Tag Archives: health insurance

Top Five Tax Benefits Your Preparer Might Be Forgetting

April 17, 2023 Nancy McClelland 1 Comment

I used to find it annoying when a client would forward me an article about a tax deduction or credit, to make sure I would take it on their tax return. But even though I take approximately 70 credit hours of continuing education each year (almost twice the requirement for Illinois CPAs), every once-in-a-while a new tax law falls between the cracks, or I might not realize a given client is suddenly eligible for an old one. So, while 99% of these shares are “old news”, it’s worth avoiding the eye roll and taking a look just in case. Out with the ego, in with the knowledge.

To that end, when you do share something with your tax preparer, I beg you to phrase it in respectful language that recognizes they are experts in their field. Examples: “I’m sure you already know about this but just wanted to play it safe,” or “I read about this new tax law and am constantly amazed at how much y’all have to keep up with; any chance this applies to my situation?”

There are five tax benefits I’ve noticed — in my interactions with colleagues at conferences, in webinar chat, or in our online communities — that seem to keep flying under the radar. Most likely the tax preparer is expecting the bookkeeper or taxpayer to bring it up if one of these situations exists, but they may not know it’s significant, and may forget to note it in the books or tax organizer. So, to make sure we’re all on the same page, here are a few choice tax benefits that are often overlooked.

Credit for Small Employer Retirement Plan Startup Costs
Employer Credit for Paid Family and Medical Leave
Restaurant Meals Enhanced Deduction (2021 & 2022 only)
Self-Employed Health Insurance
Health Insurance Premium Tax Credit

Credit for Small Employer Retirement Plan Startup Costs —
SECURE 2.0 gets most of the airtime these days, but back in late 2019, the original version of this law passed, making it easier for small business owners to set up “safe harbor” retirement plans that are less expensive and easier to administer, and made them accessible to a wider range of employees. Although many of these benefits were modified and expanded upon with SECURE 2.0, the new rules didn’t take effect until 2023. But that shouldn’t stop you (or your preparer) from taking a look at the benefits in place in 2022. For starters, Form 8881, Credit for Small Employer Pension Plan Startup Costs provides for a maximum tax credit of up to $500 per year for startup costs, and another $500 per year to employers who create a 401(k) or SIMPLE IRA plan with automatic enrollment. This benefit is a win-win for employers and employees, especially when the employee additionally qualifies for the retirement savers’ credit.

Employer Credit for Paid Family and Medical Leave —
Effective starting 2018, the Section 45S Employer Credit for Paid Family and Medical Leave is designed to cover up to 25% of the cost to employers of providing paid family and medical leave to their staff. The FMLA credit is claimed on Form 8994, Employer Credit for Paid Family and Medical Leave. To qualify, employers must have a written policy providing all eligible employees access to at least two weeks of paid family and medical leave annually, paid at 50% or more of normal wages (yes, short-term disability policies often count).

Policies must also include leave that covers one or more of the following:
– Birth of a child
– Adoption or fostering of a child
– Care for a spouse or family member with a serious health condition
– Employee’s own serious health condition
– Spouses and family member of certain active military members

Employers can claim the credit for up to 12 weeks of paid leave benefits. It’s available through 2025 and the IRS has an FAQ on it that’s chock-full of details.

Restaurant Meal 100% Deduction —
For 2021 and 2022 only, businesses can deduct the full cost of business-related food and beverages purchased from a restaurant; the limit is usually 50% of the meal, so this can be quite a savings. For our own clients, we’re simply exporting the entire “Meals” category from their financial software and reviewing all payees, sorting out the ones that are not restaurants… yet another benefit for small business owners who heed our cry to “please add payees to all transactions”.

Per the IRS, to qualify for the enhanced deduction:
– The business owner or an employee of the business must be present when food or beverages are provided.
– Meals must be from restaurants, which includes businesses that prepare and sell food or beverages to retail customers for immediate on-premises or off-premises consumption.
– Payment or billing for the food and beverages occurs after December 31, 2020, and before January 1, 2023.
– The expense cannot be lavish or extravagant.
– Grocery stores, convenience stores and other businesses that mostly sell pre-packaged goods not for immediate consumption, do not qualify as restaurants.

