Employers Can Make Tax-Free Payments to Employees to Cover Certain Costs

Date March 25, 2020
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HBK CPAs & Consultants

The toll on the economy caused by the novel coronavirus (COVID-19) has left businesses looking for ways to assist their employees through their financial struggles. The seldom used Internal Revenue Code Section 139 gives employers an opportunity to make tax-free payments to their employees, “qualified disaster relief payments,” to reimburse certain costs incurred as a result of COVID-19. Let’s look at how this works. Qualified Disaster Relief Payments IRC §139 provides an exclusion from gross income for amounts received by taxpayers that are “qualified disaster relief payments.” In addition to these not being included in taxable income for the employees receiving such payments, these qualifying payments are deductible for the employer making such payments. To qualify, the payment must reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster. Payments can also be made to reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster. Payment of employee wages, even if voluntary, does not count and will continue to be taxable. However, the provision will allow for tax-free reimbursement of specific employee expenses caused by COVID-19. For instance, employers can pay for or reimburse employee expenses that are not covered by insurance such as over the counter medications, disinfectant and other cleaning supplies, expenses relating to childcare due to school closures, funeral costs, and various work-from-home expenses. There is no cap or limitation on the amount or frequency that these qualified disaster payments can be made, and payments can be made to all employees or to an individual employee. Unlike other reimbursement plans there does not need to be a formalized, written plan in place for an employer to take advantage of §139. Although, having a written plan is always recommended so that employees understand the guidelines that their expenses must fall within to qualify, and who is eligible for such payments. There is no requirement that employees provided relief under §139 maintain a certain title or minimum days of employment before being eligible. Should an employer wish to provide their employees §139 relief all employees would be eligible. Application to the Coronavirus Pandemic COVID-19 was declared an emergency under the Stafford Act on March 13, 2020 and although there is legal debate over the terminology used, the consensus is that due to this declaration §139 relief is permitted as COVID-19 is an emergency and federally declared disaster. IRC §139 has not been utilized due to a pandemic before and so while this is unprecedented it is reasonable that given the declaration COVID-19 falls within the scope of §139. The ability to utilize §139 is likely not one that employers have come across or taken advantage of in the past, and if you believe that your employees would benefit from providing them qualified disaster relief payments please reach out to your HBK Tax Advisor.
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COVID-19 and EEOC Compliance

Date March 24, 2020
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The U.S. Equal Employment Opportunity Commission (EEOC) enforces federal laws regarding discrimination against a job applicant or employee, including the Americans with Disabilities Act and the Rehabilitation Act. As a result of the COVID-19 pandemic, the EEOC has released guidance for employers on applying these laws to job applicants or employees who may be affected directly by the virus. Some key points from the guidance:

    • ADA-covered employers, typically employers with at least 15 employees, may ask employees if they are experiencing symptoms of COVID-19 during the pandemic. This information must be kept as a confidential medical record in compliance with the ADA.
    • Employers are permitted to measure employees’ body temperatures, as the CDC and health authorities have acknowledged community spread and issued precautions that include taking temperatures. This is considered a medical examination and must be kept confidential.
    • Employers may question employees who report feeling ill at work or who call in ill about their symptoms in an effort to determine if they might have the COVID-19 virus.
    • Employers are permitted to require employees who have symptoms of COVID-19 to stay home.
    • Employers are permitted to require doctors’ notes for employees who have been out sick or with symptoms clearing them of the virus before they are allowed to return to work. However, employers should consider alternative arrangements for employees returning to work since healthcare organizations might be too busy to provide such documentation.
    • Employers are permitted to screen job applicants for COVID-19, as long as they do so for all applicants for the same type of job. Employers are also permitted to measure an applicant’s temperature as a post-job offer, pre-employment medical exam, and may delay a new hire’s start date if they have COVID-19 or symptoms of the virus. If the new hire is required to start immediately, but unable to do so because of COVID-19 or related symptoms, an employer may withdraw the job offer.

