Tax Tip 2020-57 was issued on May 14, 2020 to explain relief that will be provided on a variety of issues as part of the People First Initiativedue to COVID-19. Most importantly, the IRS has modified 2019 filing and payment deadline from April 15, 2020 to July 15, 2020.
The IRS is not expected to start new field, office, or correspondence audits during this historic time. The agency will continue to distribute refund claims without in-person contact, where possible.
The IRS may start new audits to preserve the statute of limitations when needed. In-person meetings for current field and office audits are on hold. Examiners, however, are working remotely when possible. Taxpayers are expected to respond to all requests for any information during this time whenever possible. Businesses and Corporations may begin previously scheduled audits if people and records are available. The IRS may move forward with an audit in the best interest of all parties, understanding that COVID-19 developments may show activities.
Taxpayers have until July 15, 2020 to respond to the IRS to verify income or that they qualify for the earned income tax credit. Taxpayers are to continue to submit all requested information. If they are not able to, the appropriate response is to contact the agency to explain why the information is not available. The IRS will not deny credits for failure to provide information until July 15, 2020.
Appeals employees will continue to work appeals cases; however, in-person meetings are being replaced with phone or video conferences. Taxpayers are to respond to information requests from their Independent Office of Appeals.
The IRS is continuing protection of statutes of limitations. Taxpayers are encouraged to cooperate in extending statutes if statute expirations might be jeopardized during this period. The IRS will issue Statutory Notices of Deficiency and will pursue similar actions to protect the interests of the government. SPS/GZ is a full-service ACA reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms. Let SPS/GZ be your trusted ACA tax form reporting provider.
The IRS released Fact Sheet, FS-2020-05, in May 2020. This fact sheet details specific Employer Retention Credit points made in The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) that encourage businesses to keep employees on their payroll. IR-2020-62, “the original Employer Retention Credit,” was first posted on 3/31/2020. Both documents describe assistance for businesses with workers not being forced to choose between their paychecks and the public health measures needed to combat COVID-19. Eligible employers can claim an Employee Retention Credit for wages paid after 3/12/2020 and before 1/1/2021.
The Employee Retention Credit (“ERC”) is available to all employers that have experienced an economic hardship due to COVID-19. This includes tax-exempt organizations. Two exceptions apply:
Federal, state & local governments and their instrumentalities
Small businesses that receive small business loans under the Paycheck Protection Program.
For purposes of the ERC, employers experiencing an economic hardship include those with suspended operations due to government orders related to COVID-19 or those who have experienced a significant decline in gross receipts. In addition, an employer may have had to fully or partially suspend operations because a governmental order limited commerce, travel, or group meetings due to COVID-19 in a manner that prevented the employer from operating at normal capacity during the specified time.
The ERC states that in order to qualify, a “significant decline in gross receipts” begins in the first calendar quarter of 2020 in which an employer’s gross receipts are less than 50% of its gross receipts for that same quarter in 2019. Further stating that “the decline ends the first calendar quarter in 2020 after the quarter in which the employer’s gross receipts are greater than 80% of its gross receipts for the same quarter in 2019.” It is the responsibility of the employer to calculate the measures each calendar quarter.
The tax credit is comprised of 50% of up to $10,000 in qualified wages paid to each employee. The employer’s maximum credit for qualified wages paid to any employee is $5,000. Qualified wages also include the cost of employer-provided health care premiums and expenses.
Wages that qualify for the ERC vary. The ERCs are based on the average number of an employer’s full-time employees in 2019. For example, if the employer had 100 or fewer employees on average in 2019, the ERC is based on wages paid to all employees, regardless if they worked or not.
Another example is If the employer had more than 100 employees on average in 2019. The ERC is then allowed only for wages paid to employees for the time they did not work. In each case, the wages that qualify are for wages paid for a calendar quarter in which the employer experiences an economic hardship.
The amount of qualified wages for which an eligible employer may claim the ERC does not include the amount of qualified sick and family leave wages for which the employer received tax credits under the Families First Coronavirus Response Act (“FFCRA”). The employer is not allowed to use the same wages to determine the amount of the ERC.