Self-Employed Health Insurance Deduction —
Now, this may sound obvious, since almost everyone knows that self-employed people are generally allowed to deduct their health insurance premiums for themselves, their spouses, and their dependents (and in some cases, non-dependent children). Yet we often see this benefit overlooked on tax returns, especially when S-Corp shareholders pay for their insurance through work. There are special and complex rules regarding how this health insurance deduction is claimed, which I suspect is why it is often missed (or sometimes duplicated). It’s important to understand that this is not a business deduction; neither do you have to itemize to take it. The deduction is claimed as a reduction of taxable income, and applies only to income taxes, not to self-employment taxes. It also needs to be subtracted from Section 199A Qualified Business Income before calculating the QBI Deduction, and there are complex issues when it interacts with the Premium Tax Credit (see below), so keep an eye out for these potential issues when claiming this important tax benefit.

Premium Tax Credit —
This one is often overlooked on tax returns in more than one direction… often the client forgets to provide Form 1095-A (Marketplace Health Insurance) to their preparer, which shows the advance premium tax credit, and therefore any increase or decrease in the credit based on the current year’s income is missed. How does this happen? Well, the credit is based on the prior tax year’s income, but “reconciled” on the tax return against the current tax year’s income — therefore, if the taxpayer had a good year, they may lose most or all of their credit. By contrast, in more difficult times, they may find out on the return that they’re entitled to more of a credit than they received. Not everyone enrolled on the Marketplace is eligible for a credit, so it’s easy to miss in the long list of tax organizer questions if the client doesn’t know to ask or to submit the form.

Per the IRS: If you benefit from advance payments of the premium tax credit, it is important to report life changes to the Marketplace as they happen throughout the year. Certain changes to your household, income or family size may affect the amount of your premium tax credit. These changes can alter your tax refund, or cause you to owe tax. Reporting these changes promptly will help you get the proper type and amount of financial assistance. For more information, see Claiming the Credit and Reconciling Advance Credit Payments.

To be fair to tax preparers everywhere, there is far more in the Internal Revenue Code (IRC) than any one person could ever know, which is part of why CPAs are required in most states to obtain more continuing education credits than almost any other professional designation. (Though keep in mind — there is no requirement that a tax preparer be a CPA, or even an EA. See here for my guide to finding a qualified tax preparer in your area.) The past five years have seen unprecedented increases in tax law complexity, and quite frankly — it’s hard to keep it all straight. So if you’re concerned your tax preparer is missing something, please approach the matter with respect and deference, and do not judge too harshly if they happen to have missed something. Just be glad you read this article and caught it in time! (And if you didn’t catch it in time, ask them about filing an amendment.)

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. Ths allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Education, IRS, Software, Tips

How To Add Health Insurance To S-Corp 2%+ Owner W-2 In Gusto

December 28, 2022 Nancy McClelland Leave a comment

As anyone who’s worked with me — clients, team members, colleagues, vendors — knows, I adore Gusto Payroll. They truly changed my life for the better (not to mention the lives of thousands of small business owners) when they decided to create a tech-forward payroll company that seamlessly syncs with QuickBooks Online.

(Note: our affiliate link will earn you a $100 gift card after you run your first payroll — or up to $500 if you are an accountant or bookkeeper who signs up your own clients. We may earn a commission as well — win-win! For our own clients, we offer a 15% discount in lieu of referral fees.)

I have explained the importance in prior blog posts of making sure that S-Corp medical premiums are properly tracked and reported in QuickBooks and on the W-2 forms for shareholder-employees. The IRS has driven this point home repeatedly, and even has a page devoted to som e issues that arise specific to owners of 2% or more of an S-Corp who perform services for the company.

With so many of our own clients using Gusto, I wanted to share how to properly report S-Corp medical insurance premiums, and decided to make the information available to the public as well.

Much of the following information was collected from the Gusto Help section — which is freely available to the public — but as their dynamic support site changes structure and organization frequently, it seemed like collecting the various instructions into one area would be helpful.

