Covid-19 e-Blasts

SBA Safe Harbor for PPP Loans Under $2M

Businesses that together with their affiliates accepted Paycheck Protection Program (PPP) funds of less than $2 million will be assumed to have performed the required certification concerning the necessity of their loan requests in good faith, according to guidance posted by the U.S. Small Business Administration (SBA) on Wednesday.

The guidance, provided as Question 46 in Treasury’s Q&As related to the PPP, states that borrowers with loans of more than $2 million may still have an adequate basis for making the required good-faith certification, based on their individual circumstances and the language of the certification and SBA guidance.

The SBA warned April 23 that businesses with substantial access to liquidity may not qualify for PPP loans, and several larger companies returned their PPP funds. On April 28, Treasury Secretary Steven Mnuchin and SBA Administrator Jovita Carranza announced that the SBA would review all PPP loans in excess of $2 million to make sure borrowers’ self-certification for the loans was appropriate.

Out of concerns whether their loans would be deemed appropriate, some larger companies that initially received PPP funds have returned them. For the same reason, some leaders of smaller companies have also considered returning their PPP funds or hesitated to apply for PPP loans.

The SBA said the safe harbor will promote economic certainty for PPP borrowers with limited resources as they work to retain and rehire employees. The $2 million threshold also will help the SBA conserve its resources and focus its reviews on larger loans.

If the SBA determines during its review that a borrower lacked an adequate basis for certifying the necessity of its loan, the SBA will seek repayment of the outstanding PPP loan balance and inform the lender that the borrower is not eligible for loan forgiveness. The SBA will not pursue administrative enforcement or referrals to other agencies if the borrower repays the loan after receiving notification from the SBA.

As a side note, the eight-week window currently in place for determining PPP loan forgiveness has met with deserved criticism from businesses large and small, as has the non-deductibility of expenses paid with PPP funds.  Fodder for a future eblast…

- The Vanderbilt Team 

Document dated 5/14/2020


Paycheck Protection Program - Legal and Regulatory Considerations

Dear Clients and Friends, 

Numerous recent headlines have shone the spotlight on the distribution of the first round of PPP funds to large restaurant chains including Shake Shack, as well as other prominent public and private companies. Many have questioned the propriety of the eligibility requirements and impugned the integrity and ethics of many organizations that have applied for funding. The decision by Shake Shack to return the $10 million it received from the PPP, as well other prominent companies to do likewise, has drawn attention to the perceived inequitable distribution of PPP proceeds.  

As you may remember, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provided a $2.2 trillion stimulus package that allocated funding to small businesses through new and enhanced loan programs administered by the Small Business Administration (“SBA”). The PPP was one such program designed specifically to provide eligible small businesses immediate relief if they believe that “current economic uncertainty” of the COVID-19 pandemic makes such a loan for their business “necessary to support their ongoing operations,” and were willing to certify to the lender to that affect. 

Offering funds covering up to eight weeks of payroll, the program’s purpose is to reduce the growth of unemployment, help small businesses retain employees, and enable them to rebound quickly once the pandemic is under control. Unfortunately, the initial guidance promulgated by the SBA did not provide any definition or specifics regarding the nature or extent of the required impact to operations or the “current economic uncertainty” that would make the loan request “necessary to support ongoing operations." In addition, since the PPP loan has a forgiveness component if a business meets certain conditions, the program has been touted by many as “free money.” Consequently, demand for PPP loans has been unprecedented, exceeded loan availability, and resulted in the SBA having to stop accepting PPP loan applications on April 16.  

On April 23rd, the SBA updated its Frequently Asked Questions Document to add FAQ 31. The new FAQ provides much-needed clarity regarding program qualifications specific to businesses with access to other sources of liquidity to support their ongoing operations. Any business that received a PPP loan prior to the issuance of this new guidance and who now believes that they do NOT demonstrate the necessity for the loan, can repay the loan in full by May 7, 2020. Any business that does so, will be deemed by the SBA to have made the required good faith certification on their PPP loan application. 

We certainly understand that there has been a justifiable rush for eligible small businesses to expedite processing of these loans and you may be primed to submit your PPP application, but we do want to caution you as to the potential risks of receiving these funds as these loans will be subject to regulatory and public scrutiny. Loan recipients will not remain anonymous as EINs will be made public. We anticipate heightened government scrutiny will be forthcoming to investigate potential fraud and abuse. Businesses who have received PPP loans and are later found to have not qualified under the eligibility rules and/or businesses who do not use the funding in accordance with the terms of the program, could be subject to significant legal or regulatory consequences. Further, businesses may experience reputational damage for having pursued these loans.  

