Tag Archives: unemployment

Education, Illinois, IRS, Tips

Year-End Reminders For Chicago Small Business Owners

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Chicago businesses should take a moment to review upcoming changes before year-end.

The Chicago Department of Business Affairs & Consumer Protection (BACP) was designed to “license businesses and public vehicles, provide business education and access to resources, enforce the Municipal Code, and protect consumers from fraud,” which means that sometimes they have to create and enforce ordinances and regulations that are a bit arduous or challenging for small businesses. But in the public interest, we need to take a moment to review the annual changes and requirements to make sure we have everything in order. (Besides, the penalties for willful ignorance are no fun.)

With that in mind, here are some things you’ll need to make sure to take care of before ringing in the new year.

  1. Illinois Department of Human Rights Sexual Harassment Training
    For the record, this one is state-mandated, not just city-wide. The Illinois Workplace Transparency Act requires all employers to comply with the sexual harassment prevention training by December 31, 2020, and thereafter must provide annual training to all employees.
    As of July 1, 2020, the Illinois Human Rights Act defines “employers” as those having one or more employees (replacing the prior threshold of 15 or more employees in Illinois for most types of discrimination). This means that every employer in Illinois must comply with this sexual harassment training requirement, for all employees working in Illinois, regardless of their status as part-time, intern, or temporary. There is no requirement to train independent contractors, though it is recommended.

    The Illinois Department of Human Rights provides the training for free (registration ends 24-hours before each class), or there are numerous commercial training options (as low as $25). They have an FAQ here, as well as details on minimum training for all employers, versus more comprehensive training for bars and restaurants.
  2. Chicago Minimum Wage
    Back in 2014, the city implemented a gradual increase of the minimum wage. It applies to any employee who works at least two hours in any two-week period. As of July 1, 2022 the minimum wage in Chicago is $14.50 per hour for employers with 4 to 20 workers, and $15.40 per hour for employers with 21 or more workers. Tipped workers have a minimum wage of $8.70 for employers with 4 to 20 workers, and $9.24 for employers with 21 or more workers. If a tipped worker’s wages plus tips do not equal at least the full minimum wage, the employer must make up the difference. BACP offers a one-hour-long free webinar on the ordinance.
  3. Chicago Paid Sick Leave
    This ordinance went into effect on July 1, 2017, and was so poorly-written that folks are still confused. It applies to any business or individual that employs at least one “employee” and has a facility within Chicago’s city limits (though Cook County followed suit a few months later and has a similar requirement). The term “employee” covers anyone who works at least 80 hours within a 120-day period (20 hours a month).
    – For hourly employees, paid sick leave accrues at one-hour for every 40 hours worked. Salaried-exempt employees are presumed to have worked 40 hours/week.
    – Employees are capped at accruing a total of 40 hours of sick leave each year, unless the employer opts to set a higher limit.
    – Employers must permit employees to carry over half of their accrued leave, to a maximum of 20 hours of unused sick leave each year (40 for employers with 50 or more employees).
    – Employers are not required to pay out any accrued but unused sick leave upon employment termination.

    What we’ve generally seen — given the stringent requirements and the way hours accrue — is that many employers with existing PTO policies have to get substantive revisions, as they often do not follow the same rules (even though they are often more generous). Failure to comply is costly, so we recommend having an HR professional experienced with the Chicago rules review your policy.

    BACP offers a one-hour-long free webinar on the ordinance.
  4. Illinois Secure Choice Retirement Savings Plan
    State law now requires every Illinois employer with 16 or more employees to either offer their own retirement program, or to sign up to help staff contribute to personal IRAs via Secure Choice. As of November 1, 2023, this obligation will extend to employers with 5 or more employees.

    Aside from the administrative burden, there are no costs to small businesses owners. The program facilitates saving for retirement — but is still limited to the IRS’s annual $6000 cap ($1k higher for those 50 and up), increasing to $6,500 in 2023. (For those interested in a higher limit, I strongly recommend Guideline 401k plans for small businesses, which use low-cost Vanguard Admiral Shares — my own clients have the first five months of plan fees waived.)

    Our State Representative, Will Guzzardi, co-presented an excellent informational session recently, and his team graciously invited us to share the link and passcode with anyone interested in learning more:
    https://us02web.zoom.us/rec/share/GbU0vqXStnOYNsgxPg-1sUWGWWhWy_G_Wo6dbjjDOUhCdaK8FyNfyv7ySjH3Ggb7.L9WjeYo8OmJ6cQIg
    Passcode: Vd*Uqgn2
    The session is about 40 minutes long — feel free to skip the 5-min introduction if you’re pressed for time.