Setting up benefits for S-Corp 2% shareholder-employees

For S-Corps, the IRS requires that health insurance premiums paid by the company to employees with a 2% or greater ownership be reported as wages (not pre-tax benefits), and included on their W-2s in Box 1, but not Boxes 3 or 5.

(This means that the total will be taxable for income taxes but not payroll taxes, and once the self-employed health insurance deduction is taken on the personal return, the wages and deduction net to zero — so in effect the corporation will have taken the deduction for the health insurance. More in this blog post and from the IRS here.)

Note: If your company’s benefits are provided through Gusto, they will manage this reporting for S-Corp owners automatically, as long as they are marked as a 2% shareholder in Gusto (under “Employment Details” in the shareholder-employee’s info in the “People” section).

However, if you offer benefits outside of Gusto (and use Gusto for payroll), then follow these steps to set up benefits for 2% shareholder employees:

Sign in to your Gusto admin account.
Go to the People section and select Team members.
Click on the employee’s name.
Under Employment Details, make sure the employee is designated as a 2% Shareholder.
Under Benefits, click Add Benefit.
Next to Select a Benefit, select “Create New Benefit” from the drop down menu.
Enter a Benefit Name.
Next to Benefit Type, select Medical, Dental, or Vision.
You will have the option to enter a Company Contribution Per Pay Period or Employee Deduction Per Pay Period. (For S-Corp shareholder-employees, this will usually be a company contribution, but check how your plan is set up.)
Company contributions: Taxable at the employee level only, for both federal and state income tax.
Employee deductions: Fully taxable as wages at both the employee and employer level.
Click Save.

As long as the entity is set up in Gusto as an S-Corp and the shareholder-employees that own 2% or more of the company are marked as such under Employee Details, the health insurance premium benefit should be added to Box 1, but not Boxes 3 or 5. You should review your draft W-2 at or shortly after year-end to make sure it is accurate, and contact Gusto immediately if there are issues so they can correct them before the final W-2 is issued and filed with the IRS and SSA.

FAQs about 2% shareholders:

Q: Which benefits must be taxed as wages for 2%+ shareholders?

A: Medical, Dental, Vision, HSAs, and more must be taxed as wages. Refer to Publication 15-B to view all a full list of benefits that are treated as wages.

Q: What if a 2%+ shareholder status changes part way through the year?

A: Change the 2%+ shareholder status in the employee’s account. Employees who are 2%+ shareholders at any point during the year must be taxed as such for the entire year.

Q: What happens if you need to update an employee’s 2%+ shareholder status mid-or-end year, and they have already received pre-tax benefit deductions this calendar year?

A: If your company withheld health insurance premiums rather than having them processed as 2%+ shareholder — contact Gusto Support, as their team will need to assist within adjusting the benefits, since there are tax implications.

Education, IRS, Software, Tips

Partnership And S-Corp Medical Insurance Premiums For Owners: Avoid Double-Dipping

December 28, 2022 Nancy McClelland Leave a comment

Note: much of the information below was pulled from the old Polito Eppich website — however, they have since merged with another firm to become Magnus Blue, and as such have removed their former blog content. My 2018 blog post linking to their article on how to properly account for partnership and S-Corp health insurance to avoid double-dipping now points to a web archive of the original site — but since that’s hard to find, I’m borrowing some of their material and sharing it here as well. To-date it’s the most well-illustrated and to-the-point summary I’ve seen on the topic.

The IRS rules for reporting health insurance premiums for partnership and S-Corp owners are complex, and as a result, easy to accidentally bungle. Sometimes an entity will incorrectly deduct the premium, and so will the owner — on their personal return — leading to what is known as “double-dipping”. This usually happens when the person preparing the personal return did not also prepare the business entity return.

TL;DR? The most important take-aways are:
1) you can’t double-dip; and,
2) though the particular hoops that have to be jumped through are a) different for partnerships than for S-Corps, and b) a PITA for both, they are in fact the law and must be followed.

