OSU Income Tax Schools Summer Update Federal Income Tax & Financial Update Webinar

by: Barry Ward, Director, OSU income Tax Schools

 Significant tax related changes as a result of the new legislation passed in response COVID-19 have created some questions and perhaps consternation over the past few months as taxpayers and tax professionals wrestle with how these many changes may affect tax returns this year and beyond. OSU Income Tax Schools is offering a Summer Update to address these issues and other important information for tax professionals and taxpayers.

The OSU Income Tax Schools Summer Update: Federal Income Tax & Financial Update Webinar is scheduled for August 13th and will be presented as a webinar using the Zoom platform.

Webinar Content:

New tax provisions implemented by the CARES Act and Families First Coronavirus Response Act and how to account for them such as the new net operating loss rules, the payroll tax credit, etc. Paycheck Protection Program Loan Issues: loan applications, forgiveness issues and the IRS ruling on loan expenditures that are forgiven under PPP are not tax deductible and how to account for them in preparing a return, etc.

Dealing with the IRS in these difficult times.  Also, what it means to the practitioner as to “dos” and don’ts” regarding the announcement that beginning this summer the IRS will allow the electronic filing of amended returns.

The “Hot IRS Audit Issues – Pitfalls for S Corporations and Partnerships”.  Basis of entities as to the rules and related rulings, how to track basis in these entities, creation of basis where none had been computed in prior tax years, losses in excess of basis and when they are not allowed, definition of an excess distribution, taxation of excess distributions, distribution of appreciated property,  conversion of C corporations to S corporations – do and don’ts, computation of the Built-In Gains Tax, inference and imputation of a reasonable wage for purposes of the computation of the qualified business income deduction, etc.

Other rulings, developments, and cases.

Webinar personnel:

John Lawrence, CPA, John M. Lawrence & Associates: Instructor

Barry Ward, Director, OSU Income Tax Schools: Co-Host & Question Wrangler

Julie Strawser, Program Assistant, OSU Income Tax Schools: Co-Host and Webinar Manager

Details:

OSU Income Tax Schools Summer Update

Federal Income Tax & Financial Update Webinar

(Zoom Webinar)

August 13th, 2020: 10am – 3:30 (Lunch Break: Noon – 12:50pm)

Cost: $150

Registration information and link to the registration page can be found at:

https://farmoffice.osu.edu/osu-income-tax-schools

This workshop is designed to be interactive with questions from the audience encouraged.

Continuing education offered:

Accountancy Board of Ohio (5 hours)

IRS Office of Professional Responsibility (5 hours)

Continuing Legal Education, Ohio Supreme Court (4.5 hours)

 

Economic Assistance Available for Dairy Farms

by: Dianne Shoemaker, OSU Extension, shoemaker.3@osu.edu

Click here for PDF version of article

One hundred and fifty days.  In only 150 days we have gone from anticipating a solid year of recovery for the dairy industry to seeing an April Class III price of $13.07 per cwt, the lowest Class III milk price in 10 years, with May announced at $12.14 on June 8th.  In that same time period major market disruptions occurred for nearly every commodity with impacts all along the food chain.  The response to the anticipated economic impact at the farm level has been swift, with a variety of options available to assist dairy farms.   We will touch on a few of them here, including links for additional information.  Every farm should review these options and see if there are opportunities to assist with cash flow shortfalls.

PPP– Paycheck Protection Program

At the end of May, there were still funds available for the PPP.  This low-interest loan program, authorized by the CARES Act (Coronavirus Aid, Relief and Economic Assistance Act) is administered through the SBA (Small Business Administration) to assist small businesses, including farms.  The maximum loan amount is calculated as up to 2.5 months of qualifying payroll expenses as well as sole proprietor income.    While loan proceeds can be used for any business expense, if it is used for specific expenses including payroll, utilities, mortgage interest or some rental payments within a specified time period, some portion or all of the loan may be forgiven.  Farms must apply through an SBA approved lender.  Find approved lenders and more information at http://sba.gov.   Recipients must apply for loan forgiveness.  Applications for forgiveness are now available, but specific guidance on eligible items and time periods continues to be announced.