    (I’ll be providing a breakdown and analysis of the plan and the info-session in an upcoming blog post. Spoiler alert: I’m mostly pretty happy with this legislation! –This doesn’t happen often.– However, most sole proprietors will want to make sure to implement their own savings plan simultaneously, since they won’t be eligible to participate; and many others will prefer the 401k approach due to higher limits.)
  5. State Unemployment Insurance Contribution Determination Rate
    If you have employees, you should normally have received a letter from IDES with your 2023 unemployment rate determination by now, but they are running behind and the letters won’t be posted on mytax.illinois.gov until January 5th, 2023. As soon as they do, you will need to update your payroll company’s records with the new unemployment tax rate, or it can cause expensive problems with reporting and reconciliations in the future. I wrote a blog on how to do this if you’re using Gusto for payroll.


    HAPPY NEW YEAR, CHICAGO SMALL BUSINESSES:
    WE WOULDN’T BE A WORLD-CLASS CITY WITHOUT YOU!

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.

COVID-19 Financial Relief, Education, Illinois, Tips

Year-End IDES Unemployment Rate Notices for Employers – How To Update In Gusto Payroll

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IDES taking steps to address unprecedented volume of unemployment claims | News | metropolisplanet.com

Most states, including Illinois, send out a letter at the end of each year to employers, informing them of their new “Contribution Rate Determination”. As I’m receiving lots of questions about them this year, I figured I’d take a moment to explain what these are and how to update your Gusto payroll account with this info.

This year, IDES is distributing the letter electronically for all who have opted in, with an email stating:

You have received new electronic correspondence from the Illinois Department of Employment Security (IDES). Please log into MyTax Illinois to view your correspondence as some may require a timely response. Below is a list of the new correspondence you have received.

  • Contribution Rate Determination (Mail Date: 11/30/2021)

If the notice you received has appeals rights, you must file your appeal according to the instructions stated on the notice. If you have questions, please call the IDES Employer Services Hotline: 800-247-4984.

For those who haven’t received a letter in the mail, you’ll want to log into MyTax Illinois to get your letter (or if you did get your letter in the mail, but want to download a pdf of it for your files).

Once you log into your company’s MyTax Illinois account (the same place you log into to make sales tax and corporate estimated tax payments), you’ll see a number next to the “Action Center”. Click on that and then click on the “View Letters” link.

Then click on the “View Letters” link.

And then click on the “Contribution Rate Determination” link to get your letter.

The letter will say “Rate Determination” at the top-left.

The new rate is listed at the end of the first row on the page, under where it says “Contribution Rate (New)”.

This rate is also known as your “experience rating” because it’s in part based on how many of your employees claimed unemployment over the past two years, compared with the total payroll for that same time period. (For 2020 and most of 2021 they paused this type of increase, because everyone was claiming unemployment due to the pandemic.) For 2021, the percentage will be between 0.200% and 7.625%.

You can see a list of the historical rates by year here: Annual Employer Contribution Tax Rates (illinois.gov)

If for some reason the wages, unemployment benefit claims, and rate don’t seem right, the next page in the letter allows you to contest it by sharing how your company records are different. The following page in the letter explains how the formula works, in case you’re not sure whether or not it deserves contesting.

Contesting a rate is rarely needed for small business owners, because we all have the option to contest individual claims when they happen. If a staff member quits/resigns, or if they are fired for dangerous behavior, then they don’t qualify to claim unemployment benefits — a notice for each claim is sent to the business owner and they have a short period in which they can dispute the claim. It’s important to do this to keep the IDES contribution rate down. Keep in mind that just this past year, they have stopped mailing claim letters, and business owners should check their MyTax Illinois account each month for these notices — see my blog post here for more: Illinois – No More Snail Mail for Unemployment Claim Notifications | The Dancing Accountant

In November, IDES sent out another round of reminders about this:

And on the final page they included an option to request a snail-mailed paper notification of claims:

So you’ve got your new rate — what does it mean and what should you do with it?

The rate will be multiplied against the first $12,960 of each employee’s wages (this increases slightly each year) and the resulting total will be paid as unemployment tax by the employer. That’s why you want as low a rate as possible. But if you don’t have a lot of employees, then even a high rate does not end up being a lot of money. Pretty amazing deal for how much our society depends on the unemployment safety net.

Provide the notice to your payroll provider to get the rate entered into your payroll system, or if you use Gusto, just update the rate yourself — it’s very easy, and this way you know it gets done! Log into Gusto and:

  1. Click the Taxes & compliance section and select Tax setup.
  2. Click Manage Taxes under the applicable State Tax section.
  3. Scroll to “State Tax Settings” and click edit next to SUI Rate.

The effective date for the new rate is the upcoming January 1st.

If you don’t update your payroll records asap, then you could end up paying in unemployment at a higher or lower rate than required. If it’s too low, you may end up owing penalties, and if it’s too high, then you have to file for a refund, which a lot of folks forget to do, leaving their money on the table in perpetuity.

One more reminder: anyone who received unemployment benefits in 2021 will be getting a 1099-G in January noting those amounts for tax purposes — see my blog post about this from last year here: Illinois IDES 1099-G Form For 2020 Unemployment: What You Need To Know | The Dancing Accountant

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.

COVID-19 Financial Relief, IRS

Another New Change On 2020 Unemployment Tax Rules Announced 3/23/21

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UPDATE on the new rules on taxation of unemployment income (I’ll call them the NEW new rules) — jobless benefits no longer count toward the income “cliff” threshold.

Original guidance from the IRS (3/12/21) said that the $150,000 AGI limit includes unemployment income. As an example: if AGI without unemployment is $140,000 and unemployment is $12,000, then modified AGI is $152,000 and no exclusion will be allowed. (We have been recommending clients consider an IRA contribution in this case.)

Today (3/23/21) the IRS changed course 180-degrees and says now that modified AGI does NOT include unemployment income. This is great news… but my tax software JUST updated to the 3/12/21 guidance. Sigh.

More info here from Tax Speaker.

UPDATE: Good news for Illinois filers… the IDOR will comply with the changes from IRS, so no adjustments are needed on the IL return.

And please be patient with your tax professional.

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.

COVID-19 Financial Relief, Education, Tips

Covid-19 Sick & Family Leave Credits For Employers Extended Through 9/30/21 & Expanded

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The American Rescue Plan Act (ARPA), just recently signed into law, offers many generous tweaks to federal programs for employers trying to take care of their staff, and for former employees. There are six in particular every employer should research on their own behalf and for the benefit of workers:

  1. Paid Sick & Family Leave
  2. COBRA Subsidies
  3. Dependent Care FSAs
  4. Employee Retention Credit
  5. Short-Time Compensation
  6. Unemployment Insurance

The Department of Labor will be issuing regulations or other guidance regarding these changes to the FFCRA.

Ellen M. Bronchetti & Syed H. Mannan of McDermott Will & Emery have done an excellent job summarizing these updates in this article. I’m including their sections on Paid Sick & Family Leave as well as COBRA Subsidies almost in their entirety — as no amount of summarizing seems to do them justice. I’ve included additional information on the COBRA Subsidies from L. Renee Lieux of McNees Wallace & Nurick.

Homework: Fox Rothschild has a nice Guide For Employers to the American Rescue Plan Act — it’s a good place to start digging into all the provisions.

Paid Sick & Family Leave

Under the previously passed Families First Coronavirus Response Act (FFCRA), companies with fewer than 500 employees were required to provide paid leave to employees who were unable to come to work for a number of Covid-19 related reasons. FFCRA provided employers a refundable tax credit, which would offset for employers the costs of providing the paid leaves.

The requirement to provide paid leave expired for employers with fewer than 500 employees at the end of last year. But employers can still voluntarily choose to provide FFCRA paid sick or paid family leave to employees and receive refundable tax credits for costs related to providing the leave through March 31, 2021.

This is a great value for staff and to employers, and helps keep customers and the community safer as well.

With the passage of the American Rescue Plan Act of 2021, employers should note the following additions and changes:

  • Refundable Tax Credits Available through September 30, 2021: Employers who choose to voluntarily provide FFCRA paid sick or paid family leave may now receive refundable tax credits through September 30, 2021.
  • Additional Covered Reasons for Providing Paid Sick Leave:
    Previously under the FFCRA, qualifying reasons for providing paid sick time were limited to if the employee is unable to work (or telework) because (s)he:
    (1) is subject to a federal, state or local quarantine or isolation related to Covid-19;
    (2) has been advised by a healthcare provider to self-quarantine;
    (3) is experiencing Covid-19 symptoms and seeking a diagnosis;
    (4) is caring for an individual who is subject to quarantine or is self-quarantining;
    (5) is caring for a child whose school or place of care is closed (or child care provider is unavailable) because of Covid-19; or,
    (6) is experiencing any other substantially similar condition specified by the US Secretary of Health and Human Services.

    ARPA expands on the list and now allows employers to provide leave to employees for three additional reasons:
    (1) obtaining a Covid-19 immunization;
    (2) recovering from an injury, disability, illness or condition related to the immunization; or,
    (3) seeking or awaiting the result of a Covid-19 test or diagnosis when the employee has either been exposed to Covid-19 or the employer has requested the test or diagnosis.
  • Additional Covered Reasons for Providing Paid Family Leave: The scope of reasons for providing emergency family leave is now expanded. Originally, tax credits were available to employers for providing paid family leave only if the employee was unable to work (or telework) to care for a child whose school or place of care was closed or unavailable because of the public health emergency. Now, employers can claim tax credits for providing family leave which arises from any of the six qualifying reasons provided for in the FFCRA and the additional three reasons added under ARPA (noted above).
  • Duration of Paid Sick and Family Leave for Receiving Tax Credits: ARPA allows employers to receive the tax credit for providing up to 10 days of paid sick leave beginning on April 1, 2021, even if the employer previously took a tax credit for providing paid sick leave to an employee for a covered reason before April 1, 2021. In addition, employers can receive a tax credit for providing up to 12 weeks of paid family leave. In other words, the clock sort of “re-sets” on sick and family leave.
  • Amount of Tax Credits Available for Paid Sick Leave: Employers providing voluntary paid sick leave receive a tax credit, up to a cap of $511 a day, at the employee’s regular rate of pay if the employee is on leave because of coronavirus quarantine, self-quarantine or has symptoms. ARPA now includes the additional covered reasons (discussed above) for receiving tax credits at the employee’s regular rate of pay. For any other paid sick leave reason, the amount of tax credit available to an employer is calculated at two-thirds the employee’s regular rate of pay and capped at $200 a day.
  • Amount of Tax Credits Available for Paid Family Leave: Employers providing paid family leave receive a tax credit, up to a cap of $200 a day, at two-thirds the employee’s regular rate of pay for leave which is due to any of the covered reasons for providing paid family leave. ARPA also removes the two-week waiting period (during which the leave was unpaid) for taking paid emergency family leave. The Act also increases the cap on the aggregate paid leave from $10,000 to $12,000, meaning employers can now take an additional $2,000 in tax credits per employee for providing qualifying leave.
  • Addition of Non-Discrimination Rules: Employers who are voluntarily providing leave and receiving tax credits must also follow the new non-discrimination rule. The anti-discrimination rule makes the tax credit available only to those employers who provide leave to all employees without discriminating against certain categories of workers. Specifically, the tax credit is not available to those employers who discriminate (1) in favor of highly compensated employees, (2) full-time employees or (3) on the basis of the employment tenure of the employee.

Cobra Subsidies

Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage allows employees to continue to remain covered under their employer’s health insurance for up to 18 months after coverage is lost because of a reduction in work hours or the employee’s involuntary termination of employment.

Prior to ARPA, workers and dependents assumed full responsibility for payment of premiums. ARPA now provides up to six months of 100% subsidized COBRA coverage to those who are eligible for COBRA because of an involuntary termination from employment or a reduction in work hours. The premium subsidy will last from April 1, 2021, through September 30, 2021, and sponsors of group health plans will be subject to new notice requirements. Employers will receive reimbursements for the subsidy through a payroll tax credit.

Employers must provide three notices to eligible former employees notifying them of the premium subsidy, the extended opportunity to elect coverage, and when the premium subsidy will be terminated.

In addition, employers may, at their option, allow former employees who are currently electing COBRA to elect coverage under a different plan offered by the employer as long as (i) the premium for the new coverage does not exceed the premium for the current coverage, (ii) the new coverage is not an excepted benefit, a QSEHRA, or a FSA, and (iii) the employee did not voluntarily terminate employment.

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.