Given the revised guidance issued by the SBA and the pending May 7, 2020 deadline for returning loan proceeds, we strongly encourage you, your organization’s management, and board of directors to carefully and immediately review your company’s financial situation and reconsider the relief you may have already received with a PPP loan. Specifically, consider whether your circumstances fall within the spirit and intent of this economic relief program. If you do receive and keep PPP funding, it is critical that you maintain complete and accurate documentation to support your eligibility for such funding, the specific use of these funds, as well as your qualifications for forgiveness under the terms of the program. This documentation will be crucial were your business to be audited and/or investigated. This defensive documentation will greatly minimize your potential exposure to fraud and abuse allegations related to your participation in this loan program. 

Many of the factors influencing whether you qualify or should apply for these loans are organization specific. We encourage you to consult with legal counsel if you have questions regarding your organization’s eligibility to receive funds.  

We recognize that these are difficult times and we remain committed to supporting you. If you would like our assistance with evaluating whether the PPP or other small business loan programs and/or economic relief measures are appropriate for you, please contact us.  

- The Vanderbilt Team 

Document dated 4/28/2020


Confusion Abounds!

Dear Clients and Friends, 

Here is a good flowchart that helps to understand and differentiate the SBA loans available.  Many business owners are focused on the PPP (Paycheck Protection Plan) loan, it is potentially much larger than the EIDL (Economic Injury Disaster Loan), capped at $10,000.  

BUT, the EIDL (Economic Injury Disaster Loan) can be applied for online in about 10 minutes.  Yes, if you also apply for PPP the EIDL will be taken into consideration when determining the amount of PPP offered to you.  One doesn’t eliminate eligibility for the other however.  This package is intended to get working capital into the hands of small business owners quickly, while other opportunities are pursued. 

We encourage you to take a look. 

The Team at VCPA

Document dated 4/6/2020


The CARES Act and How It Impacts You and Your Employees

Dear clients and friends,
 
Our friends at Quintes gave us permission to share their outreach that we think is an informative perspective from the plan mechanics viewpoint. 

On March 27, 2020, the Coronavirus, Aid, Relief, and Economic Security (CARES) Act (the “Act”) was signed into law. A portion of the Act is intended to loosen access to retirement plan funds for individuals impacted by the COVID-19 pandemic. The following is a summary of the retirement-related provisions of the Act:

  • $100,000 Withdrawal
    • Waiver of 10% penalty on early withdrawals for amounts up to $100,000 from a retirement plan or IRA taken between January 1, 2020 and December 31, 2020
    • This withdrawal is only available to a qualified individual (see “qualified individual” below)
    • Individuals are allowed pay the tax on withdrawal ratably over a three year period; and
    • Individuals are allowed to repay the withdrawal back to the plan, tax-free, over the three years from the date of the withdrawal (not limited by plan limits). May be repaid back into the plan making allowing the withdrawal, another qualified plan or an IRA that accepts rollovers.
    • Plan sponsor has discretion whether to offer this design in their qualified plan
  • Plan loans
    • Plan loan limits are increased  for qualified individuals (see “qualified individual” below) to the lesser of:
      • $100,000; or
      • 100% of their vested account balance.
    • Qualified individuals (see “qualified individual” below) with existing outstanding loans with  a repayment due from the date of enactment of the Act through December 31, 2020 may delay loan repayments for up to one year. The plan can choose to extend the term of the loan for up to a year as well. Doing so would allow participants to avoid a financial hardship when they do resume repayment by keeping their repayment amount the same as prior to the suspension of the repayment. These loans will continue to accrue interest during the period  of the suspension of repayments.
    • Plan sponsor has discretion whether to offer these design elements in their qualified plan
  • Qualified individual
    • Eligibility for the penalty-free $100,000 withdrawal and the adjustment to the loan limits is conditioned upon an individual meeting one of the following criteria:
      • Is diagnosed with COVID-19;
      • Whose spouse is diagnosed with COVID-19;
      • Who experiences adverse financial consequences due to furlough, quarantine, layoff, reduction in hours, inability to work due to lack of child care due to COVID-19, or closing of business/reduction of hours by individual due to COVID-19; or
      • Factors determined by the Secretary of the Treasury
    • Importantly, the Act does not require the plan sponsor to verify whether an individual qualifies for the COVID-19 adjusted loan limits or the $100,000 withdrawal.  The plan sponsor may rely upon a participant’s certification for eligibility.
  • Required minimum distributions
    • The Act waives RMD payments for 2020.
      • Includes RMD attributable to 2019 which was not paid by January 1, 2020;
      • Includes RMD if already made in 2020; but
      • Does not include RMD distributions that were made in 2019.
    • For RMDs that were already made in 2020 the participant may defer taxes and roll it back to the plan from which it was made or roll it to another qualified plan or IRA which accepts rollovers. Additional guidance regarding any potential impact to the 60 day rollover period is expected from the IRS.
  • Defined benefit and money purchase pension plans
    • The Act allows these plans to delay any contributions due in calendar year 2020 (including all quarterly contributions) until January 1, 2021. The new January 1, 2021 due date applies for all quarterly contributions (they would no longer be separately due).
    • Leveraging the delayed due date would subject the employer to interest on the delayed contributions from the original due date(s) at the effective rate for the plan year that includes the date of payment.
    • Plan sponsors should expect leveraging delay should lead to higher contributions in 2021.
  • Reporting and notices
    • The Act empowers the Department of Labor to extend certain deadlines for notices – more information expected in the coming weeks.