EIDL – Economic Injury Disaster Loan

This is another CARES-authorized SBA program which is currently open only for farm applications at the sba.gov website.  Farm businesses and agricultural cooperatives with no more than 500 employees may apply for EIDL, which gives loans up to $2 million for businesses that suffer economic injuries due to COVID-19.  An “emergency advance” component provides an advance of up to $10,000 even if the loan is not approved.  The advance may be forgiven if the farm does not also have a PPP loan that is forgiven.  Clarification is pending.  Approved loans will incur 3.75% interest for terms up to 30 years.  Collateral will be required for larger loans.  Applications taken on-line only.  Find more information at http://sba.gov.

CFAP – Coronavirus Food Assistance Program

The intent of this program is to directly assist farms impacted by the effects of the COVID-19 outbreak.  Sign-up began at your local FSA (Farm Service Agency) office on Tuesday, May 26th and continues through August 28th.  FSA offices currently work with clients via email, fax, and phone by appointment.

Two funding sources are being used for this program, CFAP ($9.5 billion), and CCC, the Commodity Credit Corporation, ($6.5 billion).  The sources and uses are being tracked separately by FSA, but the payments will be combined and distributed to farms as a single payment.  Payment limits have been raised for this program only, to $250,000 per farm or up to $750,000 for farms that are set up as corporations, limited liability companies, or limited partnerships (corporate entities).  If these entities have up to three shareholders who meet eligibility requirements, they may be eligible for up $750,000 of assistance.  Eligibility requirements include gross farm income levels, wetland, and conservation compliance, and for individuals involved in multiple-shareholder situations, time spent actively working or managing in the farm business.  Once a farm has been approved, they will receive a first payment of 80% of the total calculated payment up to $200,000 per entity (80% of the $250,000 payment limitation).  If there are still funds available, the remaining 20%, or a prorated amount based on remaining funds available, will be paid at a later time.

The CFAP program is based on the change in futures prices between the weeks of January 13 – 17, and April 6 – 9, 2020.  Commodities that experienced a decline of greater than 5% are included in this program.  For dairy, that decline was around 33%, or $5.88 per cwt., calculated by USDA as the weighted average of the Class III price (60%), and the Class IV price (40%) which was selected as a reasonable representation of the trend of the US all-milk price.

Dairy markets took a severe beating since January and only recently trended upward in June – and will only actually settle at decent price levels going forward if supply aligns with demand.  We cannot keep milking more and more cows.

The program’s dairy (milk) section will yield the greatest assistance to qualifying farmers.  Cull cows, bull calves and dairy steers are included in the cattle section.  Farms that sell qualifying grain crops which were subject to price risk in the first quarter of 2020 will also find assistance in that section.

CFAP Dairy Calculation

Milk produced in January, February, and March (first quarter 2020) that was not priced through a forward contract, is eligible for assistance.  The formula for dairy is:

1st quarter milk production (cwt.) x $4.71/cwt. (CARES act rate)

plus

(1st quarter milk production x 1.014) x $1.47/cwt. (CCC rate)

  • The CARES rate of $4.71/cwt represents the price loss in Jan, Feb, and March.
  • Part two of the equation applies a projected 1.4% production increase.
  • The CCC rate represents anticipated price losses in April, May, and June.

Example:

Background Information:

A herd with 100 milking cows ships an average of 80 pounds of milk per cow per day or a total

of 7,280 cwt. of milk for the period January – March 2020 (91 days):

Dairy formula

1st quarter milk production (cwt.) x $4.71/cwt. (CARES act rate)

7,280 cwt x $4.71 = $34,288.80

+

 (1st quarter milk production x 1.014) x $1.47/cwt. (CCC rate)

(7,280 cwt x 1.014) x $1.47 = $10,851.42

Equals

$34,288.80 + $10,851.42 = $45,140.22 Total

80% or $36,112.18 will be paid shortly after the application is approved

These program payments are not subject to sequestration deductions.

The increase in payment limitations for this program has increased the assistance available to larger farms.  Using the simple example above, a herd with 500 milking cows shipping 80 pounds per cow per day would have a calculated total payment of $227,050, leaving an opportunity to apply for some assistance based on cull cows and bull calves sold between January 15 and April 15, 2020 before reaching the $250,000 payment limit.