The key here is that when the entity pays for health insurance for owners, it is deducted as payments for services to the partners or S-Corp shareholders — who are then entitled to take the self-employed medical insurance deduction — which means it will net to zero deduction on the personal return. If you’re not careful, then the deduction is mistakenly taken on both the entity-level and personal returns. In their original article, Polito Eppich illustrated the accidental double-dipping (all charts are copyright of Polito Eppich).

We will use an example of a $10,000 medical insurance premium to illustrate this issue. Here’s what was happening (incorrect approach):

Income (Expense)	Passthrough Business Entity	Owner’s K-1	Owner’s Personal Return	Net Taxable Income
Medical premiums paid	$(10,000)
Ordinary income reduced		$(10,000)		$(10,000)
Self-employed medical insurance deducted			$(10,000)	(10,00)
Total effective deduction on owner’s return				$(20,000)

Accidental double-dipping — the $10k premium becomes $20k.

Here is how it should be handled:

PARTNERSHIPS

The actual deduction occurs at the partnership level and is passed to the partner — via lower income on the K-1.

If the partnership pays for the health insurance premiums for its partners, it deducts the expense as guaranteed payments and reports the amount to each partner on their respective K-1s as guaranteed payments.

The partner then picks up the guaranteed payment as income and reports “self-employed health insurance” deduction. The guaranteed payment offsets the self employed health insurance deduction for a net zero effect on taxable income, thus the single deduction described above on the K-1.

(When a partner pays his (her) own medical insurance premiums, the self-employed medical insurance deduction is allowed if there is self-employment income.)

Correct reporting for partnership:

Income (Expense)	Partnership	Owner’s K-1	Owner’s Personal Return	Net Taxable Income
Medical insurance premiums paid and deducted	$(10,000)	$(10,000)	$(10,000)	$(10,000)
Guaranteed payment to partner		10,000	10,000	10,000
Self-employed medical insurance deduction		(10,000)	(10,000)	(10,000)
Total effective deduction on owner’s return				$(10,000)

Partnership: by following the IRS rules, the $10k premium remains a $10k net deduction.

S-CORPORATIONS

S-Corps are a bit more complex because owners who work for the company are paid payroll via W-2 (rather than guaranteed payments to partners). Keep in mind that these rules only apply to shareholders who own more than 2% of the company. Owners below 2% are not eligible for the self-employed medical insurance deduction.

The S-corporation deducts the expense as compensation and includes the amount on the shareholder’s W-2 — in Box 1, but not in Boxes 3 or 5, which means they are not subject to Social Security or Medicare taxes (commonly known as “payroll taxes” or “employment taxes”). The amount should also be reported in box 14 of the W-2 — this is only for informational purposes, so that the personal tax preparer knows to take the deduction. Some payroll companies will track this reporting properly throughout the year, but others require a call at year-end to make sure this amount shows up properly in Box 1 and 14. (See my blog post on how to handle this for Gusto Payroll.)

The shareholder reports the compensation from their W-2, then deducts the health insurance amount noted in Box 14 on the W-2 as a “self-employed health insurance” deduction on the personal 1040. Because the amount is subject to income taxes, but not employment taxes, taking the self-employed health insurance deduction leads to a net-zero impact to taxable income. The actual deduction is achieved at the corporation level and passed to the shareholder in the form of lower income reported on the K-1.

Correct reporting by S Corporation for 2% or greater shareholders:

Income (Expense)	S-Corp	Shareholders’s K-1	Owner’s Personal Return	Net Taxable Income
Medical insurance premiums paid and deducted as owner wages lower ordinary income	$(10,000)	$(10,000)	$(10,000)	$(10,000)
Owner’s W-2			10,000	10,000
Greater than 2% shareholder medical insurance premium (Noted in Box 14 of W-2)		(10,000)	(10,000)	(10,000)
Net taxable income reported by shareholder				$(10,000)

S-Corp: by following the IRS rules, the $10k premium remains a $10k net deduction.

Either way — partnership or S-Corp, the net result is that the amount paid by the company for health insurance on behalf of owners should only be deducted once, on the entity return, and as payments for services. On the personal return these payments will net to zero after the deduction for self-employed health insurance is taken.