To claim the ERC, beginning with the second calendar quarter of 2020, employers must report their total qualified wages and the related health insurance costs for each quarter on quarterly employment tax returns. Form 941, Employer’s Quarterly Federal Tax Return is the usual form used. Employers can receive the benefit of the ERC even before filing by reducing their federal employment tax deposits by the amount of the ERC. They will account for the reduction in deposits due to the ERC on Form 941. The IRS recently posted an FAQ about the ability both to reduce deposits for the ERC and to defer the deposit of all of the employer’s share of social security tax due before 1/1/21 under a separate provision in the CARES Act (PDF).
Advance payment of the ERC may be requested if employers do not have enough federal employment taxes to cover the amount of the ERC after deferred deposits of employer social security taxes under the CARES Act. As explained in the FAQ, employers are allowed to request advance payment credit by submitting completedForm 7200 via FAX # 855-248-0552. Subject Line: Advance Payment of Employer Credits Due to COVID-19. Employers claiming the ERC are required to keep all employment tax records supporting the credit for a minimum of four years.
SPS/GZ is a full-service ACA reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms. Let SPS/GZ be your trusted ACA tax form reporting provider.
Throughout the United States and the world, Coronavirus (COVID-19) has changed daily life in many ways. From a health standpoint, COVID-19 is one of the most horrific and puzzling pandemics humanity has ever faced. Globally, over 4.3 million cases have officially been reported (with some sources predicting the actual number of cases may be as many as 10 times higher than reported due to testing availability). Some 290,000 people have died from this terrible virus, with over 83,000 of those deaths occurring in the USA.
During these uncertain times when health insurance is so critical, The Patient Protection and Affordable Care Act (“ACA”) is front and center in the political arena. Lately, there have been some wins and losses in the ACA column. While the Trump Administration is still trying to abolish this critical law that is now that backbone of the nation’s healthcare system without any alternative in place, many Democratic and even GOP politicians have argued that at least part of the law should be preserved (particularly during a pandemic when millions of Americans depend on the ACA for their insurance coverage). The ACA faces another challenge in front of the Supreme Court, who will hear a lawsuit later this fall from the GOP-led states that argue that the ACA was rendered unconstitutional after Congress eliminated the Individual Mandate tax penalty for not having health insurance. Although the Supreme Court will not likely issue a decision until 2021, the fight now to preserve the ACA is more dire than ever. The House Democrats filed a brief with the Supreme Court on May 6, 2020, stating that “…. the nation’s current public-health emergency has made it impossible to deny that broad access to affordable health care is not just a life-or-death matter for millions of Americans, but an indispensable precondition to the social intercourse on which our security, welfare, and liberty ultimately depend.”
In addition to providing insurance to millions of Americans through the Medicaid expansion program and the ACA marketplace, the law also has a very popular provision that bans insurers from denying coverage to individuals with preexisting medical conditions. In the “win” column for the ACA currently is the fact that without it, COVID-19 could be stamped as a preexisting condition in medical records, which could make it difficult for the over one million Americans who have already tested positive for Coronavirus to obtain insurance. With unemployment through the roof, many Americans will be faced with no health insurance until they can find another job or enroll in the ACA marketplace insurance during an open enrollment period. Already, 11 states/districts have created special open enrollment periods due to COVID-19, symbolizing how essential this law is to the fabric of our healthcare system.
While COVID-19 has had devastating effects on human lives, there have also been rippling effects throughout our economy, with many states still imposing closures of non-essential businesses. Unemployment rates are at levels not seen since the Great Depression. Many companies have furloughed employees with hopes to hire them back once the economy begins to open up again. Even those who still have their jobs have faced pay cuts across the board. Sadly, many businesses may never be able to reopen.
Applicable Large Employers (“ALEs”), defined as employers with 50 or more full-time and full-time equivalent (“FTE”) employees, are starting to wonder how COVID-19 will impact their reporting obligations in 2020 and into the future. With the Supreme Court decision pushed out until at least 2021 and with the added burden of the Coronavirus pandemic on the healthcare system, it seems unlikely that any significant changes to the ACA will occur in 2020 and beyond, particularly as it relates to ALEs. The IRS has been stepping up its enforcement efforts for ACA compliance, including expansive auditing and issuance of penalties to ALEs on a steadily increasing basis. With a strong need for more revenue now, those enforcement efforts are not likely to curtail. Reporting obligations for ALEs, including the mailing and filing of Form 1095-C and the filing of the Form 1094-C, are expected to stay the same in 2020 regardless of the pandemic.
