Many of you have already reached out to us with questions/concerns regarding the impact of COVID-19 on your co-ops and what to do about it. Hopefully, the information below will provide answers to some of the questions that you may have and ideas to help weather this crisis.
Recent Tax Act
Last week the federal government passed the Families First Coronavirus Response Act (H.R. 6201) to help Americans cope with this crisis. Here is some information from that law that pertains directly to employers.
The federal government is indirectly paying for sick leave and family medical leave. The credit is equal to 100% of family medical leave or sick leave pay for COVID-19-related leave. You get the credit when you file the quarterly 941 Form and if it creates a refund, you’ll get a refund payment from the IRS.
Additionally, you should know that the credit also includes the pro rata portion of the health insurance cost that the employer pays on the employee’s behalf during the time the employee is on paid sick leave or on family medical leave.
The IRS has not come out with instructions on how to include this on the Form 941. We suggest that you reach out to your payroll provider and seek help to ensure this is completed as applicable. We will provide more guidance as soon as it is available.
If any of your company owners are considered “self-employed,” they will also be entitled to get the same credit as if they were an employee. There’s a formula to calculate self-employment income during the period of time the self-employed person misses for leave, so with that you can calculate the credit. The only difference with the credit for employees, is that you will probably have to claim the credit on your 2020 individual income tax return and it will be claimed either on Schedule SE or in the credit section of the 1040.
In addition to the information provided above, here are links to some helpful resources that may be of interest to you. As new legislation is passed we expect these pages will be updated for that information.
Other Thoughts
- Since no one knows how long the virus will be a threat to our health and businesses it is critical to consider what your co-op needs to survive.
- If your sales are significantly diminished it is prudent to review the cash flow you need to maintain the co-op. That is always unique to your co-op so you need to discuss which costs are unavoidable, which costs can be put off, and which costs can be negotiated. Put that all into a spreadsheet and see how long the co-op can continue with various assumptions.
- With the federal government and many, but not all, states, extending the due date for balances due and 2020 estimated tax payments, we’re expecting that most co-ops will hold off making those payments until they are required to do so. The new due date for individuals and for calendar year tax cooperative income tax returns and tax payments has moved from April 15th to July 15th.
- If your owners are employees of the co-op you likely were paying unemployment tax and can consider that as an option. Unemployment is governed by each state so those rules vary. But any employee whose wages were subject to the unemployment tax, owner or not, should be able to claim unemployment if they are not able to work at whatever level they normally do.
Actions Wegner CPAs Has Taken
Wegner CPAs’ offices are closed and our employees are working from home to help prevent the spread of the virus to our employees and our clients. Our staff will continue to be available to provide you with the same services via phone, e-mail, and virtual meetings. Our voicemail system has been transitioned so that everyone will receive their voicemails via email.
In prioritizing our work, our focus is to get out tax returns and financial statements that have already been started. Some cooperatives may need this information to obtain or renew financing or to apply for grants or other relief. Please communicate with us if you need anything, preferably more than a few days before you need it.
Thanks and stay healthy!
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