Illinois, Tips

BCBS Relaxes Eligibility Requirements for Current Health Insurance Group Members

April 2, 2020 Nancy McClelland Leave a comment

I honestly never truly expected to see this day come. Hoping against hope two weeks ago, I spent many hours on calls with my benefits advisors, health insurance reps, and every HR resource I could find, to no avail. But apparently, since then, even big bad for-profit health insurance corporations have recognized that forcing millions of furloughed Americans into losing their group health insurance is maybe a bad idea.

Here’s the issue — let’s say you run a small business and you want to start a group insurance plan for your staff. Group plans tend to be less expensive, give you more for your money, and allow access to a wider network of health providers. (Don’t get me started on why all plans aren’t group plans, or why discrimination against self-employed or single-owner businesses is allowable.) But here’s the trick: they require you to have at least one non-owner on the plan. And the second hurdle: with a group plan they require employees to work at least 20-30 hours per week to qualify for coverage (depending on the plan). You’d think the employer would get to choose the number of hours, but no — the for-profit health insurance company does. (Again: do not get me started.)

Enter the COVID-19 crisis. Suddenly small business owners are having to lay off or furlough their staff left-and-right. Hopefully they’ll be able to hire them back when PPP funds, grants or loans come through, but in the meantime, they’re on unemployment. So this means:
1) Employees who have been furloughed or laid off don’t have health insurance unless they can afford to reimburse the employer via COBRA. Which they can’t. Because they just lost their job.
2) The employer may be generous enough to pay for the health insurance for the employee in the meantime, at least to the extent they were previously contributing to it if not more, but they’re not technically allowed to do this if the employee is no longer working 20-30 hours per week (30 hours for BCBS). Some small businesses were doing it anyway and hoping insurance companies were turning a blind eye; or they were technically putting folks on COBRA but not requiring employees to pay for it, booking it instead as an “advance” to be paid back when the business could hire them back.
3) Lastly — and this part stung the most: remember I said earlier that a business owner had to have at least one non-owner in order to have a group plan? Well, what happens if you have to lay off all your employees? The group plan would be terminated and now the owner and their family aren’t even covered anymore. (This is so messed up.)

So you can imagine my shock and thrill when I received the email below last night! Blue Cross Blue Shield of Illinois is actually relaxing the eligibility requirements for currently-enrolled group members, at least through April 30th: this includes staff who are laid off, are on a leave of absence, are furloughed, or are working fewer hours. The relief will last at least through April 30th.

They are also opening up a special enrollment period for staff who had previously declined coverage to be able to get on the company health insurance plan now, or for covered employees to add dependents. This is extremely helpful for staff who may have been covered under a spouse who just lost their job. However, these folks don’t get the same flexibility I mentioned above (which is totally ridiculous, but whatever — I don’t write these rules; if it were up to me we’d all be on a single-payer system).

The take-away: PLEASE DO NOT FLIP THE SWITCH TO COBRA YET FOR YOUR COVERED EMPLOYEES, REGARDLESS OF THEIR CURRENT EMPLOYMENT STATUS. They will remain covered, hopefully up through when the PPP or other funds come to fruition and you can hire them back. If you need to be reimbursed by your employees for their portion of insurance, consider working with them on a case-by-case basis to see who is best able to afford it. Make sure to treat them fairly, but also understand that some have more means than others. For those whose hours are reduced, work with them to make sure they have sufficient pay in their paycheck to have their contribution portion withheld as usual.

And if you are a furloughed employee in danger of losing your coverage, contact your employer to negotiate an extension of benefits at your prior contribution amount — many are willing to make exceptions to reward staff loyalty. Check out this 1-minute video on how to maintain your insurance benefits.

The full text of the email I received from BCBS is here:

Special Enrollment Period and Resources for Group Members Losing Coverage
We are committed to standing with our customers and members in this changing environment. As part of that commitment, we want to let you know about some of the options that may be available to you and several different ways we can help group members who may need coverage support due to COVID-19.

Eligibility Requirements
We have relaxed the eligibility requirements for currently enrolled/covered group members.