For more information, visit the EEOC’s FAQs regarding COVID-19 at: https://www.eeoc.gov/eeoc/newsroom/wysk/wysk_ada_rehabilitaion_act_coronavirus.cfm, or download their pandemic preparedness guide at https://www.eeoc.gov/laws/guidance/upload/pandemic_flu.pdf.

If you have questions or would like to discuss COVID-19’s effect on you or your business, contact a member of the HBK CPAs & Consultants team.

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COVID-19 and OSHA Compliance

Date March 24, 2020
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The Occupational Safety and Health Administration (OSHA), has released guidance associated with the COVID-19 outbreak. According to OSHA, the Guidance on Preparing Workplaces for COVID-19 is designed to help employers provide a safe and healthy work environment. Some key points from the guidance:

  • Implement good hygiene and infection control practices, including frequent and thorough handwashing, encouraging sick workers to stay home, respiratory etiquette to cover coughs and sneezes, and regular housekeeping. Institute flexible worksites where applicable.
  • Develop policies to identify and isolate those who are sick, including requiring employees to report it when they are sick or are experiencing COVID-19 symptoms. Policies should also be developed for isolating those suspected of having the virus and protecting those who will be in close contact with a sick person for a prolonged period or repeatedly. These policies may include the use of engineering and administrative controls, safe work practices, and/or personal protective equipment (PPE).
  • Communicate with providers of contract or temporary employees about the importance of sick employees staying home.
  • Consider eliminating the requirement for employees to provide a doctor’s note to return to work, since healthcare providers may not be able to provide this documentation in a timely manner.
  • Consider allowing employees to stay at home when a family member is ill.
  • Implement engineering controls to reduce exposure, such as high-efficiency air filters, increased ventilation, physical barriers (such as plastic sneeze guards), drive-through windows, or specialized ventilation.
  • Implement administrative controls such as social distancing, adjusting shift schedules to reduce the number of employees in a facility at a given time, discontinuing nonessential travel, and training on PPE and other protective behaviors.
  • Establish safe work practices including providing supplies such as tissues, no-touch trash cans, hand soap, hand sanitizers, disinfectants, and disposable towels.
  • Ensure the proper PPE is accessible and employees are trained appropriately.
  • Follow existing OSHA standards. All current standards remain in effect, including those for PPE and bloodborne pathogens, and the General Duty Clause, which requires all employers to provide each worker “employment and a place of employment, which are free from recognized hazards that are causing or are likely to cause death or serious physical harm.”
  • Classify risk for each employee—very high, high, medium, or low—and ensure proper controls and PPE are in place that accommodate the employee’s risk classification. OSHA’s Guidance on Preparing Workplaces for COVID-19 report can help you classify employees and evaluate necessary or suggested controls specific to each employee’s risk category.
 

To download OSHA’s Guidance on Preparing Workplaces for COVID-19, visit https://www.osha.gov/Publications/OSHA3990.pdf#page=9&zoom=100,65,61

Also, on March 14, OSHA released temporary guidance on healthcare respiratory protection annual fit-testing for N95 filtering facepieces. Due to the supply shortage of N95 filtering facepiece respirators, OSHA is recommending that all healthcare providers take measures to conserve supplies of respirators while safeguarding themselves. OSHA will use discretion enforcing the annual fit testing requirement, as long as employers take proper precautions. To read the full OSHA memo, visit https://www.osha.gov/memos/2020-03-14/temporary-enforcement-guidance-healthcare-respiratory-protection-annual-fit

To read more about OSHA’s standards in relation to COVID-19, visit https://www.osha.gov/SLTC/covid-19/standards.html.

If you have questions or would like to discuss COVID-19’s effect on you or your business, contact a member of the HBK CPAs & Consultants team.

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COVID-19 Update Employee Terminations, Furloughs, and Lay-offs

Date March 24, 2020
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Sadly the COVID-19 crisis has forced many companies to evaluate workforce capacities and cutback their workforces in terms of reduced hours, furloughs and/or lay-offs. Among the related issues are the affected employees’ benefits. We found the following article from the Alera Group helpful for employers addressing employee benefits during a temporary separation from employment and supposed many of our clients who are owner-operators might benefit from this timely information.

