Courtesy of ADP

The Paycheck Protection Program is reopened with over $284B in funds available for new loans. First-time borrowers must have 500 or fewer employees and meet other eligibility criteria. In addition, second PPP loans are available to businesses that received a PPP loan previously if they have 300 or fewer employees and meet other eligibility criteria. PPP loans are available until March 31, 2021, or until all allocated funds are disbursed.

For new borrowers, as well as borrowers who have already received a loan and not yet applied for forgiveness, the law expands eligible non-payroll costs to include certain covered operations expenditures, property damage costs, supplier costs and worker protection expenditures. Non-payroll costs remain limited to less than 40% of the loan amount. Additionally, for all borrowers who have not yet applied for forgiveness, the safe harbor deadline to restore wage and employment levels is extended from December 31, 2020, to September 30, 2021.

Second PPP loans are available to businesses that received a PPP loan previously and that meet special requirements, including:

• Second-time borrowers must have 300 or feweremployees. The rules of the program may limit participation if your organization has related entities, or if you are in certain industries. Check the Small Business Administration’s PPP website (https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program) or speak to your trusted legal or accounting advisor for more information.
• To be eligible for a second PPP loan, businesses will need to demonstrate a reduction in revenue of at least 25% between corresponding quarters in 2020 and 2019. Special rules apply to businesses that were not in operation for all or part of 2019.
• The maximum amount for second draw PPP loans is $2 million.
• Borrowers must have fully spent the loan proceeds from their first PPP loan before their second PPP loan is disbursed.

As a reminder, PPP loans are designed to be 100% forgivable as long as the proceeds are spent in accordance with program rules.

Extension of Paid Leave Credits Under the Families First Coronavirus Response Act (FFCRA)

The FFCRA required employers with fewer than 500 employees to provide mandatory paid sick and paid family leave for certain reasons related to COVID-19. It provided a corresponding tax credit for any amounts paid to employees for the required paid leave. The COVID-related Tax Relief Act of 2020 (CTRA) extends the tax credit portion of the FFCRA for employers that voluntarily offer paid sick or paid family leave through March 31, 2021. The mandatory leave portion will terminate as expected on December 31, 2020.

Extension of Employee Retention Tax Credit (ERTC)

The CARES Act allows eligible employers to claim a federal tax credit with respect to qualified wages paid between March 13 and December 31, 2020. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Act”) extends the ERTC to cover wages paid through June 30, 2021. In addition, as of January 1, the Act increases the credit rate rom 50% to 70% of qualified wages, increases the per employee wage cap from $10,000 in the aggregate to $10,000 per calendar quarter, decreases the required decline in gross receipts from 50% to 20%, and increases the threshold for treatment as a large employer from 100 employees to 500 employees. Retroactive to March 13, the Act provides that employers who receive PPP loans may still be eligible for the ERTC to the extent qualified wages are not paid using forgiven PPP loan proceeds, and it clarifies that group health plan expenses may be considered qualified wages even if no other wages are paid to the applicable employee.

Extension of Repayment Period for Deferred Employee Social Security Taxes

The current guidance issued by the IRS (IRS Notice 2020-65) required that any deferred employee portion of Social Security tax withholding between September 1 and December 31, 2020, must be ratably withheld and paid from wages and compensation paid to employees between January 1 and April 30, 2021, or penalties and interest would begin to accrue on May 1, 2021. The CTRA extends the repayment deadline from April 30, 2021, to December 31, 2021, and the date for penalty and interest to begin accruing from May 1, 2021, to January 1, 2022.

The IRS released a revised 2020 Form 941,Employer’s Quarterly Federal Tax Return, and its instructions. The form will be used to report employment taxes beginning with the third quarter of 2020. The IRS revised Form 941 to allow employers that defer the withholding and payment of the employee share of social security tax on wages paid on or after September 1, 2020, to report the deferral.

Adjustments for Payments or Deposits Made in Same Quarter as a Deferral

The instructions provide guidance on how to report a deferral of the employer and/or employee share of social security tax that is subsequently paid or deposited in the same quarter it was deferred.

Revised Instructions for Schedules B and R

The IRS also updated the Instructions for Schedule B (Form 941), and the Instructions for Schedule R (Form 941), to reflect changes made to the Form 941
Courtesy of the APA –  Curtis E. Tatum

Forbes.com
The Internal Revenue Service announced new, higher contribution limits for health savings accounts for 2021 today. You’ll be allowed to contribute $3,600 for individual coverage for 2021, up from $3,550 for 2020, or $7,200 for family coverage, up from $7,100 for 2020.

