Mar 29 2020
As you know the CARES Act was signed into law. The bill contains a lot of assistance that may be available to you. Many of you may have questions, so I have tried to answer most of them in this newsletter.
If you have a question that I did not answer, please email us at firstname.lastname@example.org, and we will get you an answer!
I will try not to bombard your inbox, but thought you might find this information helpful! It is a confusing time, so I want you to know that my office and I are available to you.
Stay home and stay healthy!
What is the amount of funding families and individuals will receive in stimulus payments under the new law?
The law provides $1,200 for each adult and $500 for each child under 17. A married couple with two children would receive $3,400. Most people will receive the money in a payment from the Internal Revenue Service (IRS) soon.
How will I know where my stimulus payment was sent?
You will receive a paper notice in the mail no later than a few weeks after your payment has been disbursed. This notice will contain information about where the payment was deposited and in what form it was made. If you cannot locate the payment at that point, please contact the IRS using the information provided on the notice.
Who qualifies for the stimulus payments?
Any adult with a Social Security number will receive a payment, as long as they are not dependents of someone else. Adults will receive the payments for the children in their household. Payments begin phasing out for individuals who have an adjusted gross income above $75,000, for heads of household (often single parents) at $112,500 and for married couples at $150,000. The payments are reduced by 5% of the individual or couple’s income above those levels. Individuals with no children with incomes over $99,000 and married couples with no children with incomes over $198,000 will not qualify for a stimulus payment.
Will most people who are receiving Social Security retirement and disability payments each month also receive a stimulus payment?Yes.
Will eligible unemployed people receive these stimulus payments? Will Veterans receive these payments?
Yes and yes.
When will the stimulus payment arrive?
US Treasury Secretary Steven Mnuchin explained the IRS may possibly start issuing payments within three weeks. However, the IRS has not announced a schedule. Individuals or families who have filed 2019 tax returns with direct-deposit information will receive their payments faster than those who will need paper checks. The IRS will provide updated information on its website about the process but is urging citizens to not call yet with questions until the process is finalized.
Will I have to apply to receive my stimulus payment?
No. If the IRS already has your bank account information, it will transfer the money to you via direct deposit based on the recent income-tax figures it already has.
How does the IRS determine whether you are receiving a payment and the amount you receive?
The government will use 2019 tax returns to set the payment amounts and 2018 tax returns if the individual has not filed yet for 2019. Individuals and families who have not filed tax returns can still file for 2019 to make sure the government has their updated income and bank-account information, as well as 2019 information about recent births, deaths, marriages, divorces and moves. Any changes that occurred after 2019 will not be reflected in the payments, however.
The IRS also will work with The Social Security Administration to obtain information for individuals who receive benefits but do not typically file tax returns. So these individuals may not need to file tax returns to claim this payment. The IRS will provide more details pertaining to this situation.
What if I expect my 2020 income to be substantially different than my 2019 or 2018 income?
The advanced stimulus payments will be determined based on 2019 income (or 2018 income if that is all that is available to the IRS) and the final amount of the benefits will be determined based on 2020 income and settled on the 2020 tax return. So individuals who ultimately qualify for more money than they receive this year—a person whose income drops from $100,000 to $70,000, for example—would receive the rest through a larger tax refund or smaller tax payment in early 2021. But for those who ultimately qualify for less money than they received this year—a person whose income rises from $70,000 to $100,000—may keep the advance payment and will not have to pay it back.
What if a child was listed as a dependent in 2018, but is filing separately in 2019?
If 2019 tax returns have already been filed, the IRS will issue stimulus payments based off that information. If the former dependent has not filed a 2019 return, there may still be time to update the information with the IRS if they file their return promptly. If they do not update in time to receive a stimulus payment, the credit will be applied to their 2020 return when they file in early 2021.
Besides those who make above the income threshold for the payments, is there anyone who doesn’t get a payment?
You must have a Social Security number to receive a payment. Also, if you are a dependent on someone else's tax return and you are not a child, you do not receive a payment. That will preclude payments for some elderly adults as well as students over age 16.
Are the payments taxable income?
No. They will not be considered as income on your tax returns.
What about taxpayers who owe money to the IRS for prior years?
Other IRS liabilities will not come out of these stimulus payments and even individuals who owe back taxes should receive the full amount they qualify for under the new law.
Current IRS rules for child support and tax refunds will apply. Therefore, refunds for taxpayers who are behind on those payments may be reduced.
If I have a child in 2020, will I receive the $500 payment?
Parents of children born in 2020 won’t get a payment for that child now. However, assuming they qualify based on their 2020 income, they will get $500 added to their tax refund or subtracted from their income-tax bill when they file their 2020 tax returns in early 2021.
If my income tax refunds are currently being garnished because of a student loan default, will this payment be garnished as well?
No. This law temporarily suspends nearly all efforts to garnish tax refunds to repay debts, including those to the IRS itself.
Small Business Loans
What is a disaster relief loan?
The disaster loan program from the SBA is in place to provide economic relief to businesses impacted by natural disasters throughout the United States. The program is used extensively after detrimental events where businesses can receive low-interest loans to get back on their feet.
