The COVID-19 pandemic has brought a host of new challenges for employers as they learn to navigate through these troubled times. These frequently asked questions (FAQ) include more detailed information for employers on the Families First Coronavirus Response Act and topics such as workplace closures, remote work, unemployment and COBRA benefits, group health plan administration, among others. 

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Families First Coronavirus Response Act FAQ

Authored by Paul Dillon, Christine Faris, Michelle Hobbs, Mike Schiavo and Michael Wronsky In an effort to mitigate some of the economic impact of the COVID-19 virus, Congress passed the Families First Coronavirus Response Act (the Act). The Act includes two payroll tax credits to help employers cover wages paid to employees who need time off due to the virus. In addition, the White House is proposing an $850 billion stimulus package to try to maintain liquidity in the economy.  Families First Coronavirus Response Act To help small businesses cope with the impact of the coronavirus pandemic, the Act provides for two payroll tax credits. It is critical to note that these credits are only available to employers with fewer than 500 employees. Sick leave credit – Not to exceed $511 per employee per day, this credit is designed to assist with the cost of providing up to two weeks of paid coronavirus-related sick leave to employees. The credit is limited to 10 days and is in effect for wages paid through December 2020. In addition, the employer cannot use this credit in connection with wages for which the employer is already receiving the employer credit for paid family and medical leave, under a provision previously enacted by the Tax Cuts and Jobs Act (TCJA). On a quarterly basis, the credit is limited to the total taxes imposed on the employer portion of the Social Security payroll tax and is refundable in certain circumstances.
– A similar credit is available to self-employed individuals, amounting to the lesser of their average daily self-employment income, or $511 per day, if caring for themselves, or $200 if caring for a family member. The credit is limited to 10 days. Family leave credit – Not to exceed $10,000 per employee, this credit is designed to compensate employers for providing paid coronavirus-related family leave to employees as separately required under the Emergency Family and Medical Leave Expansion Act. Similar to the sick leave credit, this credit is also limited to the employer portion of the Social Security payroll tax on a quarterly basis but is refundable in certain circumstances. The Act also includes several nontax provisions, which provide paid leave and food assistance to those affected by the virus, makes testing for the virus free, and expands unemployment insurance and Medicaid funding to states. The Act instructs the Treasury Department to issue guidance on documentation requirements. Until such guidance is issued, taxpayers should track the following information: Each employee requesting sick leave due to the COVID-19 virus; document whether the employee is caring for themselves or a family member Compute employee wages compared to the requisite $511 or $200 per day in order to determine the actual amount of the credit Be prepared to supply such information as part of quarterly payroll tax return or annual income tax return filings. Coronavirus emergency leave protection The Act creates an emergency paid leave program that requires private sector employers with fewer than 500 workers and government entities to provide two weeks of job-protected leave under the Family and Medical Leave Act (FMLA) for employees who have to: Quarantine because of exposure to or symptoms of the coronavirus Provide care to a quarantined family member Provide care for child younger than 18 whose school or day care has closed in response to the coronavirus Employees providing care for a child whose day care has closed as described above would be eligible for up to an additional 10 weeks of leave. For these employees, the first 10 days of leave could be unpaid, however, employees can choose to use vacation days, personal leave or other available paid leave. Following the 10-day period, workers would receive a benefit from their employers that will be at least two-thirds of their normal pay rate. The legislation modifies the FMLA to allow individuals to use unpaid leave if they are diagnosed with the virus, caring for a family member or caring for a child whose school or day care has closed because of a public health emergency through Dec. 31, 2020. Coronavirus emergency paid sick leave Employers with fewer than 500 employees and governmental employers must provide employees with temporary paid sick time. Employees must be allowed to use this additional paid sick leave before using any other paid leave benefits. The duration and amount depends on whether the employee is full-time or part-time. For a full-time employee, the employer is required to provide 80 hours of paid sick time. For a part-time or hourly employee, employer-provided paid sick leave would be the hours the employee was scheduled to work in the two-week period. For a variable-hour employee, the Act provides for a calculation based upon historical work or anticipated work. The rate of pay depends upon the reason for the employee’s absence. For absences based upon the employee’s condition, paid sick leave will be paid at the employee’s regular rate. For absences based upon a family member’s situation, pay will be two-thirds of the employee’s regular rate. Emergency paid sick leave is for an employee who is unable to work or telework because the employee: Is subject to a coronavirus-related government order to go under quarantine or isolation Has been advised by a healthcare provider to self-quarantine due to concerns related to the coronavirus Is seeking a medical diagnosis where the employee is experiencing symptoms of the coronavirus Is caring for an individual for whom quarantine or isolation is required Has children whose school or place of care has closed or the child care provider is unavailable due to coronavirus precautions The Act includes an important exception for certain employers. Employers of healthcare providers or emergency responders may elect to exclude those employees from emergency paid sick leave. The Act authorizes the Labor Department to issue regulations to: Exclude certain healthcare providers and emergency responders from paid leave benefits Exempt small businesses with fewer than 50 employees from the paid leave requirements Workers under a multiemployer collective bargaining agreement and whose employers pay into a pension plan will also have access to paid leave. White House plan Discussions on supplemental legislation have already begun. The White House appears poised to send an additional $850 billion stimulus package to Congress in the coming days. Provisions are still in the preliminary stages, but ideas being advanced include: Revision to the TCJA rules prohibiting companies from carrying net operating losses back for two years to obtain refunds A fix to the so-called “retail glitch” in the TCJA that intended qualified improvement property to qualify for bonus depreciation A small-business package as well as relief for the airline industry Treasury Sec. Mnuchin also said the administration is looking for ways to get cash to Americans “quickly.” Tax developments will likely remain fluid in the coming days and weeks. Please reach out to your Baker Tilly advisor for the latest developments and how they may impact your tax position. And be sure to visit our state tax-filing extension matrix to see if your state has changed its filing requirements with the onset of COVID-19.
For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