ALEs with a large variable hour workforce (such as the restaurant, hospitality, and healthcare industries with many shift workers) will have the added burden of complicated employee measurement due to the mass layoffs and furloughs occurring during this current economic climate. Many of the furloughed workers may ultimately be rehired, creating additional confusion and complex measurement scenarios.
During a healthy economy, the measurement for the ACA variable workforce is cumbersome and typically requires the expertise of professionals and sophisticated software platforms. With the COVID-19 pandemic, measurement scenarios will be much more complicated and challenging. Classifying employees properly in the IRS filings is critical. Incorrect classifications of full-time and FTE employees can lead to significant ACA penalties from the IRS. While Monthly Measurement and Look-Back Measurement Methods are both acceptable under the ACA, the Look-Back Method is highly recommended with the current layoff and furlough rates. The Rule of Parity within the ACA allows an employer to classify a returning employee as a rehire if their absence was less than 13 consecutive weeks (26 weeks for educational organization employers), providing that they had previously worked at least 4 consecutive weeks and their absence from work was greater than the period of employment immediately before their termination.
It is critical to note that measurement of ALE status (50 or full time or FTE employees) and employee eligibility for benefits (average of 130 hours worked per month during a measurement period) are determined in the PRIOR year. Thus, companies that had 50+ employees in 2019 will be considered ALEs for the 2020 reporting year, regardless of current headcount. Also, employees who worked an average of 130+ hours per month in 2019 should continue to receive benefits in 2020 for the months they are employed. The 2020 measurement period will determine ALE status for 2021. If employers fall below 50 or more average full-time employees in 2020, then they will not need to report in 2021. The calculation of FTE employees involves taking the total hours worked of all non-full-time employees for each month and dividing this number by 120. The quotient is added to the respective monthly headcount for the full-time employees. All months are added together and divided by 12 to determine the average monthly headcount for ALE determinate purposes.
Sound complicated? It is! Now more than ever, it is prudent for ALEs to utilize certified professionals and robust solutions for their ACA reporting needs.
The IRS is bringing back the 1099-NEC form to report non-employee compensation. The 1099-NEC form was used in the past but was discontinued in 1982 and has returned starting for the 2020 tax reporting year. Since the discontinuation of the 1099-NEC Form 38 years ago, nonemployee compensation had been reported on the 1099-MISC in Box 7 when filing with the IRS.
In 2015, the Protecting Americans from Tax Hikes Act (PATH Act) changed the due date for filing Form 1099-MISC with Box 7 payments with the IRS to January 31st. Before this legislation, the due date for e-filing the 1099-MISC, regardless of which boxes were being reported, was March 31st. This changed in the reporting deadline caused confusion for employers, taxpayers and the IRS. Employers began separating the types of payments reported on 1099-MISC forms in order to meet the required updated deadline. The IRS also sometimes mistakenly treated forms that were not reporting Box 7 payments as late returns.
The 1099-NEC form is intended to help avoid the confusion by separating the nonemployee compensation payments on its own form. Box 7 on the 1099-MISC form will now be reported in Box 1 of the 1099-NEC form. The information on 1099 filings should include payments made that meet all four of these conditions:
1. It is made to someone who is not your employee
2. The payment relates to services in the course of your trade or business
3. It is paid to an individual, partnership, estate or in some cases, corporations
4. The payments made to the payee totaled $600 or more in a calendar year.
Before filing 1099-NEC Forms, be sure the recipient’s Taxpayer Identification Number is correct to avoid IRS penalties. Form 1099 -MISC and 1099-NEC are frequently audited, which can result in large penalties to organizations. Companies should request a W-9 Form from each recipient prior to issuing payments so they have accurate information when it comes time to file 1099 forms.
Let SPS/GZ be your trusted 1099 tax form reporting provider. Our solution allows companies to simply upload their 1099 data file to our secure portal in a few easy steps and we handle everything else.
