Michigan businesses who deferred paying their Sales, Use and Withholding (SUW) taxes may be able to spread out their payments over six months under a new installment payment option. Details of Treasury's notice can be found here.
Most Michigan businesses may postpone filing and paying their March and April sales, use and withholding taxes (including quarterly returns for the first quarter) until June 20, 2020 with no penalty or interest. Treasury's latest announcement can be found here.
Executive Order 2020-57 expands the Michigan Work Share program to accept plans targeting reductions of 10% - 60%. This program permits employers to designate groups of employees to share a percentage reduction in their work hours to avoid layoffs, while allowing them to receive a corresponding percentage of their qualified unemployment benefits to supplement their reduced wages. This Fact Sheet explains the how the program works, though it has not yet been updated for the new allowable reductions.
UPDATED DUE DATES
The IRS due dates for C Corporation 1120 and Estate and Trust 1041 income tax returns, as well as first quarter estimated payments, that are normally due April 15, 2020 can be filed and paid by July 15, 2020 with no interest or penalties. Similarly, the Michigan Department of Treasury has announced that most businesses can postpone filing and paying their February and March sales, use and withholding taxes (including quarterly returns for the first quarter) until May 20, 2020 with no penalty or interest. Unfortunately, we are still waiting for similar announcements about other income tax, payroll tax, and sales and use tax forms and payments for the IRS, Michigan, and Michigan cities that will be due in the next several weeks.
Most employers are REQUIRED to offer SICK LEAVE AND FAMILY MEDICAL LEAVE to employees who are affected by the Coronavirus effective April 1, 2020 and to POST NOTICE to their employees of their right to these benefits. Employers will receive a payroll tax credit to offset their cost of these programs. This credit can be used to immediately reduce 941 payments (subject to limits); advance payments of the remainder can be claimed for qualifying expenses paid after March 31, 2020 and before January 1, 2021 by filing IRS Form 7200. There are also programs available through the Michigan Unemployment Insurance Agency (UIA) that may help you temporarily reduce your labor costs without affecting your UIA rate. Click here for more information.
IS YOUR EMPLOYEE A "CRITICAL INFRASTRUCTURE WORKER"? Michigan Attorney General Dana Nessel has created a website to help answer your questions about the legal rights of employees and employers under Executive Order 2020-21 (COVID-19).
FUNDS ARE AVAILABLE
$5,000 GRANTS ARE AVAILABLE TO SMALL EMPLOYERS WITH 3 - 20 EMPLOYEES. The Save Small Business Fund was created by the U.S. Chamber of Commerce Foundation for the purpose of helping small employers who are struggling during the COVID-19 outbreak. It is available to businesses located in economically vulnerable communities based on the zip code associated with your business as registered with the IRS (as listed on your W-9 Form). Check your eligibility and apply at SaveSmallBusiness.com.
MICHIGAN SMALL BUSINESS RELIEF GRANTS ARE AVAILABLE FOR AN EXTREMELY LIMITED TIME! (Applications are already closed for many areas.) Visit the Michigan Economic Development Corporation's website for more information and to apply.
LOAN ADVANCES UP TO $10,000 ARE AVAILABLE WITHIN THREE DAYS of successful application for an Economic Injury Disaster Loan from the SBA. Small business owners in all U.S. states, Washington D.C., and territories who are experiencing a temporary loss of revenue can apply for these working capital loans up to $2 million, and the loan advance will not have to be repaid, even if the application for the loan is denied. For more information and to apply online, visit the SBA Coronavirus page. Additional help in applying for this loan as well as other assistance is available at the Michigan Small Business Development Center (SBDC) website.
PAYCHECK PROTECTION PROGRAM LOANS are available through June 30, 2020 to cover near-term expenses between February 15 and June 30, 2020 from SBA. To qualify, you must certify you intend to use the money to retain workers, maintain payroll, make utility and mortgage/lease payments, and that current conditions make the loan necessary to maintain your business. No collateral or personal guaranty is necessary, and access to other credit does not prevent you from qualifying. If the employer maintains payroll, the portion of the loans used for covered payroll costs, interest on mortgage obligations, rent, and utilities will be forgiven. Resources to guide Michigan employers through the application and loan process can be found at a new statewide website, MIpaycheckprotection.com. Additional information about the program can be found at the Small Business Association of Michigan website.
For more information, see the U.S. Chamber of Commerce publication Coronavirus Emergency Loans: Small Business Guide and Checklist.
THE "CARES" ACT
The Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was signed into law on March 27, 2020, and includes numerous temporary and permanent changes to the Tax Code. Below is a summary of several key provisions we believe to be most relevant to our business clients. This summary is not intended as advice; relief available to any specific individual or business may be subject to other qualifications, conditions, or limitations not detailed here.
Paycheck Protection Program (PPP) Loans can provide small businesses with up to $10 million to cover payroll and other listed expenses from February 15 to June 30, 2020. Loans are available to businesses with fewer than 500 employees impacted by the pandemic and economic downturn, and are limited to a formula based on payroll costs, including employees making up to $100,000 per year. PPP Loans used for qualifying payroll, interest on mortgages, rent, and utilities may be forgiven or reduced based on employee retainage and comparative compensation levels; such debt forgiveness would be excluded from taxable income.
The Employee Retention Credit is available to eligible employers equal to 50 percent of wages and qualified health plan expenses paid during the crisis (up to $10,000 of expenses per employee). Employers qualify if they shutdown or cut back due to a COVID-19-related governmental order or suffer a decrease in gross receipts of 50 percent or more when compared to the same quarter last year. Firms with more than 100 employees can claim the credit for based on employees who are retained but not currently working due to the crisis; firms with 100 or fewer employees can claim the credit based on all employee wages. This credit can be used to immediately reduce 941 payments (subject to limits); advance payments of the remainder can be claimed for qualifying expenses paid after March 12, 2020 and before January 1, 2021 by filing IRS Form 7200. (WARNING: This credit is not available to employers receiving PPP Loans; claiming this credit may hinder obtaining a PPP loan at a later time.)
Employers may defer payment of the 6.2% Social Security payroll tax incurred from March 27, 2020 through the end of the year, with 50 percent owed on December 31, 2021 and the remainder owed on December 31, 2022. (WARNING: Deferral is not available to employers receiving PPP loans; utilizing this deferral may hinder obtaining a PPP loan at a later time.)
The net interest deduction is expanded to 50 percent of earnings before interest, tax, depreciation, and amortization (EBITDA) from the 30 percent limitation. This expansion applies to 2019 and 2020.
Net operating losses (NOLs) may be carried back five years for losses incurred in 2018, 2019 and 2020. The NOLs used from these losses are not limited of 80 percent of taxable income.
Employer payments made for student loan principal and interest are excludable from taxable income when paid under an employee education assistance program. Payments must be made to an employee or lender before January 1, 2021 and are subject to the same $5,250 limit and non-discrimination rules.
Qualified Improvement Property (QIP) is now a 15-year property for depreciation purposes (retroactive to January 1, 2018) under a long-awaited technical correction to the 2017 Act, making it eligible for bonus depreciation. Taxpayers who placed Qualified Improvement Property into service in 2018 or 2019 may be required to amend their returns or use Form 3115 to correct prior depreciation claimed.
For more information, we recommend this 60-minute webinar on the CARES Act made available by the Small Business Association of Michigan, or read The Small Business Owner's Guide to the CARES Act created by the U.S. Senate Committee on Small Business & Entrepreneurship.
- Questions and answers about IRS filing and payment deadlines
- IRS announces relief ranging from easing payment guidelines to postponing compliance action
- Other IRS information about Coronavirus Tax Relief
- Michigan resource page about the Coronavirus
- Links to other state tax agencies
(Last updated May 27, 2020)