Read the article.

This article is being shared with permission from Marathas Barrow Weatherhead Lent LLP and Alera Group.

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Resources for Mid-Atlantic Employees and Employers Affected by COVID-19

Date March 22, 2020
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HBK CPAs & Consultants

Employers and employees of Pennsylvania, New Jersey and New York who are affected by the COVID-19 virus have the following resources available:

Pennsylvania –
If you are employed in Pennsylvania and are unable to work because of COVID-19, you may be eligible for Unemployment or Workers’ Compensation benefits. Previously, claimants were not eligible for benefits during their first week of unemployment (the “waiting week.”) This has been suspended; eligible claimants may receive benefits for the first week that they are unemployed.

Click the link below for additional information:
https://www.uc.pa.gov/Pages/covid19.aspx

If you believe you may have been exposed to COVID-19 in your workplace, you may be eligible for workers’ compensation (WC).
https://www.uc.pa.gov/COVID-19/Pages/WC-COVID-FAQs.aspx

New York –
The 7-Day waiting period is being waived for Unemployment Insurance benefits for people who are out of work due to COVID-19 closures or quarantines.

Click the link below for additional information:
https://labor.ny.gov/unemploymentassistance.shtm

New York offers both workers compensation and disability insurance. Currently, the website does not offer much guidance regarding the COVID-19.

Click the link below for additional information:
http://www.wcb.ny.gov/content/main/Workers/Workers.jsp

The state of New York will allow some homeowners to skip their mortgage payments for three months in response to the spread of COVID-19.On Thursday, the New York Department of Financial Services (DFS) sent a letter to mortgage servicers directing them to provide several relief options in response to the outbreak, including suspending mortgage payments for up to 90 days.

Click the link below for additional information:
https://www.dfs.ny.gov/industry_guidance/industry_letters/il20200319_coronavirus_mortgage_relief

New Jersey –
A person who is out of work because their employer voluntarily closed because of the COVID-19 could be eligible for unemployment insurance.

Click the link below for additional information:
https://myunemployment.nj.gov/

New Jersey has among the most comprehensive Earned Sick Leave, Temporary Disability and Family Leave Insurance laws in the country, which cover all employees – full-time, part-time, temporary and seasonal.

Click the link below for additional information:
https://www.nj.gov/labor/worker-protections/earnedsick/covid.shtml

Small Business Association (SBA) – SBA’s Economic Injury Disaster Loans offer up to $2 million in assistance for small businesses and non-profits. These loans can provide vital economic support to small businesses to help pay for fixed debts, payroll and other bills that cannot be paid because of the COVID-19 impact. Pennsylvania, New Jersey and New York are among the states that have been approved.

Click the links below for additional information:
https://www.sba.gov/about-sba/sba-newsroom/press-releases-media-advisories/sba-provide-disaster-assistance-loans-small-businesses-impacted-coronavirus-covid-19
https://www.sba.gov/funding-programs/disaster-assistance

Conclusion:
We will continue to follow developments and provide guidance and clarity surrounding COVID-19 business issues. We are only beginning to understand how to navigate these unprecedented times. For business questions related to or to discuss COVID-19’s effect on your business, contact your HBK advisor.

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The Families First Coronavirus Response Act: What You Need To Know

Date March 20, 2020
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On March 18, 2020 the President signed into law the Emergency Families First Coronavirus Response Act (“Bill”), H.R. 6201, which provides relief related to the coronavirus. The Bill amends the Family Medical Leave Act of 1993 (FMLA) to provide for two separate paid leave requirements, which will only apply to employers with fewer than 500 employees, and payroll tax credits to help offset the cost. Here is what you need to know:

Brief Overview of the FMLA
Currently, the FMLA provides eligible employees with up to 12 work weeks of unpaid leave per year, and requires group health benefits to be maintained during the leave. An eligible employee is required to have been employed by their employer for a year, worked for 1,250 hours, and worked in a location where there are 50 other employees within a 75-mile radius. Employers subject to the FMLA are those who employ 50 or more employees or at least 20 work weeks in the current or preceding calendar year.