Cull Cows

Dairy cull cows qualify for assistance in the “Slaughter Cattle – Mature Cattle” category.  The definition for these animals is “culled cattle raised or maintained for breeding purposes, but which were removed from inventory and are intended for slaughter.”  For animals sold between January 15 and April 15, the payment rate is $92 per head.  The dairy breeding stock herd is not eligible for a per-head payment.

Bull Calves, Dairy Steers

These animals, because they are going into beef production channels, qualify as either “Feeder Cattle less than 600 pounds” or “Feeder Cattle more than 600 pounds”.  Cull heifers sold for beef production would also be included in these categories depending on weight.  Animals less than 600 pounds are eligible for $102 per head (CARES Act rate) if they were sold between January 15 and April 15.  Animals greater than 600 pounds sold in the same time period are eligible for assistance at $139 per head (CARES).  For farms that finish steers (or heifers for beef) that meet weight requirements of 1,400 pounds liveweight or more with an average carcass weight greater than 800 pounds intended for slaughter are eligible for $214 per head (CARES rate).  The CCC rate applied to these animals is based on the highest inventory between 4/16/2020 and 5/14/2020.  If the farm keeps an inventory of animals for beef production, the highest inventory of animals between 4/16/2020 and 5/14/2020 is eligible for a $33 per head payment.  For cull cows, it appears that the highest inventory will be the total number of cows culled between 4/16 and 5/14.  For bull calves, the highest inventory between 4/16 and 5/14 would be equal to the largest group of calves sold in that time period.

Feed and Grain

Clarifications issued by FSA indicate that corn silage converted to bushels of grain is eligible for the CFAP program as well.  Farms that also sell grain and other eligible commodities can make application for those commodities.

Applying for CFAP

Farm Service Agency offices are working with farms via phone, fax, US mail, and internet.  Most FSA offices will ask for supporting documentation for milk and livestock sales at the time of application.  Participating farms should also keep records of those sales for at least three years.

At the FSA office, information is collected via a user-friendly spreadsheet found along with additional program information at  https://www.farmers.gov/cfap.  Farmers who have not previously applied for FSA programs can find information for first-time applicants at this web site or call 877-508-8364 for additional assistance.  While documentation is not collected at time of application, it may be requested for verification or spot checking during the next three years.

Dairy prices have taken tremendous hits, which were painfully obvious in the April final milk checks.  The Class III milk price of $13.07 is the lowest since April 2010 and even with a positive producer price differential of $1.15, well below cost of production. May will be more of the same.

These programs will help with some of the resulting cash shortfall.  Find more information about all these programs and others that may assist with COVID-19 related employee-related leave and unemployment issues at http://dairy.osu.edu and http://farmoffice.osu.edu.

Dairy farms are facing huge challenges this spring and have to make many unanticipated decisions.  Our OSU Dairy Working Group is responding with DIBS (Dairy Issue Briefs) to help inform those decisions.  These “breaking news” DIBS are posted regularly at http://dairy.osu.edu

 

 

Farm Office Live Webinar Slated for Thursday, June 11 at 9:00 a.m.

OSU Extension is pleased to be offering the a “Farm Office Live” session on Thursday morning, June 11 from 9:00 to 10:30 a.m.  Farmers, educators, and ag industry professionals are invited to log-on for the latest updates on the issues impact our farm economy.

The session will begin with the Farm Office Team answering questions asked over the two weeks.  Topics to be highlighted include:

  • Updates on the CARES Act Payroll Protection Program
  • Prevent Plant Update
  • Business & Industry CARES Act Program
  • EIDL Update
  • CFAP- update on beef classifications and commodity contract eligibility
  • Dicamba Court Decision Update
  • Other legal and economic issues

Plenty of time has been allotted for questions and answers from attendees. Each office session is limited to 500 people and if you miss the on-line office hours, the session recording can be accessed at farmoffice.osu.edu the following day.  Participants can pre-register or join in on Thursday morning at  https://go.osu.edu/farmofficelive 

 

Navigating Direct Support for Ohio’s Farmers and Ranchers Webinar on May 27 at 9:30 am

Join OSU Extension’s Ben Brown and Dianne Shoemaker for a webinar  on “Navigating Direct Support for Ohio’s Farmers and Ranchers” on Wednesday, May 27, 2020 at 9:30 am with special guest, Ohio Farm Service Agency Director Leonard Hubert.  This webinar is generously produced and distributed by Ohio Ag Net.

