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Seattle: Are B&O taxes deferred during the coronavirus outbreak?

For those small businesses with taxable income of less than $5 million in 2019, they qualify for an automatic B&O tax due date extension out to the tentative Oct. 31, 2020 due date. The deferral is automatic and businesses do not need to contact Seattle Department of Finance and Administrative Services. If you have questions, please call (206) 684-8484 or email: tax@seattle.gov.

Does the PPP loan need to be used for payroll or can it just be used to utilities/other bills?

This goes over what is and isn’t eligible for uses under the PPP:

What costs are eligible for payroll?
Answer:

  • Compensation (salary, wage, commission, or similar compensation, payment of cash tip or equivalent)
  • Payment for vacation, parental, family, medical, or sick leave
  • Allowance for dismissal or separation
  • Payment required for the provisions of group health care benefits, including insurance premiums
  • Payment of any retirement benefit
  • Payment of State or local tax assessed on the compensation of employees

What costs are not eligible for payroll?
Answer:

  • Employee/owner compensation over $100,000
  • Taxes imposed or withheld under chapters 21, 22, and 24 of the IRS code
  • Compensation of employees whose principal place of residence is outside of the U.S
  • Qualified sick and family leave for which a credit is allowed under sections 7001 and 7003 of the Families First Coronavirus Response Act

What are allowable uses of loan proceeds?
Answer:

  • Payroll costs (as noted above)
  • Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums
  • Employee salaries, commissions, or similar compensations (see exclusions above)
  • Payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation)
  • Rent (including rent under a lease agreement)
  • Utilities
  • Interest on any other debt obligations that were incurred before the covered period

What the requirements are for the PPP loans to be forgiven?


Especially the parts with servers and tips. What and how are we supposed to pay tips? Based on what/when ?

A: Forgiveness is based on the employer maintaining or quickly rehiring employees and maintaining salary levels. Forgiveness will be reduced if full-time headcount declines, or if salaries and wages decrease. What this means is in order to get the maximum amount of forgiveness you will need to mantain the same level of employees as you had before the crisis, specifically February 15th, 2020.

The loan will be fully forgiven if 75% of the funds are used for payroll costs, an example of those costs include:

  • salary, wages, commissions, or similar compensation
  • cash tips or the equivalent (based on employer records of past tips or, in the absence of such records, a reasonable, good-faith employer estimate of such tips)
  • payment for vacation, parental, family, medical, or sick leave
  • allowance for separation or dismissal
  • payment for the provision of employee benefits consisting of group health care coverage, including insurance premiums, and retirement
  • payment of state and local taxes assessed on compensation of employees
  • for an independent contractor or sole proprietor, wage, commissions, income, or net earnings from self-employment or similar compensation

The PPP can also be used for interest on mortgages, rent, and utilities however that does not count towards payroll costs. Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.

Paid Sick Leave – is it true there will be some kind of IRS deduction for those who pay out paid sick leave at this time?

The employer will be reimbursed for the costs of the leave through a fully refundable tax credit equal to 100% of the qualified sick leave wages. The tax credit will be applied against employer Social Security taxes, but employers are reimbursed if their costs for qualified sick leave exceed the taxes they would owe.

Additional credit for health plan expenses

The amount of the tax credit is further increased by the amount of the expenses of the employer’s health care plan allocable to the qualified sick leave. This allows the employer to seek reimbursement for the cost of continuing to provide health insurance while the employee is on sick leave.

Small Business Exemptions

The Secretary of Labor is authorized to issue regulations to exempt small businesses with fewer than 50 employees from the requirement to offer leave to care for a child when a school is closed when the imposition of paid sick leave would jeopardize the viability of the business as an ongoing concern.

Relationship to Existing Programs

This paid sick leave is in addition to whatever sick leave is already offered by the employer (including subject to state or local requirements).

Is the $10,000 SBA loan advance forgivable?

Economic Injury Disaster Loans & Emergency Economic Injury Grants

These grants provide an emergency advance of up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days of applying for an SBA Economic Injury Disaster Loan (EIDL). To access the advance, you must first apply for an EIDL and then request the advance. The advance does not need to be repaid under any circumstance, and may be used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.

A lot of employees are on standby. The employees are wanting to know if they will still qualify to receive the $600 from the Federal Govt via CARES ACT?

According to the Washington State Employment Security Division(ESD) FAQs on the federal stimulus package, an additional $600 per week will be available to everyone on unemployment through July 31, 2020 (from the date of the passage of the bill).

ESD says they are working as quickly as possible to update their technology to ensure everyone who is eligible gets the full amount they are owed. They are also waiting on some additional guidance from the U.S. Department of Labor to make some final changes. That means it will take a couple of weeks to update, with a target launch of mid-April. They will backdate a claim so the employee is paid from the time the employee separated from your job or otherwise became eligible under the CARES Act.

How do I apply for the Employee Retention Tax Credit?- Phase 3 relief program

This is not something that is “applied for” specifically but a tax credit that can be used if they meet the criteria as outlined below. They may need to reach out to their tax professional for assistance.

Employee Retention Tax Credit
The employee retention tax credit (ERTC) for employers subject to closure due to coronavirus. The provision provides a refundable payroll tax credit for 50% of wages paid by employers to employees during the crisis. The credit is available to employers whose
1. operations were fully or partially suspended, due to a coronavirus-related shut-down order, or
2. gross receipts declined by more than 50% when compared to the same quarter in the prior year.
For employers with greater than 100 full-time employees, qualified wages are wages paid to employees when they are not providing services due to the coronavirus-related circumstances described above. For eligible employers with 100 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020 through December 31, 2020.

Can I pay bonuses during the 8 week period covered by my PPP funds?

The CARES Act and SBA do not have specific guidance on bonuses and raises at this time. It is likely that the business will need to demonstrate why a bonus or raise would be necessary to support ongoing operations.