Tax Updates Due To COVID-19
TAX UPDATES DUE TO COVID-19
Please note that the filing AND payment due date for 2019 income tax returns from April 15 to July 15 2020. Federal estimated income tax payments (including payments on self-employed income) have also been delayed from April 15 to July 15.
PPP: Paycheck Protection Program Updates - Apply by June 30
The Paycheck Protection Program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll.
SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities.
You can apply through any existing SBA 7(a) lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating in the program.
The following entities affected by Coronavirus (COVID-19) may be eligible:
- Any small business concern that meets SBA’s size standards (either the industry based sized standard or the alternative size standard)
- Any business, 501(c)(3) non-profit organization, 501(c)(19) veterans organization, or Tribal business concern (sec. 31(b)(2)(C) of the Small Business Act) with the greater of:
- 500 employees, or
- That meets the SBA industry size standard if more than 500
- Any business with a NAICS Code that begins with 72 (Accommodations and Food Services) that has more than one physical location and employs less than 500 per location
- Sole proprietors, independent contractors, and self-employed persons
Under the new rules, the loan will be fully forgiven if the funds are used for payroll costs, interest on mortgages, rent, and utilities (due to likely high subscription, at least 60% of the forgiven amount must have been used for payroll). Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees.
- This loan has a maturity of 5 years and an interest rate of 1%.
Borrowers now may use the money over a 24-week period, rather than the 8-week period set in the first legislation.
In addition, your loans can be forgiven even if you don’t bring back the same number of employees. And business owners now must use 60% of the money on payroll, down from 75%. The law also gives you more time to apply for loan forgiveness. The new deadline is Dec. 31, a pushback of six months.
Employee Retention Credit
A notable Business Provision of the Coronavirus relief bill is the Employee Retention Credit for Employers Subject to Closure Due to COVID-19.
Under this provision, all eligible employers are permitted to claim a 50% credit against wages paid.
This Credit is available for $10,000 of compensation, including health benefits, paid to an eligible employee. Eligible employers with 500 or fewer full-time employees, all employee wages qualify for the credit, whether the employer is open for business or subject to a shut-down order.
SBA loans will be awarded for 2.5 times your monthly business expenses, including payroll expenses, rent, utilities, mortgage payments, etc. Immediate relief is also available in the form of a $10k grant that businesses will not be required to pay back.
In order to receive the $10,000 grant, you must apply for an Economic Injury Disaster Loan. $10 billion of the $2 trillion coronavirus relief bill is available, meaning only 1 million businesses across the country will receive the grant.
Please note that even if you do not qualify for the SBA loan, you may still be awarded the $10k grant. You can do this by visiting SBA.gov and clicking the yellow banner at the top of the screen as seen in the first picture.
The first page of the application will test your eligibility. To qualify for the $10,000 advance, you must be able to select the first or second option by owning a business with no more than 500 employees, or you are an individual with a sole proprietorship, with or without employees, or as an independent contractor. You must also check all of the options in the lower box.
On the next few pages, you will be asked for information about your business as well as the owners. Information you should have on hand before completing these pages are your EIN or SSN for sole proprietorship, the date your business was established, and your gross sales for the period between February 2019 and January 2020. If your business has Costs of Goods Sold, you will need this information for the same period.
If your business is a multimember LLC or multimember Corporation, you will need to know each member’s percentage of ownership as well as their information.
On the Additional Information page, you must select the box that says: I would like to be considered for an advance of up to $10,000. You will then enter your banking information to receive the funds and submit the application.
Please click to enlarge the photos below.
Coronavirus Aid, Relief, and Economic Recovery (CARES) Act
Included in the $2 trillion coronavirus relief bill, the Coronavirus Aid, Relief, and Economic Recovery (CARES) Act, is a provision that provides a ‘Recovery Rebate” in the sum of $1,200 for each taxpayer ($2,400 for joint returns) PLUS $500 for every qualifying child.
These checks start to phase out for those earning more than $75,000 ($150,000 for joint returns and $112,500 for head of household). For every $100 of income above those thresholds, your check will drop by $5. (A single filer earning $75,100, your check will be $1,155 ($1,200-$5) and so on)
This amount phases out completely for those single filers making $99,000, married couples filing jointly who make $198,000, and head of households making $146,500.
The IRS is basing these amounts on the taxpayer’s 2019 tax return, or 2018 tax return if 2019 is not yet filed. If there has been no filing for either year, the rebate will be calculated based on information provided by Form SSA-1099 or RRB-1099, the 2019 Social Security Benefit Statement.