In the meantime, you can still top off health savings account contributions for 2019 through the Covid-19-related extended tax day deadline of July 15, 2020. And it’s as good a time as ever to check that your contributions for the 2020 calendar year are on track.

While more and more Americans are opening up these triple-tax-advantaged accounts, few are fully embracing the potential tax savings they offer. Some accounts go unfunded. And only 6% of accountholders choose to invest the money they contribute, according to the Employee Benefit Research Institute.

Is it really worth the hassle of keeping track of a savings and investing account dedicated to healthcare? Absolutely. With an HSA, you save whether you use the money in the account for current out-of-pocket healthcare expenses, or invest it with the intention of using it to help cover your healthcare costs in retirement.

You can even used an HSA to save on a typical trip to the CVS. Thanks to a tax relief provision tucked in the last Covid-19 stimulus package, you can use money you stash in an HSA or FSA (more on those later) for over-the-counter medications like Tylenol or Flonase as well as menstrual products like tampons and pads. That reverses Obamacare restrictions on OTC meds requiring a doctor’s prescription for them to be eligible for reimbursement. Lively, an upstart HSA and FSA provider, has an updated list of eligible expenses here.

As of January 2020, there were 29.4 million HSAs, holding $71.7 billion in assets, according to the 2019 Year-End Devenir HSA Research Report. Contributions and asset growth has been accelerating. As of year-end 2019, investment account holders had a $16,012 total balance on average, Devenir found.

Most HSAs are offered as an employee benefit. But Lively and Fidelity Investments also offer fee-free individual HSAs for self-employed folks, independent contractors and gig workers.

Here are the details on how HSAs work. You put money in on a taxfree basis (usually through salary deferrals), it builds up tax free (you can invest it), and it comes out taxfree to cover out-of-pocket healthcare expenses.

You can contribute to an HSA if you’re in a qualifying high-deductible health plan. (For 2021, that means a plan with a minimum annual deductible of $1,400 for individual coverage or $2,800 for family coverage.) If you’ll be 55 or older by December 31, you can sock away an additional $1,000 for that year. (That catch-up amount isn’t subject to inflation adjustments.) If you’re married, have family coverage and your spouse will be 55 by the end of the year, he or she can also put away the $1,000 catch-up—but only into his or her own HSA, which can be set up specifically to accept these contributions. Here’s a link to the IRS Revenue Procedure 2020-32with the official numbers.

At a minimum, you should put enough money in your HSA to cover your annual health plan deductible. If you lowballed your annual contribution, you can top it off up until the tax year filing deadline. Say you get a big unexpected doctor’s bill. You can put money into your HSA, take it right out, and the government just paid maybe 25% of the bill. The higher your tax bracket, the bigger your savings.

A savvy strategy for high-income earners is to invest the money in your HSA for the long haul. Once you’re 65, you can take out taxfree distributions to cover Medicare premiums. If you withdraw money at that point for non-medical uses, you pay the same tax as you would on withdrawals from a pretax 401(k). But you can also take money out tax-free to reimburse yourself for prior years’ out-of-pocket medical expenses if you have the old receipts.

Note HSAs are a different beast than healthcare FSAs (sometimes confusingly called health spending accounts). FSAs have lower contribution limits and are riskier because you have to spend the money down in one year or you forfeit it (some FSAs have a $500 carryover provision). By contrast, the money you put in an HSA is yours to keep forever: you can spend it when you want. If you have an HSA-eligible health plan, you can’t also put away money in a regular FSA but you can put money in a limited FSA for dental and vision care expenses only.

See also, IRS Covid-19 Fix For Workplace Health And Dependent Care Flexible Spending Accounts: Mid-Year Changes Now Allowed.

The IRS released Form 941 instructions and instructions to Schedule B for the second, third and fourth quarters of 2020 in late June. Several issues have now arisen with the deferral of the employer’s 6.2% share of Social Security taxes.

Designating Deferrals

Although employers can’t defer a deposit of Social Security taxes they’ve already made, employers may be able to claw back some of the deferral from taxes already deposited by designating those funds as employees’ withheld income and FICA taxes and the employer’s portion of Medicare taxes.

Why:The Form 941 instructions state that regardless of how deposits are identified for EFTPS purposes, employers can consider prior deposits during a quarter as first being deposited for employment taxes other than the employer’s share of Social Security taxes.

The IRS used strikingly similar language to define “federal employment taxes” in its FAQs on claiming pandemic-related tax credits. There, the IRS defined the phrase as including employees’ withheld income and FICA taxes and your portion of Medicare taxes.