From now through April 30, employers can maintain employees who were enrolled on their plans as of March 20, regardless of the eligibility definition stated in their plan or the BPA.
This includes reduced work hours, furlough, leave of absence or layoffs.
Groups do not need to do anything. No paperwork or email is needed, as we will accept current and accurate eligibility files.
This flexibility does NOT apply to those who are newly electing coverage via the special enrollment period (see below).

Special Enrollment Period
We are also offering groups an optional special enrollment period from March 30 to April 30. This would apply to eligible employees and their dependents who previously declined coverage and now want to enroll, or currently enrolled employees who wish to add an eligible spouse or dependent to their existing coverage.

Applicable enrollment changes must be received on or before Friday, May 1.
Effective date of coverage will be the group’s standard coverage effective date/billing date – for most groups this will be April 1.
This enrollment event will be for medical/pharmacy and dental coverage only.
Employers should notify their account representative if they plan to use this special enrollment option and use the standard eligibility process to add employees.

Other Coverage Options
If you have employees losing coverage through your group health plan, those employees may have several options for alternative coverage.

Federal COBRA: Eligible employers with 20 or more employees must offer coverage under federal COBRA. Employees losing coverage due to a qualifying event, which can include job loss or a reduction in hours, may have the opportunity to enroll in COBRA coverage to continue their current group health plan.

Individual coverage:

Marketplace plans – Any individual can enroll in a Marketplace plan, and some may qualify for financial assistance, depending on their income. Employees can view their benefit plan options at Selectbcbsil.com.

Medicaid plans – Eligibility for Medicaid depends on income and other state requirements. Employees can view their benefit plan options at bcbsil.com/bcchp.

Additional Resources
We have created materials to help you communicate these options to employees:

An email template you can use to explain their coverage options
A flier that can be printed or shared electronically
- English PDF
- Spanish PDF

We are here to help our customers and our members during this difficult time. Please don’t hesitate to reach out to your account representative with any questions.

If this or any other posts on the website were useful to you, and your financial situation permits it, please consider contributing to my tip jar. This allows me to continue to provide free accounting resources to small businesses who do not have the funds available to hire a CPA.

Education, Illinois, Tips

Questions About Illinois Unemployment (IDES)

March 29, 2020 Nancy McClelland Leave a comment

I’m getting a lot of client questions about unemployment these days — understandably… one person referred to it as the “IDES of March” — and thought a short Q & A + random notes and tips might be helpful. Some of these are notes from clients and friends based on their own experiences and research.

None of this should be taken as legal advice. Please see the State of Illinois’ unemployment website or give them a call (I’m hearing wait-time is about 45 minutes, so get a book or magazine out) with specific questions.
For Employers: (800) 247-4984
For Employees: (800) 244-5631
I’ve also heard that some of the branch offices have shorter wait times, such as Arlington Heights (847-981-7400) and Skokie (847-745-3242).

Block Club Chicago has done a lot of excellent reporting since its inception, and the journalists have earned my deep respect. And they are providing all COVID-19 coverage free to the public (consider subscribing to support their work if you are able). This particular article does a nice job outlining how to obtain unemployment benefits, rent relief, and more.
https://blockclubchicago.org/2020/03/18/out-of-work-due-to-coronavirus-heres-how-to-get-unemployment-benefits-rent-relief-and-more/

IMPORTANT NOTE:
For some reason, IDES benefits cannot be applied for with a smart phone — YOU MUST APPLY USING A COMPUTER. I know, this is ridiculous. Don’t shoot the messenger. Here’s the information you’ll need to apply.

Q: What if I’m temporarily laid off because the place where I work is temporarily closed because of the COVID-19 virus?
A: An individual temporarily laid off in this situation could qualify for benefits as long as he or she is able and available for and actively seeking work. Under emergency rules IDES recently adopted, the individual would not have to register with the employment service [office of IDES]. He or she would be considered to be actively seeking work as long as the individual was prepared to return to his or her job as soon the employer reopened.