This webinar is produced and distributed by Ohio Ag Net.

The webinar will be available for viewing at https://farmoffice.osu.edu/, or through Ohio Ag Net’s Facebook Live Video.

Sign up for USDA-CFAP Direct Support to Begin May 26, 2020

Ben Brown, Peggy Kirk Hall, David Marrison, Dianne Shoemaker and Barry Ward
The Ohio State University

Since the enactment of the Coronavirus Aid, Relief, and Economic Security (CARES) Act on March 27, 2020 and the announcement of the Coronavirus Food Assistance Program (CFAP) on April 17, 2020, producers in Ohio and across the country have been anxiously awaiting additional details on how the Coronavirus Food Assistance Program (CFAP) will provide financial assistance for losses experienced as a result of lost demand, short-term oversupply and shipping pattern disruptions caused by COVID-19.

The additional details on CFAP eligibility, payment limitations, payment rates, and enrollment timeline arrived on May 19, 2020, when the USDA issued its Final Rule for CFAP.  In this article, we explain the Final Rule in this issue of News from the Farm Office.

Click here to read the complete article

Starting Tuesday, May 26, 2020, producers can contact their local FSA office and begin to sign up for CFAP.  This bulletin serves as the authors’ interpretations of the Final Rule released by USDA, and FSA interpretation may be different.

OSU Extension and Ohio FSA will conduct a webinar in the upcoming days to outline program materials and answer questions. For information about the webinar and additional information on CFAP, please visit farmoffice.osu.edu.

Information provided on the program by USDA along with a webinar for new FSA program participants is available at farmers.gov/CFAP.

Ohio Corn, Soybean and Wheat Enterprise Budgets – Projected Returns for 2020

by: Barry Ward, Leader, Production Business Management, College of Food, Agricultural and Environmental Sciences, Ohio State University Extension

COVID-19 has created an unusual situation that has negatively affected crop prices and lowered certain crop input costs. Many inputs for the 2020 production year were purchased or the prices/costs were locked in prior to the spread of this novel coronavirus. Some costs have been recently affected or may yet be affected. Lower fuel costs may allow for lower costs for some compared to what current budgets indicate.

Production costs for Ohio field crops are forecast to be largely unchanged from last year with lower fertilizer expenses offset by slight increases in some other costs. Variable costs for corn in Ohio for 2020 are projected to range from $359 to $452 per acre depending on land productivity. Variable costs for 2020 Ohio soybeans are projected to range from $201 to $223 per acre. Wheat variable expenses for 2020 are projected to range from $162 to $198 per acre.

Returns will likely be low to negative for many producers depending on price movement throughout the rest of the year. Grain prices used as assumptions in the 2020 crop enterprise budgets are $3.20/bushel for corn, $8.30/bushel for soybeans and $5.10/bushel for wheat. Projected returns above variable costs (contribution margin) range from $109 to $240 per acre for corn and $179 to $337 per acre for soybeans. Projected returns above variable costs for wheat range from $152 to $262 per acre.

Return to Land is a measure calculated to assist in land rental and purchase decision making. The measure is calculated by starting with total receipts or revenue from the crop and subtracting all expenses except the land expense. Returns to Land for Ohio corn (Total receipts minus total costs except land cost) are projected to range from -$48 to $72 per acre in 2020 depending on land production capabilities. Returns to land for Ohio soybeans are expected to range from $65 to $214 per acre depending on land production capabilities. Returns to land for wheat (not including straw or double-crop returns) are projected to range from $70 per acre to $173 per acre.

Total costs projected for trend line corn production in Ohio are estimated to be $759 per acre. This includes all variable costs as well as fixed costs (or overhead if you prefer) including machinery, labor, management and land costs. Fixed machinery costs of $75 per acre include depreciation, interest, insurance and housing. A land charge of $187 per acre is based on data from the Western Ohio Cropland Values and Cash Rents Survey Summary. Labor and management costs combined are calculated at $67 per acre. Details of budget assumptions and numbers can be found in footnotes included in each budget.

Total costs projected for trend line soybean production in Ohio are estimated to be $517 per acre. (Fixed machinery costs: $59 per acre, land charge: $187 per acre, labor and management costs combined: $46 per acre.)

Total costs projected for trend line wheat production in Ohio are estimated to be $452 per acre. (Fixed machinery costs: $34 per acre, land charge: $187 per acre, labor and management costs combined: $41 per acre.)

Current budget analyses indicates favorable returns for soybeans compared to corn but crop price change and harvest yields may change this outcome. These projections are based on OSU Extension Ohio Crop Enterprise Budgets. Newly updated Enterprise Budgets for 2020 have been completed and posted to the Farm Office website: https://farmoffice.osu.edu/farm-mgt-tools/farm-budgets

 

 

Being and Maintaining an Economically Resilient Farm

by: Chris Zoller, Extension Educator, ANR, Tuscarawas County

The word “resilience” is used often in the agricultural press.  What does this mean?  Merriam-Webster defines resilience as:

  1. The capability of a strained body to recover its size and shape after deformation caused especially by compressive stress.
  2. An ability to recover from or adjust to misfortune or change.

We often see resilience used in agriculture when discussing climate and weather.  There is documented evidence of weather changes that have impacted agriculture, and farmers have done their best to adapt to these changes.  Examples include building soil health, managed grazing, the use of cover crops, water management strategies, technology adoption, and more.

Resilience can also be used when discussing the economics of agriculture and the resulting effects.  It is no surprise to anyone in agriculture that people are strained, are experiencing stress, and are trying to adjust to new and different ways of operating.

Strategies to Be Economically Resilient

  • Mission statement

A mission statement is a short description of the fundamental reasons your business exists – its critical purpose.  The statement aligns what the business says it does, what it actually does, and what others believe it is about.  The statement reflects the underlying values, goals, and purposes of the business.

Example mission statement:

“The mission of Brown Family Farms is to produce high-quality crops in sufficient quantity and quality to provide a good standard of living for our family and employees.  We believe a farm is the perfect environment to raise a family and strive to have the farm remain a viable business for future generations.”

  • Set Goals

An acronym commonly used to describe goals is SMART.  Goals must be Specific, Measurable, Action-oriented, Realistic, and Timed to be useful management tools.  As you develop goals, it may be helpful to divide them into personal, production, and operational categories.

Goals should be:

Specific – and focus on a specific problem or need

Measurable – to have some means of tracking achievement

Action-oriented – action is the pathway to achieving goals

Realistic – aim high, but keep goals within the realm of possibility

Timed – to include a realistic completion date

  • Know Your Cost of Production

Do you know the true costs to produce every acre of a crop, every pound of milk, every ton of hay, and each pound of meat?   Are there some crops or livestock that make more money than others?  Are there some acres that could be converted to a use that provides a higher net return?  How does your farm compare with the established farm financial ratios?  An in-depth financial analysis can help answer these and other questions.

Visit the Ohio State University Extension Farm Profitability Program (https://farmprofitability.osu.edu/) for additional information or to enroll in the Benchmarking Program.

  • Postpone Major Capital Investments

Most everyone is already doing this, but it is a good idea to assess what investments are necessary, how urgent these needs are for your farm, and the cost of these investments.  Do you really need to buy a new piece of equipment?  Could you accomplish what is needed by hiring someone or renting the equipment?  If you need to make a major capital investment, consider not only the initial cost, but the associated “DIRTI 5” – Depreciation, Interest, Repairs, Taxes, and Insurance that must be accounted for after the purchase.

  • Restructure Debt

Discuss with your lender opportunities to refinance or restructure debt.  Do you have short-term liabilities that could be moved to intermediate notes to improve cash flow?

  • Evaluate Expenditures

Analyze your expenses to see where you might be able to trim costs without sacrificing production.  For example, can you reduce your seeding rates to reduce costs?  Ohio State University Extension has been conducting on-farm research to evaluate corn and soybean seeding rates.  Contact your Extension educator or review the trials reports here https://digitalag.osu.edu/efields/efields-reports.  Dairy farms will find helpful information and cost-control considerations here https://dairy.osu.edu/.

Talk with your nutritionist, agronomist, Extension educator, and other experts to evaluate inputs and expenditures.  Do you need every ingredient in your ration?  Do you need a seed variety with every available trait?

  • Reduce Family Living Expenses

The Bureau of Labor Statistics data from 2018 indicate average family living expenses equaled $61,224 annually.   A February 2019 article published by the Center for Farm Financial Management at the University of Minnesota show a family of three averages almost $64,000 annually in family living expenses before paying income taxes or making other non-farm capital purchases and investments.  Are there “extras” that are costing too much?  Evaluate what you want versus what you need as a family.

  • Consider Non-Farm Income

The current pandemic may make finding off-farm employment more difficult, but there are opportunities.  Look in the local newspaper, conduct online searches, let family and friends know you or a family member could use help finding employment.  Calculate how much you need to earn at an off-farm job.

  • Seek Opportunities to Be Entrepreneurial

 Challenging times might not seem like the opportunity to get creative and extend the current workload further, but there likely are tangential opportunities to your existing business that meet the needs of the community. Maybe that is offering storage facilities, tree trimming, bookkeeping, or other enterprises. This can reenergize someone in a time when it is easy to feel down and creates a productive diversion. Some of the best creative work in this country came from a less than opportune economic environment.

  • Don’t Be Afraid to Ask for Help

To say that operating a farm business in today’s environment is a challenge is an understatement!  There are plenty of people who want and are available to help you sort through the complexities, answer questions, and provide guidance to help you succeed.

References

Bureau of Labor Statistics, Consumer Expenditures – 2018,  https://www.bls.gov/news.release/cesan.nr0.htm

Characteristics of Financially Resilient Farms, University of Nebraska, https://cropwatch.unl.edu/2018/characteristics-financially-resilient-farms

Developing Goals for the Agricultural Business, Ohio State University Extension, https://ohioline.osu.edu/factsheet/anr-45

Family Living Expenses Add Up, Center for Farm Financial Management, University of Minnesota, https://finpack.umn.edu/family-living-expenses-add-up/

Whole Farm Planning Model, Ohio State University Extension, https://ohioline.osu.edu/factsheet/anr-52

Farmers and 1099 filers might qualify for new COVID-19 unemployment benefits program

by: Peggy Kirk Hall

Farmers aren’t traditionally eligible for unemployment benefits, but that won’t be the case when Ohio’s newest unemployment program opens.   We’ve been keeping an eye out for the opening of the Pandemic Unemployment Assistance (PUA) program, which will provide unemployment benefits to persons affected by COVID-19.  The program is targeted to persons who are not eligible for regular unemployment benefits, such as self-employed and 1099 filers.   PUA is yet another economic assistance program generated by the Coronavirus Aid, Relief and Economic Security (CARES) Act recently passed by Congress.

PUA will provide regular unemployment benefit amounts to qualifying individuals, plus an additional $600 per week for the period of March 29 to July 25, 2020.   Qualification doesn’t include a minimum income requirement, but a person must not be eligible for Ohio’s regular unemployment benefits and must not be currently receiving vacation, sick or other paid leave.  The applicant must also be unable to work due to one of the following situations:

  • The applicant has been diagnosed with COVID-19 or has symptoms and is seeking medical diagnosis;
  • A member of the applicant’s household has been diagnosed with COVID-19;
  • The applicant is providing care for a family or household member who has been diagnosed with COVID-19;
  • The applicant cannot work due to caring for a child whose school or other facility has closed due to COVID-19;
  • The applicant has become the primary support for a household because the head of the household has died due to COVID-19;
  • The applicant has quit his or her job, was laid off, or could not begin a new job as a direct result of COVID-19;
  • The applicant’s place of employment is closed because of COVID-19.

Applications should open by mid-May, on the Ohio Department of Job and Family Services website.  Self-employed individuals will have to submit proof of employment, such as earnings statements that reflect profit and loss, payroll deposits, or a 2019 tax return.  The unemployment benefits will be retroactive to the date of eligibility and will last for no more than 39 weeks, up to December 26, 2020.  PUA may also provide an additional 13 weeks of benefits for those who’ve exhausted regular unemployment benefits.  To learn more or apply for PUA, visit https://unemploymenthelp.ohio.gov/expandedeligibility/.

