. Preference will be given to small businesses whose owners are women, minorities, veterans, members of other underrepresented groups, who are focused on serving the Gateway Cities of Massachusetts, and those most negatively impacted by the COVID-19 pandemic. Preference will also be given to applicants that have not been able to receive aid from other federal programs related to COVID-19.
Gateway Cities: Wondering which cities are Gateway Cities? According to MassInc at: https://massinc.org/our-work/policy-center/gateway-cities/about-the-gateway-cities/:
Gateway Cities are midsize urban centers that anchor regional economies around the state. For generations, these communities were home to industry that offered residents good jobs and a “gateway” to the American Dream. Over the past several decades, manufacturing jobs slowly disappeared. Lacking resources and capacity to rebuild and reposition, Gateway Cities have been slow to draw new economy investment.
The Legislature defines 26 Gateway Cities in the Commonwealth, which are Attleboro, Barnstable, Brockton, Chelsea, Chicopee, Everett, Fall River, Fitchburg, Haverhill, Holyoke, Lawrence, Leominster, Lowell, Lynn, Malden, Methuen, New Bedford, Peabody, Pittsfield, Quincy, Revere, Salem, Springfield, Taunton, Westfield, and Worcester.
The program offers two types of grants – one of which is for businesses with 50 or fewer employees. For this grant, businesses can receive up to $75,000 but capped at up to 3 months of operating expenses, as evidenced by your business’ 2019 Federal Tax Returns. Grant amounts will be considered for actual expenses for 2020 during the pandemic. The funds can be used for employee payroll and benefit costs, mortgage interest, rent, utilities and interest on other debt obligations.
More info is available at: https://schwartzaccountants.com/2020/10/massachusetts-announces-covid-19-grants-for-small-businesses/, or apply at: https://massgcc3.submittable.com/submit/177585/small-business-grants-for-50-or-fewer-employees. As always, feel free to submit this online application on your own. Or we can submit the application on your behalf for a fee of $500 per application filed.
Please be aware of a recent scam involving people impersonating the Small Business Association. The imposters claim to be conducting “site visits” on behalf of the SBA. When contacted, the SBA states that they do not conduct site visits.
- SBA does not initiate contact on either 7a or Disaster loans or grants. If you are proactively contacted by someone claiming to be from the SBA, suspect fraud.
Additional scams involving the SBA and loans have sprung up since the COVID-19 Relief Act. You can read about other scams at: