This article starts with the Stimulus Bill which is still a work in progress. Although it has been approved by Congress and signed off by the President, parts of it are still be ironed out. After the Stimulus Bill section, you’ll find the rest of the guidance that was previously passed. I’ve included useful links as well. This article is a living document that is being updated as we receive guidance and clarity. Learn what the heck is happening with the Covid-19 relief efforts below and check back often for updates.
Last Updated: April 17th, 2020
Stimulus Bill – The CARES Act
March 28th – Yesterday the President signed off on the Congress approved $2.2 trillion stimulus package known as the CARES Act. The 883-page bill includes the following highlights.
Most Americans will receive a single-payment stimulus check or direct deposit – $1,200 per adult and $500 per child/dependent. There are income limits where these payments will decrease and eventually phase-out. The IRS will use your 2019 tax return to determine your stimulus payment amount. If you haven’t filed your 2019 tax return, they’ll use your 2018 tax return. Nothing else needs to be done on the taxpayer’s end; the payments will automatically be sent out. The Treasury Secretary states that taxpayers will begin to receive these payments in 3 weeks.
LBA bonus tip: If you haven’t filed your 2019 OR 2018 tax returns, you run the risk of missing out on your stimulus payments, so get that done as soon as possible. If you were over the income threshold in 2018 and made less in 2019, you should file your 2019 return ASAP to get a higher amount in your stimulus check.
April 17th, 2020 update: Taxpayers have started to see stimulus payments deposited into their bank accounts. You can check the status of your payment and update your bank information on the IRS website that went live today, https://www.irs.gov/coronavirus/get-my-payment
Expanded Unemployment Benefits
The expanded program will cover self-employed people, part-time workers… essentially anyone who is unemployed, partially unemployed and/or who cannot work for a wide variety of coronavirus-related reasons will receive benefits! The amount you will receive still depends on your state, but the CARES Act has provided for an additional $600/week above and beyond the state amounts for those who are laid off due to Covid-19 related reasons. Despite expanded coverage to include the self-employed (including “gig” workers), it still doses not cover you if you quit your job.
April 17th, 2020 – Some states have started rolling out the additional payments and the expanded benefits to the self-employment but many have not. Check your state’s website for updates on when they will be ready to process applications under the expanded PUA rules.
Small Business SBA Loans & Grants
The CARES Act includes $349 billion specifically earmarked to help small businesses who are suffering COVID-19 hardships. These funds will be made available to small businesses through loans, of which much will NOT be required to be repaid provided certain conditions are met. We are talking potentially free money, y’all!
Let’s start with the SBA Economic Injury Disaster Loans. These will be working capital loans of up to $2 million given to small businesses suffering revenue losses due to COVID-19. The loans must be used for payroll costs, rent, mortgage, debt or expenses caused by COVID-19. These loans will have low-interest rates and have deferred payments of up to 4 years. WAIT! IT GETS BETTER! The SBA will give your business up to a $10,000 advance if you opt in for the advance. EVEN BETTER….. This advance will not need to be repaid! Even if the rest of your loan is denied, you don’t have to pay this advance back. FREE MONEY!!!!!!
March 30, 2020 update: The application process has been streamlined. The first step takes about 20 minutes and you need very limited information. You don’t even need to put in the total loan amount you are going to be applying for. What you do need to make sure you do is click the button on the last page of the application that says you are opting in for the $10,000 advance. This new application can be found here: https://covid19relief.sba.gov/#/
April 7th, 2020 update: There has been stipulations put on the advance. Small businesses can qualify for an advance amount of $1,000 per employee. The max advance amount is still $10,000. Also, there is uncertainty on when the funds will actually be released to the business owner.
April 17th, 2020 update: Some business owners started to see their advances earlier this week while many are still waiting. In terms of the actual loan itself (not just the advance), some business owners who applied before the streamlined application was released on March 29th have seen their application process proceed and have received EIDL funding. However, those who filed using only the streamlined application have seen their loan process halted. It has also been shared by multiple reliable sources that the original $2 Million loan maximum has been decreased to $15,000.
The next loan program created for small business relief was specifically created to help those companies keep their employees in place. The Paycheck Protection Program will provide loans equivalent to 2.5 months worth of payroll payments up to $10M. The amount will be based on the average of the previous year’s payroll and will exclude any salaries above $100,000. This loan program also has a “BETTER NEWS!” piece to it! The loan will be forgivable in its entirety if the funds are used for payroll, mortgage interest, rent and/or utilities for the 8 week period following receipt of funds. The forgivable amount can be decreased for various reasons including:
- If the employer reduces the number of employees
- If the employer reduces an employee’s pay by more than 25%
LBA bonus tip: While you are able to start completing the application on your own, you will have to find. bank/lender to work with you to get this loan approved. Start by checking with the bank you already use for your business or personal banking. Also, if these funds will allow you to rehire employees, plan on doing so so that you don’t disqualify any amount of your loan from being forgiven.