COVID-19 Financial Relief, IRS, Tips

IRS Provides American Rescue Plan Guidance – DO NOT FILE AMENDED RETURNS YET

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From National Association of Tax Professionals (NATP) less than an hour ago (7:15 pm Central, March 12, 2021):

The IRS strongly urges taxpayers not to file amended returns related to the new legislative provisions or take other unnecessary steps at this time.

The IRS will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable.

For those who haven’t filed yet, the IRS will provide a worksheet for paper filers and work with the software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return.

For those who received unemployment benefits last year and have already filed their 2020 tax return, the IRS emphasizes they should not file an amended return at this time, until the IRS issues additional guidance.

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.

COVID-19 Financial Relief, Education, Illinois, IRS, Tips

Illinois IDES 1099-G Form For 2020 Unemployment: What You Need To Know

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Understandably, there is some confusion this year about unemployment compensation, how it is reported to recipients, and what tax forms taxpayers might need to report it on their returns.

The Illinois Department of Economic Security (IDES) created the helpful infographic above, as well as an Info Sheet, which I’m sharing in its entirety here so it’s easy for folks to find.

From the Illinois Department of Employment Security (IDES) – January 2021

Background

All individuals who received unemployment insurance (UI) benefits in 2020 will receive the 1099-G tax form.

Claimants who collected UI benefits last year need the 1099-G tax form from IDES to complete their federal and state tax returns. The 1099-G tax form will be available by the end of January 2021 and mailed or emailed to IDES claimants based on previously selected claimant preference.

The 1099-G form is necessary for individuals who received state and/or federal benefits. This pertains to claimants who received both regular UI benefits and benefits paid under new federal pandemic relief programs including Federal Pandemic Unemployment Compensation (FPUC), state Extended Benefits (EB), Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC), and Lost Wages Assistance (LWA).

How to Access the 1099-G Form

Upon establishing an IDES account, claimants are provided an option to receive their 1099-G form electronically. Those who opted for electronic delivery will receive an email notification towards the end of January 2021. This email will contain instructions to access the document from the IDES website.

For those who opted NOT to receive their 1099-G form electronically, IDES will mail a paper form during the last week of January. These claimants may also access and print their 1099-G form online by going to ides.illinois.gov/1099G, or calling Tele-Serve at (312) 338-4337.

Fraud Warning

If an individual did not receive UI benefits in 2020, yet still received a 1099-G form from IDES, this may indicate that a fraudulent claim was filed in their name. The IRS has provided guidance to states regarding these nationwide identity theft and unemployment fraud schemes. Individuals who may have erroneously received a 1099-G form should immediately contact IDES at (800) 244-5631.

IDES representatives will return calls on a first-in, first-out basis to ensure the fraudulent claim is shut down, and to address the 1099-G form. Once a fraudulent claim is reported, investigated, and confirmed by IDES, the victim will not be held responsible for repaying any benefits fraudsters may have received in their name, nor will they be held responsible for tax implications resulting from a fraudulent claim. IDES understands the urgency associated with tax season and is committed to ensuring agency resources are available to assist individuals who received a form in error.

See the recent alert on 1099-G forms from the U.S. Department of Justice National Unemployment Insurance Fraud Task Force.

Additional Information and Questions

Additional information on 1099-G forms is available at ides.illinois.gov/1099G. For tax filing information, individuals
are encouraged to call the IRS at (800) 829-1040 or visit their website at irs.gov.

Individuals can also contact the Department at 800-244-5631 and select the appropriate queue to speak with an expert:

• Select your language

• When prompted, press 2 to indicate you are an individual

• Next, press 1 if you received a 1099-G form in error, or press 2 for all other 1099-G related inquiries

If you are already awaiting a callback for a different inquiry, we will be able to handle your 1099-G related questions on that same call. There is no need to queue for an additional callback.

Additional FAQs are available here. With questions about tax filing, please visit the IRS.

Tax fraud can result in criminal penalties. Some of the criminal activities in violations of federal tax law include deliberately underreporting or omitting income or hiding or transferring assets or income. See https://www.irs.gov/compliance/criminal-investigation/types-of-fraudulent-activities-general-fraud. Federal criminal penalties can include fines and imprisonment. See 26 U.S.C. §7201, §7206, and §7207. Under Illinois law, intent to defraud for tax purposes may be inferred from conduct such as concealment of assets or covering up sources of income, or any other conduct, the likely effect of which would be to mislead or conceal. See 86 Illinois Admin Code 700.330(c). State law provides penalties for tax fraud. 35 ILCS 735/3-6.