Emergency Paid Sick Leave
The Bill creates a new emergency paid sick leave section within the FMLA that requires employers with fewer than 500 employees to provide a portion of an employee’s 12 work week FMLA leave as paid leave time. The Department of Labor has the ability to issue regulations that would exempt small businesses with fewer than 50 employees from this requirement. This new section only applies through December 31, 2020. To qualify for the paid leave time, an employee must have been employed for 30 calendar days, which is different from the normal FMLA eligibility requirement.

The employer must provide up to 80 hours (10 business days) of emergency paid sick leave for full-time workers (pro-rated for part-time employees or employees with varying work schedules), subject to the following limitations.

For the following situations, the employee must be paid at their regular rate of pay, with a daily limit of $511, and an aggregate limit (total amount paid) of $5,110:

  • The employee is subject to a federal, state, or local quarantine or isolation order due to COVID-19;
  • The employee has been advised by a health care provider to self-quarantine due to COVID-19 concerns; or
  • The employee has COVID-19 symptoms and is seeking a medical diagnosis.

For the following situations, the employee must be paid 2/3 of their regular rate of pay, with a daily limit of $200 and an aggregate limit of $2,000:

  • The employee is caring for an individual who is subject to or has been advised to quarantine or self-isolate;
  • The employee is caring for a son or daughter under the age of 18 whose school or place of care is closed, or child care provider is unavailable, due to COVID-19 precautions; or
  • The employee is experiencing substantially similar conditions as specified by the Secretary of Health and Human Services, in consultation with the Secretaries for Labor and Treasury.

 

The federal government will be providing a model notice which employers will be required to post at their workplace, informing employees of their right to emergency paid sick leave. Additional guidance will be provided by the Department of Labor detailing how the emergency paid sick leave will be calculated.

It should be noted that eligible employees can use the emergency paid sick leave before using the new public health emergency paid family and medical leave time discussed below.

Emergency Family and Medical Leave Expansion Act – Amendment to FMLA
The Bill amends the FMLA to allow employees who have been employed for at least 30 days by employers with fewer than 500 employees with the right to take up to 12 weeks of job-protected leave, through December 31, 2020, if the employee is unable to work due to having to care for a son or daughter under age 18 if the child’s school or place of child care has been closed due to the COVID-19 public health emergency. Employers have the ability to elect to exclude health care workers and first responders from taking the public health emergency FMLA.

The first 10 days of the public health emergency leave may be unpaid, though employees may choose to use accrued paid leave. An employer cannot require employees to use this accrued paid leave time before using the public health emergency 12 weeks of leave time. After this 10 day period, employers are required to pay employees 2/3 of their regular rate of pay, capped at $200 per day ($10,000 in the aggregate per employee). Adjustments may be made for employees with varying schedules.

During this 12 week leave time, the covered employers are required to hold an employee’s job open. An exception to this general rule applies for employers with fewer than 25 employees, if the employee’s position no longer exists due to economic conditions or other changes in the employer’s operations that are caused by the COVID-19 crisis, so long as the employer makes reasonable efforts to restore the employee’s job. If those reasonable efforts fail, the employer must agree to reinstate the employee if an equivalent position becomes available within one year.

Payroll Tax Credits
The Bill creates a refundable tax credit against the employer’s portion of Social Security or Railroad Retirement Tax Act (RRTA) tax for amounts paid under the these amendments and additions to the FMLA. The credit is equal to 100% of the compensation paid to employees under these provisions in each calendar quarter, subject to the following:

  • Credit cap of $511 of eligible wages per employee per day for emergency paid sick leave that is paid to employees who need time off for a quarantine or isolation order by federal, state, or local governments or by a health care provider, or if the employee has symptoms and is awaiting diagnosis of COVID-19.
  • Credit cap of $200 of eligible wages per employee per day for emergency paid sick leave that is paid to employees who need time off to care for a son or daughter under the age of 18 whose school or place of care is closed.
  • The credit for emergency paid sick leave wages is only available for a maximum of 10 days per employee for the duration of the program.
  • Credit cap of $200 of eligible wages per employee per day for the expanded emergency family and medical leave, with an overall cap of $10,000 for all calendar quarters.