Plans can adopt the new rules immediately. The plan will eventually need to be amended on or before the last day of the first plan year beginning on or after January 1, 2022, or later if prescribed by the Secretary of the Treasury.

Source: https://www.napa-net.org/sites/napa-net.org/files/CAREs%20Act%20revised_032220.pdf

For any questions related to the CARES Act, your plan, or how it impacts your employees and participants, please contact your appropriate Quintes team member or Mark Laughton at mark@quintes.com or 831-601-1710.

- The Vanderbilt Team

Document dated 4/3/2020


Additional Updates

Dear Clients and Friends, 

Here are some updates for you. 

FTB is postponing until July 15 the filing and payment deadlines for all individuals and business entities for: 

  • 2019 tax returns 
  • 2019 tax return payments 
  • 2020 1st and 2nd quarter estimate payments 2020 LLC taxes and fees 
  • 2020 Non-wage withholding payments 

Monterey County property taxes are due and payable April 10, 2020, as always.  The assessor’s office explains this is a state law over which they have no power. Late payment penalties MAY be waived with cause, but no mechanism is in place for automatic waiver 

The Small Business Administration (SBA) has a new website called Coronavirus (COVID-19): Small Business Guidance and Loan resources. The new website includes information on the Paycheck Protection Program, Economic Injury Disaster Loans, SBA debt relief, SBA Express Bridge Loans, and other guidance and resources for individuals and businesses suffering economic damage from the coronavirus (COVID-19) outbreak. Coronavirus COVID-19 Small Business Guidance  

For more information about the SBA programs created by the CARES Act, please read Blog Post: Small Business Loans – We Finally Have Some Answers

IRS announced that distribution of economic impact payments will begin in next 3 weeks and will be distributed automatically, with no action required for most people. But, some seniors and others who typically don't file return will need to submit simple return to receive payment. Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive full payment in amount of $1,200 for individuals or $2,400 for married couples; and parents will receive $500 for each qualifying child. And for filers with income above these amounts, payment amount is reduced by $5 for each $100 above thresholds; and single filers with income exceeding $99,000 and $198,000 for joint filers with no children aren't eligible for payments. (IR 2020-61) 

- The Vanderbilt Team

Document dated 4/1/2020


Relief Package Forgiveness of Loans

Dear Clients and Friends, 

This morning we have a little more detail about the small business loan provisions in the Relief Package (CARES Act). 

An eligible recipient is eligible for forgiveness of indebtedness on a covered loan in an amount equal to the sum of the following costs incurred and payments made during the covered period: (1) payroll costs; (2) interest payments on any covered mortgage obligation; (3) payments for covered rent obligations; (4) covered utility payments.  Further, the amount forgiven under this provision is excluded from gross income. 

What does “covered” mean in this context? 

1.    An eligible recipient is the recipient (borrower) of a covered loan. 

2.    A covered loan is a loan guaranteed under Sec 7(a)(36) of the Small Business Act (an SBA loan). 

3.    The covered period is the 8-week period beginning on the origination date of the covered loan. 

4.    A covered rent obligation is rent paid under a lease agreement in force before February 15, 2020. 

5.    A covered mortgage obligation is any indebtedness or debt instrument incurred in the ordinary course of business that is the liability of the borrower, is a mortgage on real or personal property, and was incurred before February 15, 2020. 

6.    Covered utility payments are payments for a service for the distribution of electricity, gas, water, transportation, telephone, or internet access for which service began before February 15, 2020. 

We will keep the information coming as it becomes available to us.  Stay safe everyone. 

- The VCPA Team 

Document dated 3/30/2020


CARE Act Provisions for Individuals 

Dear Clients and Friends, 

We have focused on the provisions of the Act helpful to our business clients, however there are some tidbits for individuals as well. 