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.

COVID-19 Financial Relief, Education, IRS, Tips

New Relief Package Passes Congress

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I will be spending the afternoon in webinars learning the details of the recent financial relief package that will become law soon, including “PPP2”, and will share what I learn in a post here later today. In the meantime, the National Association of Tax Professionals has prepared a summary for its members — it’s the clearest, most succinct explanation of “what you need to know” that I’ve read in the past two days. Many thanks to them for allowing us to pass along this info to clients.

Both houses of Congress voted to pass the latest COVID relief legislation and all indications are that the president will sign it into law. We know that more guidance will be provided as this rolls out, but here are the highlights as we know them:

PPP and small business support: New COVID-19 relief package provides much needed support for small businesses. Business expenses paid for with the proceeds of PPP loans are tax deductible, consistent with Congressional intent in the CARES Act. In addition, the loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less. Unspent funds totaling $138 billion will be reinvested in the PPP program.

Economic impact payments (EIP): The bill includes a second round of EIPs for qualifying Americans.

The IRS will use the data it already has in its system to begin making payments at the end of December through the first two weeks of January. If the IRS has your direct deposit information, you will receive a payment that way. If it does not, you will receive your payment as a check or debit card in the mail. If you are eligible but don’t receive your check for any reason, you can claim the payment when you file your 2020 taxes in the spring of 2021.

In regards to eligibility, any person who has a valid work-eligible Social Security number (SSN), is not considered as a dependent of someone else and whose adjusted gross income (AGI) does not exceed certain thresholds (see below) is eligible to receive the credit. This means workers, those receiving veterans’ benefits, Social Security beneficiaries and others are all eligible.

  • Spouses of military members are eligible without an SSN
  • An adopted child can use an Adoption Tax Identification Number to be eligible

Under the CARES Act, joint returns of couples where only one member of the couple had an SSN were ineligible for a rebate. This latest round of relief changes that provision. These families will now be eligible to receive payments for the members of the family who have SSNs. This change is retroactive, meaning those who fall under this category who missed out on the first round of EIPs can claim that money when filing 2020 tax returns in the spring of 2021.

The full credit amount is $600 per individual, $1,200 per couple and $600 for children. It is available for individuals with AGI at or below $75,000 ($112,500 for heads of household), and couples with AGI at or below $150,000. If you have children, you will receive an additional $600 per child.

For those above this income level, your tax rebate amount will be reduced by $5 for each $100 your AGI exceeds the above thresholds.

This means:

  • An individual without children will not receive any rebate if their AGI exceeds $87,000.
  • A couple without children will not receive any rebate if their AGI exceeds $174,000.
  • A family of four will not receive any rebate if their AGI exceeds $198,000.

The IRS will use the same methodology for calculating payments as it did for the first round of economic impact payments.

Unless obtained by fraud, rebate checks do not need to be repaid. If an individual experienced an income loss in 2020, or if they have an increase in family size, they may be able to claim an additional credit of the difference when the individual files their 2020 tax federal income tax return in spring of 2021.

If you are eligible and the IRS does not have your direct deposit information, you will receive your payment as a paper check or a debit card as long as the IRS has your address. If the IRS does not have updated contact information for you, you can claim the payment when you file a tax return in spring 2021.

Someone who is claimed as a dependent on another taxpayer’s tax return is not eligible to receive the $600 refund check themselves. Children 17 and older are not eligible for the $600 per child tax credit.

For those with taxable income, you will need to file a tax return for the 2020 tax year, which you can do during the coming filing season that is expected to begin in late January and end on April 15, 2021. Those with little or no taxable income are encouraged to use the IRS’ free file program.

Other than Social Security beneficiaries (retirement and disability), railroad retirees and those receiving veterans’ benefits, individuals with no taxable income will be able to file a simple form provided by the IRS specifically for the purpose of receiving the rebate check.

Social Security retirement and disability beneficiaries, railroad retirees and those receiving veterans’ benefits do not need to file to receive their rebate. The IRS has worked directly with the Social Security Administration, Railroad Retirement Board and the Veterans Administration to obtain information needed to send out the rebate checks the same way benefits are paid.

The credit is not taxable, consistent with other refundable tax credits.