Where can I apply for the Paycheck Protection Program?
You can apply for the Paycheck Protection Program (PPP) at any lending institution that is approved to participate in the program through the existing U.S. Small Business Administration (SBA) 7(a) lending program and additional lenders approved by the Department of Treasury. This could be the bank you already use, or a nearby bank. There are thousands of banks that already participate in the SBA’s lending programs, including numerous community banks. You do not have to visit any government institution to apply for the program. You can call your bank or find SBA-approved lenders in your area through SBA’s online Lender Match tool. You can call your local Small Business Development Center or Women’s Business Center and they will provide free assistance and guide you to lenders.
Who is eligible for the loan?
You are eligible for a loan if you are a small business that employs 500 employees or fewer, or if your business is in an industry that has an employee-based size standard through SBA that is higher than 500 employees. In addition, if you are a restaurant, hotel, or a business that falls within the North American Industry Classification System (NAICS) code 72, “Accommodation and Food Services,” and each of your locations has 500 employees or fewer, you are eligible. Tribal businesses, 501(c)(19) veteran organizations, and 501(c)(3) nonprofits, including religious organizations, will be eligible for the program. Nonprofit organizations are subject to SBA’s affiliation standards. Independently owned franchises with under 500 employees, who are approved by SBA, are also eligible. Eligible franchises can be found through SBA’s Franchise Directory.
I am an independent contractor or gig economy worker, am I eligible?
Yes. Sole proprietors, independent contractors, gig economy workers, and self-employed individuals are all eligible for the Paycheck Protection Program.
What is the maximum amount I can borrow?
The amount any small business is eligible to borrow is 250 percent of their average monthly payroll expenses, up to a total of $10 million. This amount is intended to cover 8 weeks of payroll expenses and any additional amounts for making payments towards debt obligations. This 8 week period may be applied to any time frame between February 15, 2020 and June 30, 2020. Seasonal business expenses will be measured using a 12-week period beginning February 15, 2019, or March 1, 2019, whichever the seasonal employer chooses.
How can I use the money such that the loan will be forgiven?
The amount of principal that may be forgiven is equal to the sum of expenses for payroll, and existing interest payments on mortgages, rent payments, leases, and utility service agreements. Payroll costs include employee salaries (up to an annual rate of pay of $100,000), hourly wages and cash tips, paid sick or medical leave, and group health insurance premiums. If you would like to use the Paycheck Protection Program for other business-related expenses, like inventory, you can, but that portion of the loan will not be forgiven.
When is the loan forgiven?
The loan is forgiven at the end of the 8-week period after you take out the loan. Borrowers will work with lenders to verify covered expenses and the proper amount of forgiveness.
What is the covered period of the loan?
The covered period during which expenses can be forgiven extends from February 15, 2020 to June 30, 2020. Borrowers can choose which 8 weeks they want to count towards the covered period, which can start as early as February 15, 2020.
How much of my loan will be forgiven?
The purpose of the Paycheck Protection Program is to help you retain your employees, at their current base pay. If you keep all of your employees, the entirety of the loan will be forgiven. If you still lay off employees, the forgiveness will be reduced by the percent decrease in the number of employees. If your total payroll expenses on workers making less than $100,000 annually decreases by more than 25 percent, loan forgiveness will be reduced by the same amount. If you have already laid off some employees, you can still be forgiven for the full amount of your payroll cost if you rehire your employees by June 30, 2020.
Am I responsible for interest on the forgiven loan amount?
No, if the full principal of the PPP loan is forgiven, the borrower is not responsible for the interest accrued in the 8-week covered period. The remainder of the loan that is not forgiven will operate according to the loan terms agreed upon by you and the lender.
What are the interest rate and terms for the loan amount that is not forgiven?
The terms of the loan not forgiven may differ on a case-by-case basis. However, the maximum terms of the loan feature a 10-year term with interest capped at 4 percent and a 100 percent loan guarantee by the SBA. You will not have to pay any fees on the loan, and collateral requirements and personal guarantees are waived. Loan payments will be deferred for at least six months and up to one year starting at the origination of the loan.
When is the application deadline for the Paycheck Protection Program?
Applicants are eligible to apply for the PPP loan until June 30th, 2020.
I took out a bridge loan through my state, am I eligible to apply for the Paycheck Protection Program?
Yes, you can take out a state bridge loan and are still be eligible for the PPP loan.
If I have applied for, or received an Economic Injury Disaster Loan (EIDL) related to COVID-19 before the Paycheck Protection Program became available, will I be able to refinance into a PPP loan?
Yes. If you received an EIDL loan related to COVID-19 between January 31, 2020 and the date at which the PPP becomes available, you would be able to refinance the EIDL into the PPP for loan forgiveness purposes. However, you may not take out an EIDL and a PPP for the same purposes. Remaining portions of the EIDL, for purposes other than those laid out in loan forgiveness terms for a PPP loan, would remain a loan. If you took advantage of an emergency EIDL grant award of up to $10,000, that amount would be subtracted from the amount forgiven under PPP.