March 31st, 2020 update: The U.S. Treasury website has been updated to include the PPP application as well as multiple supporting documents to provide additional guidance. Make sure to check out our Facebook group, Money, taxes and finance for small business. We have a few videos and Q&A sessions planned to go over the PPP application.
April 2nd, 2020 update: Small businesses with employees and non-profit organizations can apply for the PPP loan beginning April 3rd. Independent contractors and sole proprietors will be able to apply starting April 10th.
New guidance clarified that independent contractors will NOT count as employees for the purposes of the PPP loan amount calculations because those independent contractors can apply for their own PPP loans.
The interest rate on the PPP loans will be set at 1% with a maturity rate of two years. There will also be a 6 month deferment of payment following the disbursement of the loan.
April 7th, 2020 update: There is still a lot of uncertainty within the banking system, therefore we are seeing delays in processing the applications that have been submitted. Many small businesses are also encountering obstacles finding banks that will work with them on a PPP loan.
April 17th, 2020 update: The originally allocated $349 billion have been allocated and we are awaiting word from Congress who is working to pass a bill that would approve another $250 billion to this program.
Employee Retention Credit
A payroll tax credit available to small businesses to help them retain employees.
- Businesses that have experienced a 50% drop in gross receipts relative to the same quarter last year may qualify for a payroll tax credit worth up to $10,000 per employee so long as they are still paying their employees wages and/or health benefits.
- Even businesses that have furloughed employees due to forced closures under state and local mandates may claim the credit as long as they are still paying their workers wages or health benefits on furlough.
- The credit would reduce the small business’ payroll tax liability and the employer may get an advance on that credit from the IRS.
- The credit would also be refundable, meaning it would still be paid in full even if it exceeds the business owner’s payroll tax liability.
- But there is one caveat: small businesses that opt to claim this credit will not be allowed to apply for the new SBA forgivable loans.
LBA bonus tip: Because taking this credit disqualifies the business from applying for the forgivable loans described above, I’d suggest starting with applying for the loans first.
People First Initiative IR-2020-59, March 25, 2020
The People First Initiative was created to help people facing COVID-19 issues assistance with a variety of issues related to their IRS and taxes. This guidance provides suspension and relief in relation to programs such as installment agreements, Offers in Compromises (OIC), etc.
Corona-virus related paid-sick leave for workers & tax credits for small/mid-sized businesses (IR-2020-57, March 20, 2020)
The Families First Coronavirus Response Act will go into effect on April 2, 2020, with parts being retroactively available. The FFCRA includes a paid-sick leave policy for employers with less than 500 employees. Here are the three scenarios this paid- sick leave covers:
- Employees who are quarantined or sick with COVID-19 will be eligible for two weeks (up to 80 hours) of paid sick leave at 100% of the employee’s pay (up to $511/day for 10 days).
- Employees who are unable to work because they need to care for an individual subject to quarantine or for a child whose school is closed or child care provider is unavailable for reasons related to COVID-19 are eligible for two weeks (up to 80 hours) of paid sick leave at ⅔ of their normal pay (up to $200/day for 10 days).
- Scenario 2 can be expanded by 10 weeks under an extended Family Medical Leave Act (FMLA)
On the employer side, the FFCRA offers payroll credits for covering the above paid-sick leave expenses. At this time it’s uncertain what the time gap (thus the cash flow gap) for receiving this credit will be. This credit is available to self-employed people as well if they have to halt their business due to quarantine, illness or caring for children. We will have to await further guidance on how to actually calculate the wages (and therefore the paid-sick leave amount) for self-employed individuals.
Finally, there are also exemptions to this paid-sick leave policy for certain businesses. We will update as we receive instructions on how to qualify for and apply for these exemptions.
Tax season extended until July 15th, 2020 (IR-2020-58, March 21, 2020)
This new filing date of July 15th, 2020 includes filing returns AND payment of taxes due. The extension is automatic and no extension form needs to be filed. Taxpayers are still encouraged to file on time, especially if they are expecting a refund or need their return completed to get a loan or to ensure they get their full stimulus payment amount. 1st quarter 2020 estimated tax payments are also due on July 15th, 2020.
As for state tax returns, most are following the federal extension, but you should check your state’s Department of Revenue for further guidance.
April 17th, 2020: The 2nd quarter 2020 federal estimated tax payment due date has also been pushed to July 15th, 2020.
If you have questions or need advice for your taxes please contact us here.