Required Minimum Distribution (RMD) requirement is waived for 2020 for plans maintained by an employer or an individual retirement plan.  The RMD requirements also are waived for any distribution otherwise required by virtue of a required beginning date occurring in calendar year 2020 and any such distribution not having been made before January 1, 2020. 

 10% additional tax does not apply to any coronavirus-related retirement plan distribution, up to $100,000, that otherwise would be subject to penalty. 

A coronavirus-related distribution is any distribution subject to $100,000 limit made on or after January 1, 2020, and before December 31, 2020, from an eligible retirement plan made to a qualified individual. 

A qualified individual is an individual (1) who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention (CDC), (2) whose spouse or dependent is diagnosed with such virus or disease by such a test, or (3) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury.  

The administrator of an eligible retirement plan may rely on an employee's certification that the employee satisfies the conditions of (3) above in determining whether any distribution is a coronavirus-related distribution. 

$300 above-the-line charitable deduction added for tax years beginning in 2020. This provision excludes contributions made to donor advised funds. 

Qualified contributions are disregarded in applying the 60% limit on cash contributions of individuals and the Code Sec. 170(d)(1) rules on carryovers of excess contributions.  

Qualified contributions are charitable contributions if they are paid in cash during calendar year 2020 to a 501(c)(3) and certain other charitable organizations and the taxpayer has elected to apply this provision with respect to the contribution.  

However, contributions to a donor advised fund are not qualified contributions.  

Effective date:  Contributions made after December 31, 2019. 

Last but not least, there is more detail about to whom and how the COVID Rebate/Relief checks will be distributed.   In summary, Treasury will use your 2019 tax return if filed to calculate the rebate or your 2018 tax return if 2019 has not been filed.  If you are entitled to more than you receive in 2020, you will be able to claim the balance owed to you on your 2020 income tax return.  If, on the other hand, you receive more than that which you were entitled, you are NOT required to pay back the difference. 

We realize the information we provide here about the rebate is cursory.  Email or call us please if you have questions about the Rebate and we will share details as we understand them.  Our overall takeaway is that you do not have to DO anything.  Treasury is making decisions from information they have and any errors can be corrected on your 2020 income tax return. 

Stay safe everyone! 

- The VCPA Team 

Document dated 3/30/2020


Payroll Tax Relief

Dear Clients and Friends, 

First, we apologize to those of you who are getting this eblast for whom it may not apply.  We made the decision to send these news releases broadly rather than risk missing somebody.   

The recently passed Families First Coronavirus Response Act is designed to provide employees with paid leave and employers with a credit to offset the cost of the leave.   

For COVID 19 related reasons, employees receive up to 80 hours of paid sick leave and expanded child care leave when employees’ children’s schools are closed or child care providers are unavailable. Employers with fewer than 50 employees are eligible for an exemption from the requirements to provide leave where the viability of the business is threatened. 

Employers receive payroll tax credits designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus related leave to their employees.   

·       Health insurance costs are included in the credit 

·       Employers face no payroll tax liability 

·       Self-employed individuals receive an equivalent credit 

Reimbursement will be quick and easy to obtain. 

·       An immediate dollar-for-dollar tax offset against payroll taxes 

·       Where a refund is owed, IRS will send the refund as quickly as possible 

To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes.  Payroll taxes available for retention are: 

·       Withheld federal income taxes 

·       Employee and employer share of Social Security and Medicare 

·       Self employed may reduce estimated income tax payments 

 A streamlined claim form for obtaining refunds owed will be released next week.   

This relief will be available between March 18, 2020 and December 31, 2020. 

There are a number of qualifying factors and limitations to the Paid Leave and Child Care provisions, so please call us or look up IRS News Release 2020-57.  It is written in fairly simple language so we encourage you to Google it and download to your payroll procedures in the short term. 

Remember this relief only applies to the specific circumstances described.  We hope for more general relief soon and will keep you informed. 

Stay safe everyone! 