The rebate is considered a tax refund and is not counted towards eligibility for federal programs for both income and asset test purposes. The rebate checks are not subject to the majority of offsets, including student debt and state debts. The only administrative offset that will be enforced applies to those who are subject to a child support garnishment court order.

A family with a child born in 2020 is eligible for the $600 per child rebate amount (assuming all other requirements are satisfied). The IRS will calculate the payment based on the most recent tax data in its system. If a child was born since the family’s last filing, the family will not automatically receive the $600 rebate amount for the child born in 2020. To receive the credit the family can claim the $600 credit on their 2020 tax return filing made in spring 2021.

If you believe you are eligible for an economic impact payment but did not receive a round one or round two payment, you will have the opportunity to claim the payment on your 2020 tax return. This year’s tax forms will provide a place for individuals to claim the payments. If you don’t normally file taxes and are eligible for a payment, make sure to file a return this spring to claim the payments.

The IRS has not announced the exact date the coming filing season will begin, but it typically begins near the end of January. If you need to update your information by filing your tax return, keep an eye out for an IRS announcement about the start of the filing season.

Individuals can claim the payment by filing a simple tax return when the tax filing season opens in late January 2021.

Unemployment assistance: For those who are unemployed, the pandemic unemployment insurance program will be extended by 16 weeks. Supplemental federal unemployment benefits of $300 per week will continue into April 2021 instead of ending in December.

Rental assistance: The current CDC eviction moratorium will be extended until Jan. 31, 2021.

Student loans: Extension of student loan forbearance provisions created in CARES and extended by executive order, from the current expiration date of Jan. 31, 2021 through April 1, 2021.

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COVID-19 Financial Relief, Illinois, Tips

Illinois – No More Snail Mail for Unemployment Claim Notifications

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Big news from the Illinois Department of Employment Security (IDES).

Two big pieces of info:

  1. Employers will no longer receive paper copies of snail mail notices — this may not sound like a big deal, but it’s huge. Employers only have 10 days to contest an employee’s potentially false unemployment claim. Often quite a few of these days have unfortunately already passed by the time the snail mail notice arrives. So although in theory this is a good move, it requires employers to regularly check their MyTaxIllinois account — potentially every few days, since there’s no other way to know when a former employee (who may have departed months ago) has made a claim.
  2. For now, #1 above isn’t that big a deal, inasmuch as for the meanwhile, IDES is going to presume that all claims are COVID-19 pandemic-related, unless the employer says otherwise. And as such, the employer unemployment tax rate will not be increased based on these charges. But when they decide to go back to letting unemployment claims affect the employer’s experience rating, this is going to be a huge problem, as most employers will not notice the claims in time to respond to those that should be challenged.

I see an opportunity for a business that monitors each employer’s MyTaxIllinois account for claims submitted, and alerts the employer immediately in case they would like to challenge the claim. Let me know in the comments if you find anyone offering this service. In the meantime, employers should actively check the IDES section of their account on MyTaxIllinois.

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.

Illinois, Tips

Illinois State Unemployment Now Open To Self-Employed – May 11

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Per Becky Canary-King at Levenfeld Pearlstein LLC:

Earlier this week, the Illinois Department of Employment Security (IDES) released new instructions for 1099 workers who have lost work due to COVID-19. The new Pandemic Unemployment Assistance (PUA) program provides 100% federally-funded unemployment benefits for individuals who are unemployed for specified COVID-19-related reasons and are not eligible for the state’s regular unemployment insurance program. Workers, including independent contractors, who believe they may qualify for new federal benefits under PUA must first apply for regular unemployment insurance before applying for benefits under PUA. The new PUA application portal is set to open on May 11. 

Those new instructions from IDES indicate the following:

Workers who believe they may be eligible for new federal benefits under the Pandemic Unemployment Assistance (PUA) program must first apply for regular unemployment insurance before applying for benefits under PUA when a new application portal opens on May 11, 2020 via the IDES website.

If claimants receive an eligibility determination of $0, they can then appeal that decision by providing verification of wages earned, or they can submit a claim for PUA benefits. Claimants who have already applied for and been denied regular unemployment benefits can submit a claim through the new PUA portal when it opens. Receiving a denial for regular unemployment benefits is a mandatory first step in determining eligibility for PUA.

