As you know, information about tax programs is changing a lot. We are publishing weekly updates. There are many programs available to help you deal with this epidemic. However, not all programs are good for everyone.
As a business owner, you need to pay attention and determine which program will have the best impact on your business.
Our offices are virtually open to help you navigate these programs.
We will talk about:
- Various Deadlines and Extensions
- Tax Rebates
- COVID-19 Payroll Tax Credits
- Cash Payments To Businesses In Distress
- and other Covid 19 programs
Various bills has been introduced and more help is on its way but here is what we know for sure today.
- Paycheck Protection Program: A $350 billion loan program for small businesses to pay for expenses like rent, mortgage, and utilities.
- Funding for Disaster Loans and Grants: An additional $10 billion in funding for SBA Economic Injury Disaster Loans (EIDL), with emergency grants of up to $10,000 to provide immediate relief for small business operating costs.
- Debt Relief for existing SBA loans: $17 billion for the Small Business Administration (SBA) to cover 6 months of payments for small businesses with existing SBA loans, including 7(a), Community Advantage, 504, and Microloan programs.
The CARES Act requires that SBA enact these programs with regulations within 15 days. See below for more details on the CARES Act, and check back for updates on how to take advantage of these programs.
Financial relief options include
- Coronavirus Aid, Relief, and Economic Security (CARES) Act
- Small Business Administration (SBA) Economic Injury Disaster Loan (EIDL) assistance for COVID-19
- State by State Stimulus Packages & Policies
Paycheck Protection Program: Small Business Loans
- The Paycheck Protection Program is a $350 billion loan program that applies to:
- Small employers with 500 employees or fewer, as well as those that meet the current Small Business Administration (SBA) size standards
- Self-employed individuals and “gig economy” individuals; and
- Certain nonprofits, including 501(c)(3) organizations and 501(c)(19) veteran organizations, and tribal business concerns with under 500 employees.
- Loan amount: The size of the loans equal 250% of an employer’s average monthly payroll, up to a maximum loan amount of $10 million.
- Use of funds:
- Covered payroll costs include salary, wages, and payment of cash tips (up to an annual rate of pay of $100,000); employee group health care benefits, including insurance premiums; retirement contributions; and covered leave.
- Loans can also be used to pay interest payments on mortgage obligations, rent, utilities, and interest on other debt obligations previously incurred.
- Reduced costs: The cost of participation in the program is reduced for both borrowers and lenders by providing fee waivers, an automatic deferment of payments for one year, and no prepayment penalties.
- Availability: Loans are to be made available immediately through more than 800 existing SBA-certified lenders, including banks, credit unions, and other financial institutions, and SBA would be required to streamline the process to bring additional lenders into the program.
- SBA Express Loans: The maximum loan amount for SBA Express loans has been increased from $350,000 to $1 million. Express loans provide borrowers with revolving lines of credit for working capital purposes.
Tax Provisions for Small Businesses
- Employee Retention Tax Credit: This provision provides a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 crisis. The credit is available to employers whose (1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or (2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
- Employer Payroll Tax Delay: This provision allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees.
- Modification For Net Operating Losses: This provision relaxes the limitations on a company’s use of losses. Net Operating Losses (NOL) are currently subject to a taxable-income limitation, and they cannot be carried back to reduce income in a prior tax year. The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years.
- Modification of Limitation On Business Interest: The provision temporarily increases the amount of interest expense businesses are allowed to deduct on their tax returns, by increasing the 30-percent limitation to 50 percent of taxable income (with adjustments) for 2019 and 2020.
Individual Taxpayer and Unemployment Relief
- Recovery Rebates: One-time checks of $1,200 to Americans with adjusted gross income up to $75,000 for individuals and $150,000 for married couples. Individuals and couples are eligible for an additional $500 per child.
- Pandemic Unemployment Assistance: Temporary Pandemic Unemployment Assistance program through December 31, 2020 to provide payment to those not traditionally eligible for unemployment benefits (self-employed, independent contractors, those with limited work history, and others) who are unable to work as a direct result of the coronavirus public health emergency.
- Increased Unemployment Benefits: Additional $600 per week payment to each recipient of unemployment insurance or Pandemic Unemployment Assistance for up to four months.
- Paid Leave Provisions: Limits employer paid leave obligations to no more than $200 per day and $10,000 in aggregate for each employee covered. Caps for emergency paid sick leave are $511 per day and $5,110 in aggregate per employee. Employees laid off after March 1, 2020 are required to have access to paid family and medical leave if they are rehired by the employer. The bill allows employers to receive an advance payroll tax credit for required paid sick leave.
On March 6, the U.S. Congress passed a COVID-19 preparedness and response supplemental funding bill that designated COVID-19 as a disaster under the Small Business Administration (SBA) and provided $20 million to support the SBA’s administration of loan subsidies to small businesses of up to $2 million per loan. On March 27, Congress passed the CARES Act, adding $10 billion to the loan program and waiving or relaxing several loan eligibility requirements.
- Loans offer up to $2 million in assistance and can provide vital economic support to small businesses to help overcome the temporary loss of revenue they are experiencing.
- Loans for businesses will have an interest rate of 3.75%, and for nonprofits a rate of 2.75%.
- SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.
- Terms of the loans are decided on a case-by-case basis and on ability to repay, but they can have a maximum length of 30 years, and are based on a business’ actual economic injury and financial needs.
- Loans can be approved on the basis of a credit score; tax returns are no longer required.
- For loans under $200,000, the requirement for personal collateral is waived.
- The SBA will make $10,000 advances to applicants within 3 days of applying to support payroll, sick leave, and other debt obligations; these amounts are not subject to repayment obligations.
- For existing SBA loans, the government is providing $17 billion to pay all principal, interest, and fees, for six months, to small businesses negatively impacted by COVID-19.
- SBA loans may be subject to other rules; check the SBA website for the most current program information.
Qualifying for an EIDL loan
Be sure to consult the EIDL loan application forms for specific requirements, but in general, you must be a registered for-profit business; be physically located and operates in the U.S. or its territories; and have invested your own time or money into the business
Applying for an EIDL loan
You can apply online on the SBA Disaster website. You’ll need the following:
- Business plan
- Amount and proposed use of funds
- Credit history
- Financial projections, and how you will pay back the loan
- Collateral, such as a home, car, inventory, or other property you own, for loans over $200,000
- Industry experience, while not required, can drive lender confidence
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