Farm Office Live Session Slated for Thursday, May 14 from 9:00 to 10:30 a.m.

OSU Extension is pleased to be offering the a “Farm Office Live” session on Thursday morning , May 14 from 9:00 to 10:30 a.m.  Farmers, educators, and ag industry professionals are invited to log-on for the latest updates on the issues impact our farm economy.

The session will begin with the Farm Office Team answering questions asked over the ten days.  Topics to be highlighted include:

  • Updates on the CARES Act, Payroll Protection Program, Economic Injury Disaster Loan (EIDL), and Coronavirus Food Assistance Program (CFAP) Update
  • Corn and soybean budgets
  • Supply and demand balance sheets
  • Other legal and economic issues

Plenty of time has been allotted for questions and answers from attendees. Each office session is limited to 500 people and if you miss the on-line office hours, the session recording can be accessed at farmoffice.osu.edu the following day.  Participants can pre-register or join in on Thursday morning at  https://go.osu.edu/farmofficelive 

Paid Sick Leave and COVID-19: Requirements & Tax Credits Under the Families First Coronavirus Response Act

Written by Barry Ward, Leader, Production Business Management and Director, OSU Income Tax Schools

In our recent Farm Office Live webinars, we’ve discussed the paid sick leave provisions in the Families First Coronavirus Response Act.  The new law recognizes that many employees have been forced by COVID-19 to stay home rather than report to work.  In such cases, the law obligates employers to provide paid sick leave but also gives federal tax credits to employers for doing so.  Here’s a summary of how the law works.

Emergency paid sick leave provision

Employers with less than 500 employees are required to provide paid sick leave to employees who are unable to work (or telework) if they have become ill with COVID-19, have similar symptoms, or must provide care to someone with COVID-19 issues.  Employees who have to care for children due to school or day care closure are also eligible for partial paid sick leave. Employers are required to provide 100 percent of the usual pay rate to an employee if they have COVID-19 or the related symptoms, up to $511 per day. If they’re unable to work due to the need to care for an affected individual or to care for children due to school or daycare closure, the employee must be paid 2/3rds of their usual pay rate up, up to $200 per day.

Capture

Expanded family leave provision

A second provision, the expanded family leave provision, requires employers to provide employees with up to 12 weeks of leave for COVID-19-related needs.  This leave requirement applies to employees who are unable to work due to having to care for children whose school or daycare is closed or unavailable because of COVID-19.   The first ten days of the expanded family leave are unpaid (a deductible of sorts), although the employee can use the “emergency paid sick leave provision” or accrued sick leave to cover these days if necessary.  After the first ten days, the employee is eligible to receive 2/3rd of regular pay for the remaining ten weeks, capped at $200 per day.

Note that employers with fewer than 50 employees are eligible for an exemption where the viability of the business would be threatened.  The exemption applies to the requirements to provide leave to care for a child whose school is closed or if child care is unavailable.

Employer tax credits to fully compensate for required leave

This new law provides corresponding refundable tax credits to equal all required leave provided by an employer whether the leave was required and provided under the emergency paid sick provision or the expanded family leave provision.  The credits are refundable payroll tax credits, designed to immediately and fully reimburse employers, dollar-for-dollar, for the cost of providing the required leave to their employees.

To receive the credit, employers hold on to payroll withholding as offset. Payroll withholding that can be held as this tax credit includes withheld federal income taxes, the employee share of Social Security and Medicare taxes, and the employer share of Social Security and Medicare taxes with respect to all employees.  If this amount isn’t enough to provide the full tax credit due the employer, the employer will have to file a return with the IRS.  More information on how to claim these credits is available at: https://www.irs.gov/newsroom/covid-19-related-tax-credits-how-to-claim-the-credits-faqs

Additional details are available on the U.S. Department of Labor’s “Families First Coronavirus Response Act: Employer Paid Leave Requirements” page, here: https://www.dol.gov/agencies/whd/pandemic/ffcra-employer-paid-leave