Filing for regular unemployment also provides claimants the opportunity to select how they want to receive benefits. Eligible claimants can choose between direct deposit or a [Key Bank] debit card onto which their benefits will be loaded. Debit cards can take up to one to two weeks to receive in the mail while direct deposit payments take two to three days once a claimant completes their weekly certification for benefits.

PUA provides 100% federally-funded unemployment benefits for individuals who are unemployed for specified COVID-19-related reasons and are not eligible for the state’s regular unemployment insurance program, the extended benefit (EB) program under Illinois law, or the Pandemic Emergency Unemployment Compensation program (PEUC), including independent contractors and sole-proprietors. Up to 39 weeks’ worth of benefits are potentially available under the program for COVID-19-related unemployment claims.

PUA claims will be backdated to the individuals’ first week of unemployment, but no earlier than February 2, 2020, and will continue for as long as the individual remains unemployed as a result of COVID-19, but no later than the week ending December 26, 2020. The program is similar to the federal Disaster Unemployment Assistance program which provides unemployment benefits in response to local disasters.

IDES Website, May 11 2020

From the feedback I’ve gotten from clients, even if you recently received PPP funding, you can apply for back-pay for the past two months — then you only certify for the weeks up until you received the PPP loan funds. You’ll indicate that you file Form 1040, as both your partnership income will show up there (Schedule E) and your sole proprietorship income will show up there (Schedule C). You’ll need to provide your 2019 tax returns, and income numbers from the return’s front-page. You also will need your driver’s license and social security numbers, and you’ll need to pick an appropriate job title/description.

To reiterate, you have to apply for regular unemployment and get denied first. Then on the middle of the regular unemployment page (as in, about halfway down) — there’s a button that says “certify for PUA” — it actually contains the application as well as the certification. You follow the prompts, answer the questions, upload your tax documentation… and wait.

Many thanks to the clients and colleagues who assisted in updating me with their personal experiences! If you have more to add, please do so in the comments rather than emailing me directly, so more folks can benefit from your experiences.

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, IRS, Tips

PPP Loan Forgiveness NOT In Jeopardy By Employees Refusing To Return To Work

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ABA Banking Journal reported last night that the SBA has updated its Payroll Protection Program FAQ confirming that PPP “borrowers who attempt to rehire employees that were laid off will not have their loan forgiveness amounts reduced if those employees decline the offer to return to work”. 

The exact wording of FAQ #40 is here:

This is huge news for some of my clients who run restaurants, cafes, retail, and other types of businesses where working remotely is not an option, and where working conditions are cramped and staff are unable to maintain 6-foot social distancing. Understandably, some employees are hesitant to return to a job that puts their health and the health of their families and communities at risk, especially if those staff members or their loved ones are immuno-compromised.

There has been a lot of political talk about this situation, criticizing furloughed employees for this choice, but let’s all try to remember that the only folks making more money on unemployment are generally earning less than $45,000 annually — and these are the people we’re asking to put their lives in danger for our economic benefit. It’s not exactly a fair criticism, in my opinion.

That said, it certainly negatively affects the small business owners I serve, and I have been challenged by these dual needs pulling my heart in opposite directions, as I can empathize with both perspectives. The business needs to spend 75% of the PPP funds on payroll, and maintain 75% of the prior full-time-equivalent hours for their staff. So if staff are unwilling to return, then the entire PPP forgiveness is put at-risk.

This new FAQ lifts that burden for employers, which I applaud. It does make it clear that the unemployment benefits for those employees may be in jeopardy as a result, but at least the owner does not have to shoulder the burden of being the bad guy who reports them (at least, not according to this FAQ — state unemployment laws may have other requirements).

Two recommendations for business-owners who receive PPP funds and are challenged by this situation, where former employees do not want to return to a risky work environment because they are making enough on unemployment:

  1. Offer returning staff a hazard-pay bonus to make it worth the risk. Obviously this isn’t an option for those who are immuno-compromised, since no amount of money is worth their life; but for everyone else, consider increasing their pay temporarily with weekly retention bonuses. This will increase company loyalty, help meet the 75% payroll rule for PPP forgiveness, and assist in rebuilding the business. You can easily set up a “Hazard Bonus” payroll item in your payroll software.
  2. Point out to staff that returning to work will leave them additional unused weeks of unemployment pay for future use, if the business ends up having to close again after the PPP funds are exhausted.

Finally, some good news. Awaiting further guidance on PPP forgiveness and will be posting more as I learn more.

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.