The IRS released Notice 2020-32 on April 30, 2020. In the notice, the IRS provides guidance regarding the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Guidance and rules regarding the Paycheck Protection Program (“PPP”) loans continue to unfold. Prior to this notice, it was unclear whether a payment would be considered a “tax benefit” or not. The notice explains that loan recipients will be eligible for forgiveness of a covered PPP loan in the amount equal to the total of payroll, mortgage interest, rent and utilities incurred and paid during the defined eight-week period following the funding of said loan.
Furthermore, income associated with the forgiveness is excluded from gross income for purposes of the Code pursuant to the CARES Act. This guidance underscores the fact that “double dipping” will not be allowed under the IRS Code for an expense that is otherwise deductible.
SPS/GZ is a full-service ACA reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms. Let SPS/GZ be your trusted ACA tax form reporting provider.
On April 27th, 2020, the Supreme Court ruled in favor of four health insurers who filed suit against the United States for billions of dollars for failure to pay risk corridor payments established as part of the Affordable Care Act (“ACA”), Section 1342. The ACA provision was intended to prevent hefty premiums and encourage risk-averse insurers to participate in the Marketplace by offering policies that covered individuals with pre-existing conditions and who might have higher than expected insurance claims. According to the National Law Review, “To mitigate insurers’ risk entering unpredictable new marketplaces, Congress created the “Risk Corridors” program, set out in §1342 of the ACA, which allowed insurers to share both profits and losses in the new marketplaces’ first three years of existence. Under § 1342, if the insurance plans were not profitable, then the federal government “shall pay” the insurers according to the formula specified in the statute, to compensate for their losses; but if the insurance plans were profitable, then the insurers were required to share the benefits with the federal government by paying it according to the statutory formula.”
In the case, Maine Community Health Option v. The United States, by a vote of 8-1,the Supreme Court awarded over $12 billion in unpaid risk corridor payments to insurers from 2014 to 2016. The Supreme Court ultimately ruled against the Federal Government, who argued that in 2014, after the ACA legislation was established, Congress passed an appropriations bill, blocking the payments of CMS (Center for Medicare and Medical Services) funds to pay for the program, claiming the corridors would be revenue-neutral. The insurers when determining their premiums for the opening of the exchange health plans were told by the CMS, they would be paid regardless of the amount the government collected through the program. Unfortunately, in the first three years, the insurers’ claims vastly exceeded the amount collected. This deficit resulted in many smaller insurers and co-op health insurance plans to go out of business Other insurers left the Marketplace or increased their premiums. The insurers argued that the government violated the original legislation, which claimed they would be reimbursed for losses if they participated in the Marketplace exchanges and this could not be revoked by Congress after the fact with riders in an appropriation bill.
Ultimately the decision by the Supreme Court determined insurers were owed the risk corridor payments. It was stated in Justice Sonia Sotomayor’s majority opinion “these holdings reflect a principle as old as the Nation itself: The Government should honor its obligations.” This ruling is imperative to keeping the ACA exchanges in place and help keep health insurance premiums affordable to all. Insurance experts claim that the lack of funding to help these insurers in the preliminary phase of the ACA caused premiums to increase in the Marketplace. However, according to the Kaiser Family Foundation, “ACA premiums are falling in many areas of the U.S. in 2020”. To see how premiums are changing in your region visit, https://www.healthcare.gov/health-plan-information-2020/ where you can access a pricing tool for 2020 health plans.
During the COVID-19 pandemic, Americans are facing many hurdles: a healthcare crisis, a struggling economy, social isolation, remote learning, working from home, and many other challenges. To help flatten the curve and slow the spread of the virus, most states have issued a stay at home order, resulting in many non-essential businesses having to close. Since some businesses were unable to continue operations, they had to make the difficult decision to lay off employees. Many of these individuals who lost their jobs also lost their health insurance that came with it.