Makeup Deposits

Employers must repay half the deferral by Dec. 31, 2021, and the other half by Dec. 31, 2022. According to the IRS, payments made before Dec. 31, 2021, are first applied against payments due on Dec. 31, 2021, and then applied against the payment due on Dec. 31, 2022.

Upshot:If the deferral is more than the deposit, the makeup deposit may not be split evenly; the lion’s share may need to be paid by Dec. 31, 2022.

Flip side: If the deferral is less than the deposit, nothing would be due Dec. 31, 2021, and everything would be due Dec. 31, 2022.

Corporate Deductions

If employers choose to defer their deposits of Social Security taxes, corporate deductions for those taxes are also deferred.
This is courtesy of the Payroll Legal Alert found in the APA website

8/8/2020 Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster
MEMORANDUM FOR THE SECRETARY OF THE TREASURY
SUBJECT: Deferring Payroll Tax Obligations in Light
of the Ongoing COVID-19 Disaster
By the authority vested in me as President by the Constitution and the laws of the United States of
America, it is hereby ordered as follows:
Section 1. Policy. The 2019 novel coronavirus (COVID-19) that originated in the People’s Republic
of China has caused significant, sudden, and unexpected disruptions to the American economy. On
March 13, 2020, I determined that the COVID-19 pandemic is of suicient severity and magnitude to
warrant an emergency declaration under section 501(b) of the Robert T. Staord Disaster Relief and
Emergency Assistance Act, 42 U.S.C. 5121-5207, and that is still the case today. American workers
have been particularly hard hit by this ongoing disaster. While the Department of the Treasury has
already undertaken historic eorts to alleviate the hardships of our citizens, it is clear that further
temporary relief is necessary to support working Americans during these challenging times. To
that end, today I am directing the Secretary of the Treasury to use his authority to defer certain
payroll tax obligations with respect to the American workers most in need. This modest, targeted
action will put money directly in the pockets of American workers and generate additional
incentives for work and employment, right when the money is needed most.
PRESIDENTIAL MEMORANDA
Memorandum on Deferring Payroll Tax Obligations
in Light of the Ongoing COVID-19 Disaster
BUDGET & SPENDING
Issued on: August 8, 2020
★ ★ ★8/8/2020 Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster | The White House
https://www.whitehouse.gov/presidential-actions/memorandum-deferring-payroll-tax-obligations-light-ongoing-covid-19-disaster/ 2/3
Sec. 2. Deferring Certain Payroll Tax Obligations. The Secretary of the Treasury is hereby directed
to use his authority pursuant to 26 U.S.C. 7508A to defer the withholding, deposit, and payment of
the tax imposed by 26 U.S.C. 3101(a), and so much of the tax imposed by 26 U.S.C. 3201 as is
attributable to the rate in eect under 26 U.S.C. 3101(a), on wages or compensation, as applicable,
paid during the period of September 1, 2020, through December 31, 2020, subject to the following
conditions:
(a) The deferral shall be made available with respect to any employee the amount of whose wages
or compensation, as applicable, payable during any bi-weekly pay period generally is less than
$4,000, calculated on a pre-tax basis, or the equivalent amount with respect to other pay periods.
(b) Amounts deferred pursuant to the implementation of this memorandum shall be deferred
without any penalties, interest, additional amount, or addition to the tax.
Sec. 3. Authorizing Guidance. The Secretary of the Treasury shall issue guidance to implement this
memorandum.
Sec. 4. Tax Forgiveness. The Secretary of the Treasury shall explore avenues, including legislation,
to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this
memorandum.
Sec. 5. General Provisions. (a) Nothing in this memorandum shall be construed to impair or
otherwise aect:
(i) the authority granted by law to an executive department or agency, or the head thereof; or
(ii) the functions of the Director of the Oice of Management and Budget relating to budgetary,
administrative, or legislative proposals.
(b) This memorandum shall be implemented consistent with applicable law and subject to the
availability of appropriations.
(c) This memorandum is not intended to, and does not, create any right or benefit, substantive or
procedural, enforceable at law or in equity by any party against the United States, its departments,
agencies, or entities, its oicers, employees, or agents, or any other person. 8/8/2020 Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster | The White House
https://www.whitehouse.gov/presidential-actions/memorandum-deferring-payroll-tax-obligations-light-ongoing-covid-19-disaster/ 3/3
(d) You are authorized and directed to publish this memorandum in the Federal Register.
DONALD J. TRUMP