Congress passed the Families First Coronavirus Response Act to help soften the economic blow the coronavirus is having on employees and employers across the country.

Center for the Return of Manufacturing

Congress passes COVID-19-related tax relief

As companies grapple with COVID-19 and the impact it is having on the workforce, we are learning that a growing trend previously viewed as a benefit is now becoming a requirement as employers scramble to implement work from home policies and technology requirements.   One of the biggest workplace trends as we enter the new decade will be increasing remote work opportunities.  As of last year, 69% of employers surveyed by the Society for Human Resources Management (SHRM) reported that they offer some sort of work from home arrangements. Not only is the sheer number of work-from-home opportunities increasing year over year, but a larger variety of positions are being transitioned to include remote capabilities. Common positions that have added remote capabilities include: Administrative Data entry Project Management Customer Service Information Technology Consulting Accounting and Finance Marketing Employees who work from home report having a better work-life balance saw increased productivity and focus, and report feeling less work-related stress. According to a survey by Robert Half, 77% of workers said that they would be more likely to accept a job if it offered the ability to work from home. Remote work is not a passing trend. According to the U.S. Census Bureau, the share of Americans working from home rose from 3.3% in 2000 to 5.4% in 2018. Worldwide, 70% of employees work remotely at least once a week. As many companies continue to replace full-time staffers with freelancers and remote employees, others are concerned that such practices are greatly affecting culture and connectivity. Some pitfalls to be aware of include: Employees may lose a social connection to their coworkers. Socializing is important to building trust and support in the workplace. Working from home removes interpersonal collaboration and socialization. This can equate to feelings of isolation. Employees may experience issues with work and personal boundaries. For example, parents or pet owners may be forced to transition between their personal roles and professional roles throughout the day when working from home. This can cause disruptions to work flow. Employees may struggle with creativity. According to the Harvard Business Review, “a creative work life requires social relationships and serendipitous interactions.” Bursts of creative problem solving often result from daily interactions that may not occur if workers are not physically sharing space. There are steps organizations can take to maintain their company culture and uphold interpersonal relationships while transitioning positions to include remote capabilities. First leaders should determine what kind of culture they want to create. From there, employers should review the day- to-day agenda of each role in the company to determine which roles would be suitable for remote options. Next employers should survey the physical and technological needs of each department in order to catalog changes, upgrades, costs, and security risks that would be required to allow work-from-home access. By setting remote workers up with the right tools, creating a culture of appreciation, modeling expected behavior, and scheduling regular in-person check-ins, organizations can foster a healthy remote environment.

As companies grapple with COVID-19 and the impact it is having on the workforce, a trend previously viewed as a benefit is now becoming a requirement as employers scramble to implement work from home policies and technology requirements.