Americans are now not only worried about being exposed to the virus but also how they will pay for their treatment with no health coverage if they were to become infected. According to the Kaiser Family Foundation, the cost to an uninsured patient that is hospitalized with severe symptoms of COVID-19 could exceed $40,000. To help reduce the risk of excessive medical costs, several states have established a special open enrollment period to make the process of enrolling in health coverage easier with fewer restrictions. Currently, under the ACA guidelines, an individual who has a life event, such as loss of employment, can enroll in health coverage in the federal marketplace within 60 days of losing his/her job. However, with the expansion of the state’s own ACA healthcare special open enrollment periods, an individual can enroll without having to prove special conditions, such of loss of employment or other “qualifying life events” which would allow an individual to enroll in health insurance outside of the open enrollment period.
There are 10 states, plus the District of Columbia, that have their own state-run marketplaces and have been able to establish a special open enrollment period These states include California, Colorado, Connecticut, Maryland, Massachusetts, Minnesota, Nevada, New York, Rhode Island, and Washington. Other states, that use the federal government health insurance marketplace, www.healthcare.gov, have not offered an extended open enrollment period to Americans who may have been without insurance or lost their insurance. Two major national associations, America’s Health Insurance Plans and Blue Cross Blue Shield Association, have sent a letter to Congress asking the Federal Government to consider a special enrollment period to help alleviate the worries of both the hospitals and individuals so that those being admitted will have adequate health coverage during these uncertain times. According to the Kaiser Family Foundation, there were approximately 28 million uninsured Americans before the COVID-19 pandemic. Based on the model published by Proceedings of the National Academy of Sciences of the United States, it is estimated that between 2%-7% of the uninsured will require hospitalization. While the states that established special open enrollment periods to help the uninsured is an option for individuals residing in these areas, those who are uninsured in other regions of the United States need to look into possible affordable options for health insurance to avoid the possibility of facing large medical bills.
According to an NBC News article, the COVID-19 Pandemic could be a true test of how well the ACA will handle significant coverage loss. Prior to the pandemic, approximately half of Americans were insured through their jobs. Millions are finding themselves in a most unfortunate position today due to having lost health insurance in addition to having lost their jobs.
10 U.S. states and Washington, DC are offering their uninsured residents an opportunity to sign up for a health plan outside of the traditional enrollment season. (CA, CO, CT, MA, MD, MN, NV, NY, RI, VT, WA, DC).
SPS/GZ is a full-service ACA reporting firm that provides personalized service and exceptional support, utilizing state-of-the-art technology to create and e-file ACA forms.
The Corona Aid, Relief, and Economic Security Act (CARES) is the third stimulus bill passed to help provide relief to individuals and businesses in reaction to the current Coronavirus pandemic. The CARES Act contains provisions that are important to sponsors of group health plans as well as qualified retirement plans and fringe benefit plans. Here is a brief summary of some of the entitlements under this legislation that affect healthcare plans.
Group Health Plans would be required to reimburse out-of-network providers for any Covid-19 tests and other services related to the Covid-19 virus. Providers are required to publish the cash price online or risk a penalty by HHS of up to $300 per day.
Group Health Plans would be required to cover the cost of preventative services in relation to the COVID-19 virus, specifically vaccines, without pre-authorization.
A HDHP with an HSA would cover telehealth services without having to satisfy the plans minimum deductible.
HSAs, FSAs and HRAs funds can be used to purchase over-the-counter medications without a prescription including the purchase of menstrual care products. This change repeals the ACA regulations that prohibited these reimbursements.
Other important elements to The CARESAct in regard to retirement plans and fringe benefits are summarized below.
Allows an individual affected by
COVID-19 to withdraw up to $100,0000 from their eligible retirement plan
without incurring early withdrawal penalty. Individuals can avoid paying income
tax if the amount is repaid within three years.
Individuals can take loan up to 100 percent of
the vested amount in account, up to $100,000, as opposed to previous rules
where participant could only withdraw 50 percent of their vested amount.
Payment of loan can be deferred for one year,
with repayment due within 5 years.
Interest will be incurred during the delayed payment period.
Plan sponsors can rely on participant’s
self-certification for withdrawal of funds as long as plan is amended by the
end of 2022 plan year.
Allows plan sponsors to waive the minimum
distribution requirements for 2020 for certain Defined Contribution Plans
including employers maintaining single-employer pensions plans with due dates
in 2020 until January 1, 2021.