Q: What if I quit my job because I am generally concerned over the COVID-19 virus?
An individual who leaves work voluntarily without a good reason attributable to the employer is generally disqualified from receiving UI. The eligibility of an individual in this situation will depend on whether the facts of his or her case demonstrate the individual had a good reason for quitting and that the reason was attributable to the employer. An individual generally has a duty to make a reasonable effort to work with his or her employer to resolve whatever issues have caused the individual to consider quitting.

Q: How are unemployment benefits calculated?
A: Here’s the place where IDES shows how they calculate the amount:
https://www2.illinois.gov/ides/IDES%20Forms%20and%20Publications/CLI105L.pdf — see page 16 starting with “how your benefits are determined”.
Basically, they take the prior three 3-month periods (quarters) and average your wages during that time. So contrary to popular belief, it’s not based on the most recent week or pay-period. (In fact, the most recent quarter is not even included in calculations.) Then they pay 47% of that amount.

And for more information on how unemployment benefits vary so widely from state-to-state, check out this great article. The number of complicating factors involved makes apples-to-apples comparisons almost impossible.

Q: I heard that the federal government is paying an additional $600 per week as well. Do you have to apply separately to get the federal government amount?
A: To the best of my knowledge at this time, there is no separate Federal application form. The state is supposed to be handling that aspect, and be reimbursed for the Federal amount, as well as their “extra” expense to process everyone. Heads-up that the one week “waiting period” will not apply for the $600 weekly amount — just for the state benefit amount. Once the Federal portion kicks in, the $600 will continue for up to four months, with the state paying for normally 29 weeks, plus another 13 weeks per Congress’ bill.

Q: I use Gusto as my payroll service. What are my options for making sure my employees are eligible for unemployment until I’m able to get everyone back to work again?
A: You have two main options:
1) Dismiss all your furloughed employees in Gusto so they can apply for unemployment — Gusto will save all their data, and they will still be in the system the moment you are able to rehire. To rehire: Go to People –> Show dismissed people (right column) –> Select employee –> on the right, under actions, click “rehire employee”.
– If you dismiss an employee in Gusto, then you will no longer be charged the monthly fee to keep them in the payroll system.
– Keep in mind that when you dismiss an employee, you must then report to your benefits coordinator or health insurance company that the employee has been dismissed. This makes them eligible for COBRA for 18 months. COBRA allows them to remain on the group plan and reimburse the company for the cost (plus an admin fee).
However, many employees cannot afford to do this, given that they’ve just lost their jobs. (Desperately trying to refrain from dwelling how immensely stupid this is, and wishing we had a single-payer tax-supported universal healthcare system.)
Luckily, all the arrangements for COBRA payments happen outside both the payroll and health insurance systems. You can negotiate any arrangement you want with employees, as long as they are all treated fairly. So if the company is able to and wants to foot the bill for health insurance while the employees are furloughed, they can. If they want the employee to continue to pay only their employee percentage, and not the whole cost, they can. Or if they want to offer to fully or partially foot the bill, but defer the employee’s payment until the company reopens and they can return to work, that is also a choice you can make. Just be sure to track the liability, and document the agreement in writing.
2) The other option is to keep them on payroll at a zero or very reduced pay rate. Some employers are keeping the pay just exactly high enough for the employee to be able to have their portion of health insurance benefits withheld from their paycheck. However, it is not as easy to apply for unemployment, and they may only qualify for partial benefits. But they should be able to show the reduced or zero wages, explain that they are furloughed due to business slowdown from COVID-19 sequestering orders, and be treated accordingly as unemployed or partially-unemployed per IDES regulations.
– One benefit of this approach is that they do not use up any of their 18 months of COBRA, and it allows you to easily have them pick up a shift or an odd job here or there.
– This allows the employee to potentially qualify for up to 2 weeks of paid sick leave (or partially-paid leave to take care of a sick family member or a child that must be home-schooled due to school closings), and another 10 weeks of partially-paid family medical leave — to be reimbursed to the employer by the federal government in the form of refundable payroll credits.
– Gusto is also providing options for deferring or waiving monthly payroll processing charges for those who need it.

The Dancing Accountant