The Vanderbilt Team 

Document dated 3/25/2020


Vanderbilt CPAs Still Here to Serve You - Safe Curbside Drop-Off/Pick-Up

Vanderbilt CPAs is offering a safe, no interaction, curb side pick-up or drop-off for all clients who prefer to pick up paper copies of their tax return packages or drop off tax documents.  The office and entire building are closed. We ask you to please stay in your car and call us at (831) 620-0811 when you get here, and we will place your package outside the front building door and wait for you to gather it up.  Same system for drop off, in reverse. Candace, our administrative assistant, will be your point of contact.  REMEMBER TO CALL AHEAD FIRST to make an appointment, and CALL AGAIN when you arrive. Candace cannot hear knocks on the windows or doors from her desk so please do not show up without an appointment.  Do not leave a drop off unless and until you see Candace at the door, and rest assured, we will NOT leave your completed tax return unattended outside the door. 
Remember the following facts regarding the tax filing deadlines that we sent e-blasts about previously:

We consider all of you to be part of the Vanderbilt CPAs family and understand how difficult the current situation is for everyone.  We hope that you and your families are all healthy and safe.  We look forward to seeing you all when the crisis has passed and we can get back to taxes as usual! 
- The Vanderbilt Team

Document dated 3/24/2020


IRS extends time to file and pay

Dear Clients and Friends, 

In an announcement earlier today, March 20th 2020, the IRS, is extending the April 15 tax-filing deadline to July 15, 2020. Treasury Secretary Steven Mnuchin made the announcement earlier this morning to provide people more time to prepare and pay their taxes during the coronavirus outbreak. The filing extension applies to all taxpayers and businesses.  

Please note that this announcement is an update to the email sent out earlier this week announcing that the IRS has only extended the time to pay and not file.  

We will continue to advise and prepare returns as we have in the past, keeping in mind that although this extension has been granted returns still must be filed in a timely manner currently defined as July 15, 2020 for IRS and June 15, 2020 for the Franchise Tax Board (CA). 

As always, we will continue to monitor the situation and provide you with updates.  

We thank you for all your patience and understanding – stay safe everyone! 
- The Vanderbilt Team 

Document dated 3/20/2020


Office Closure

Dear Clients and Friends,

Earlier today Monterey County issued an announcement ordering all residents to stay inside their place of residence with very few exceptions. We are no exception to this rule and per this announcement we have closed our office until this order is lifted.

Please be assured we are still working hard to make sure your tax returns are completed in a timely manner. Our team is now working remote with strict security in place to protect your personal information. Additionally, all staff members have full access to email and can be reached via phone by calling our office. During this time, we ask that any communication be done via email and please make no attempts to come to our office until further notice. When your tax return is complete Angie will contact you by email or telephone to discuss delivery options.

We will continue to keep you updated as information comes in. Thank you for your understanding and as always please feel free to email or call with questions.  
- The Vanderbilt Team 

Document dated 3/17/2020


An update to yesterday’s news.

Dear Clients and Friends,

This afternoon (March 17th, 2020) Treasury Secretary Steven Mnuchin, in response to the COVID-19 pandemic announced that the IRS has not extended the April 15th deadline to file but has extended the deadline pay 2019 taxes to July 15th, 2020. There has still been no word from the IRS regarding an extension for quarterly estimated tax payments normally due on April 15th and June 15th, 2020.

Please note that at this point, the IRS has only announced an extension of time to PAY not file.
 
We will continue to monitor the situation and provide you with updates.
 
We thank you for all your patience and understanding.
- The Vanderbilt Team

Document dated 3/17/2020


How will it impact this tax filing season?

Dear Clients and Friends,

By now most of you have heard rumblings of a possible extension to the Federal and California tax filing deadlines due to the COVID-19 pandemic. We wanted to take this opportunity to inform you of what has been communicated to us.

Last Friday, March 13th, 2020 the Franchise Tax Board (FTB) announced special tax relief for California taxpayers affected by the COVID-19 pandemic. Affected taxpayers are granted an extension of time to file 2019 California tax returns and make certain payments until June 15, 2020. The relief is extended to Partnerships, LLCs who are taxed as partnerships and individual filers. First quarter estimated tax payments normally due on 4.15.2020 have also been extended to 6.15.2020. At the bottom of this email is a hyperlink to the FTB’s website which explains the above in more depth.

In addition, according to the American Institute of Certified Public Accountants (AICPA) the IRS is planning on granting an extension of the April 15th deadline by as much as 90 days and granting waivers of penalties and interest for most taxpayers.  Please be aware, there has been NO announcement from the IRS regarding extending the time to file, the above is simply what the AICPA has communicated to us. As such, we have continued to work as we have in the past, keeping the April 15th deadline in our sights. Please continue to submit your tax documents as you have always done.

As you know this matter is evolving and we will do our best to keep you informed of the major updates that will impact the 2019 tax season.

https://www.ftb.ca.gov/about-ftb/newsroom/news-releases/2020-2-more-time-to-file-pay-for-california-taxpayers-affected-by-the-covid-19-pandemic.html
- The Vanderbilt Team

Document dated 3/16/2020


As always, please give us a call if you have any questions or would like to discuss this matter further.

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