Department of Labor has the authority to
postpone ERISA filing deadlines for a period up to one year because of public
Employers can provide up to $5250 in tax-free student
loans repayment benefits. This means the employer could contribute to student loan
payments for their workers and it would be included as income.
This overview provides some of the provisions in The CARES Act. It is advisable to contact your TPA or benefits attorney for more detailed information or if you have any questions on specific details. We are anticipating further legislation in the coming months that will offer continued relief to businesses and individuals during this pandemic.
With efforts to help reduce the spread of the coronavirus epidemic many companies that employ hourly workers such as restaurants and bars were ordered to close. Many other industries due to shelter in place orders around the country have had to resort to short term layoffs, or furloughs, of their employees due to the lack of work. The government has passed legislation to try to help companies and employees with a stimulus package to get through these months where income has come to a halt. However, once the coronavirus spread has slowed and companies are able to open back up and start bringing back workers there will be questions on how the temporary layoffs or furloughs will impact companies when it comes time to determine their eligibility for an offer of health insurance.
Under ACA guidelines companies need to offer health insurance coverage to employees that average over 130 hours per month. There are two methods of measurement used to determine eligibility for their variable hour workers, a.k.a. hourly workers, The Monthly Measurement Method or The Look-Back Measurement Method. It is recommended under the current circumstances that companies use the Look-Back Method to minimize the risk of ACA penalties. For the Look-Back Method you can set a measurement period, typically 6, 9 or 12 months, not to exceed 12 months, add the total hours for the employee for the designated measurement period and divide by the number of months you were measuring to get the average. Since there will be a gap in hours for the time an employee was not working during the epidemic, employers need to know how this can impact the measurement for an employee. It is recommended to consult a knowledgeable ACA reporting company to make sure your company is adhering to the ACA reporting guidelines and avoiding possible exposure to penalties.
Amid the COVID-19 outbreak and the “stay at home” order by many states, companies are losing business and struggling to pay bills and their employees. Due to these circumstances, businesses are having to make the difficult decision to either furlough or layoff a significant amount of their employees. The number of unemployment claims filed as of April 4th was 6.6 million, a new record from the 3.3 million record claims in the previous week, and is expected to continue to grow significantly. Along with loss of employment, many individuals have also lost their access to health insurance.
If you find yourself among this group of unemployed, now is the time to act so you don’t find yourself in a situation where you need medical attention and don’t have health coverage, especially during a time when we are facing a worldwide epidemic. Many are wondering what options they have if they lose their health insurance. Here is a short summary of some healthcare options for unemployed workers:
MARKETPLACE – You may qualify to enroll in Marketplace insurance, which was established as part of the Affordable Care Act. Typically, you would enroll in a health plan on the Marketplace (https://www.healthcare.gov/) during the Open Enrollment Period, November 1st 2020 until December 15th 2020. However, a loss of a job is considered a qualifying “life event”, which would make you eligible for a Special Enrollment Period (SEP). You only have 60 days from the time of the qualifying event to apply for the special enrollment, so you must act quickly. If you miss the deadline, you may need to wait until the open enrollment period.
COBRA – Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), you are entitled to keep the health insurance from your former employer for up to 18 months. This insurance can be very expensive since you will be responsible for the total monthly premium. According to the Kaiser Family Foundation survey data, the monthly premium for single coverage in 2019 was $7,188 and $20,576 for family coverage. This could be difficult to afford after losing your job.
MEDICAID – Medicaid is an insurance program run by the government and eligibility varies from state to state. Medicaid offers free or low-cost insurance coverage based on income and family size. Many states have expanded their Medicaid benefits under the Affordable Care Act. To determine if you are eligible you can complete an application on your state’s health insurance marketplace.
Another possibility for some may be to enroll in a spouse’s or family member’s employer-sponsored plan. According to the ACA regulations, children under the age of 26 can be covered under a parent’s plan. You have 30 days from the time your employer stops paying for insurance to enroll in family member’s plan. Since enrollment periods for health plans are time sensitive, you need to act quickly to avoid a lapse in coverage.
It is important to take the time to review these options now to determine the best fit for your needs.