The payroll tax credit is increased by amounts paid or incurred by the employer in order to maintain a group health plan, to the extent that the amounts paid are excluded from the employee’s gross income under the internal revenue code, and are properly allocable to the respective emergency paid sick leave time, or expanded FMLA wages required to be paid under the Bill. Regulations will provide additional guidance on how this allocation may be made, though the Bill indicates that a pro rata allocation among covered employees and periods of coverage would be treated as properly made.

In addition, the payroll tax credit is increased by the amount of the employer’s liability for Medicare tax on wages that are required to be paid under the Bill.

In order to avoid a double benefit, any amount received as a credit will not be deductible. In addition, to the extent a credit in connection with the wages is allowed under another provision (e.g. the credit for paid family and medical leave under IRC § 45S), the new payroll tax credit will not be available.

Payroll Tax Exemption
Wages that are paid in connection with the above provisions will not be considered wages for the purposes of calculating the employer’s portion of the Social Security or RRTA tax. They are still considered wages for other taxes, including the employee’s portion of Social Security, RRTA, and Medicare taxes.

Family Medical Leave Act Update

Family Leave Medical Act

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Resources for Ohio Employees and Employers Affected by COVID-19

Date March 18, 2020
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The Ohio Department of Job and Family Services (ODJFS) has released several resources and policy changes available for employees and employers who are affected by the COVID-19 virus:
      • The Ohio Development Services Agency (DSA) has requested that all Ohio businesses complete the Economic Damage Assessment Survey. Note that this survey is not an application for resources.  Instead, the survey, which asks employers questions regarding topics such as revenue loss and employee headcount reduction due to COVID-19, will be used by Ohio’s leaders to develop response plans.
      • The Ohio Department of Jobs and Family Services (ODJFS) is requesting that Ohio employers provide employees who are laid off as a result of COVID-19 with the form found at this link: http://www.odjfs.state.oh.us/forms/num/JFS00671/pdf/. By using this form, or otherwise providing employees with the mass layoff number 2000180, claims processing can be expedited, allowing your employees to collect unemployment benefits sooner.
      • During the state’s emergency declaration, Ohioans may receive unemployment benefits when a medical professional, local health authority, or employer requests that the employee be isolated or quarantined due to COVID-19, even if the employee is not actually diagnosed with the virus. Note that asymptomatic employees imposing a self-quarantine are generally not eligible for unemployment benefits, since work is available to them.
      • All otherwise eligible employees who are laid off because of loss of production due to COVID-19 will be eligible for unemployment insurance benefits.
      • Ohio employees seeking more information about unemployment or applying for benefits can visit unemployment.ohio.gov, or call (877) OHIO-JOB or TTY (888) 642-8203 Monday through Friday, from 8 a.m. to 5 p.m.
      • Ohio offers the SharedWork Ohio program, which allows employers to reduce hours worked for certain employees, instead of laying off those workers. To be eligible, employers must have at least two affected employees, be current on all unemployment obligations, and agree to the program requirements.  Hours reduced must be at least 10% but no more than 50% of the normal weekly hours.  Workers receive their pay for hours worked, and can collect unemployment for the hours that were reduced.
      • Ohio employers seeking more information about unemployment should visit the Ohio Department of Job and Family Services or email UCTech@jfs.ohio.gov.
      • To obtain more information about COVID-19 in Ohio, visit coronavirus.ohio.gov or call 1-833-4-ASK-ODH.

For questions or to discuss COVID-19’s effect on your business, contact a member of the HBK CPAs & Consultants team.

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