State & Local Government

Human Capital

Fostering a healthy remote work environment

Authored by Christine Faris, Mark Heroux and Devin Tenney The IRS issued two new proposed regulations under the meals and entertainment (M&E) rules that serve to describe, clarify and expand on the changes made to the M&E rules in the Tax Cuts and Jobs Act of 2017 (TCJA) and related subsequent guidance. Specifically, one of the proposed regulations focuses on entertainment expenses, with the other centered on food and beverage expenses. Generally, under the TCJA, entertainment expenses are not deductible and meals are 50% deductible. The proposed regulations further define what entertainment is and when meals are deductible.   Entertainment expenses The proposed regulations focus on two key concepts pertaining to entertainment expenses. First, entertainment is defined as “any activity which is of a type generally considered to constitute entertainment, amusement, or recreation, such as entertaining at bars, theaters, country clubs, golf and athletic clubs, sporting events, and on hunting, fishing, vacation and similar trips, including such activity relating solely to the taxpayer or the taxpayer's family.”  The IRS also provided that an objective test will be used to determine whether an activity is entertainment. Therefore, if an activity is generally considered to be entertainment, it will be treated as entertainment regardless of whether the expenditure can also be described as not being an entertainment expense. Amounts treated as entertainment expenses are nondeductible.  Second, the proposed regulations make it clear that food or beverage expenses must be plainly distinguished from entertainment expenses. Taxpayers can distinguish food or beverage expenses from entertainment expenses by either (1) purchasing the food or beverage separately or (2) ensuring the cost of the food or beverage is stated separately from the cost of the entertainment. Food or beverage expenses purchased or stated separately are 50% deductible. If food or beverage is not purchased or stated separately, then no allocation can be made, and the entire amount is a nondeductible entertainment expenditure. Food or beverage expenses The other proposed regulation addresses food and beverage expenses — specifically, (1) what expenses are included in the cost of food or beverage, (2) when are the expenses deductible, and (3) whether the expenses are subject to the general limitation of 50% or meet an exception to be fully deductible.  The M&E rules say no deduction is allowed for the expense of any food or beverages unless such expense is: not lavish or extravagant under the circumstances (neither the statute nor the proposed regulations define “lavish” or “extravagant”; the determination is subjective, based on the facts and circumstances), and  the taxpayer (or an employee of the taxpayer) is present at the furnishing of such food or beverages.   The new rules incorporate these two requirements and expand the law by adding a third requirement that food or beverages must be provided to a business associate for the cost to be deductible.  The new rule, however, shouldn’t cause taxpayers much concern, as “business associate” is loosely defined to be “a person with whom the taxpayer could reasonably expect to engage or deal in the active conduct of the taxpayer’s trade or business such as the taxpayer’s customer, client, supplier, employee, agent, partner, or professional adviser, whether established or prospective.” The question has also arisen concerning exactly what ancillary expenses should be included in the cost of food or beverage. The new rules define food or beverage expenses to mean the cost of food or beverages, including any delivery fees, tips and sales tax. The rules go on to say that in the case of employer-provided meals at an eating facility, food or beverage expenses do not include expenses for the operation of the eating facility such as salaries of employees preparing and serving meals, and other overhead costs. As stated above, the general rule is food or beverage expenses are limited to 50%, unless they qualify for one of six exceptions. The new rules provide additional clarification on when these exceptions apply. The following provides a brief overview. Expenses treated as compensation are generally 100% deductible. However, this exception does not apply if the expenses for food or beverages have a value that is less than the amount included in the employee’s gross income or if the value required to be included is zero. In such a case, the deductible amount is limited to 50%.  Expenses paid for food or beverages by a taxpayer for recreational, social or similar activities primarily for the benefit of employees are generally 100% deductible. The exception only applies to food or beverages provided primarily for the benefit of employees other than the highly compensated employees and shareholders who own a 10% or greater interest in the business. This exception applies also when the benefit is provided to a limited number of employees at a single time, e.g., one department. This exception does not apply to free food or beverages provided in the break room (subject to a 50% limit, unless de minimis).  Food or beverages made available to the general public are generally 100% deductible. This exception applies to the entire amount of the expense for food or beverages provided to employees if similar food or beverages are provided by the employer to, and are primarily consumed by, the general public. For this purpose, “primarily consumed” means greater than 50% of actual or reasonably estimated consumption and “general public” includes customers, clients and visitors. Goods or services sold to customers are generally 100% deductible. The new rules address concerns from the food and beverage industry. They provide that a restaurant or catering business may continue to deduct 100% of its costs for food or beverage items, purchased in connection with preparing and providing meals to its paying customers, which are also consumed at the worksite by employees who work in the employer’s restaurant or catering business.  For more information on this topic, or to learn how Baker Tilly specialists can help, contact our team. The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

The Tax Cuts and Jobs Act created some ambiguity in regard to expensing food and beverage and entertainment costs; two proposed regulations aim to clear up that uncertainty.

Families First Coronavirus Response Act FAQ

Congress passes COVID-19-related tax relief

Fostering a healthy remote work environment

Hungry and bored? Proposed regulations clarify meals and entertainment expenses

Families First Coronavirus Response Act FAQ

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