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COVID-19 Financial Update 4-2-2020

COVID-19 Financial Update 4-2-2020


We are officially in the “how the heck do we implement this” phase of the initial COVID-19 relief. Let’s knock this out:

  1. Stimulus payments: The stimulus check being sent out is actually an advance of a credit for 2020. They use the info on your 2019 return to determine if you are eligible. If your 2019 return is not available, they will use your 2018 return.  Important note: The threshold for reduction of the payment is $75k for single, and $150 for married filing joint. This is for tax year 2020… If they advance you more than what is due, they are not going to recapture this. Takeaway: If your 2018 is below the threshold, and your 2019 will be above the threshold, wait to file your 2019 return.

  2. SBA Loans: They have streamlined the loan process now, you can go to www.sba.gov and fill the streamlined application. It takes about 5 minutes to complete. Is there a $10k grant (free money) in this loan? Technically yes, but practically no. If you apply for the loan, you can ask for a consideration of up to $10,000 advance. If they deny you a loan, you will not need to repay this advance. Who should consider this loan: Any business that has taken a financial loss due to COVID-19. They have waived the application fees, and made the interest rate 3.75% with terms of 5, 15, or 30 years.

  3. PPP Loans (Paycheck Protection Program Loans): The treasury just released guidance on these loans, which will become available tomorrow, April 3, 2020. How do you get these: You will need to go through a traditional lender that offers these SBA PPP loans. Is there loan forgiveness: Yes, there is a provision that provides for forgiveness of up to the full principal amount of qualifying loans. You need to maintain your workforce and pay them for a period of time after the loan origination date. This is an incentive to maintain your workers. Who should consider this loan: Small businesses with employees on the payroll who receive W-2’s. Other notes: In their guidance, the treasury has clarified that independent contractors do NOT count as employees. Technical Planning Notes: The CARES act also introduced the employee retention credit worth up to $5,000 per employee. You cannot qualify for both the PPP loan forgiveness and the employee retenWe are officially in the “how the heck do we implement this” phase of the initial COVID-19 relief. Let’s knock this out:

  1. Stimulus payments: The stimulus check being sent out is actually an advance of a credit for 2020. They use the info on your 2019 return to determine if you are eligible. If your 2019 return is not available, they will use your 2018 return.  Important note: The threshold for reduction of the payment is $75k for single, and $150k for married filing joint. This is for tax year 2020… If they advance you more than what is due, they are not going to recapture this. Takeaway: If your 2018 is below the threshold, and your 2019 will be above the threshold, wait to file your 2019 return.

  2. SBA Loans: They have streamlined the loan process now. You can go to www.sba.gov and fill out the streamlined application. It takes about 5 minutes to complete. Is there a $10k grant (free money) in this loan? Technically yes, but practically no. If you apply for the loan, you can ask for a consideration of up to $10,000 advance. If they deny you a loan, you will not need to repay this advance. Who should consider this loan: Any business that has taken a financial loss due to COVID-19. They have waived the application fees, and made the interest rate 3.75% with terms of 5, 15, or 30 years.

  3. PPP Loans (Paycheck Protection Loans): The treasury just released guidance on these loans which will become available tomorrow, April 3, 2020. How do you get these: You will need to go through a traditional lender that offers these SBA PPP loans. Is there loan forgiveness? Yes, there is a provision that provides forgiveness up to the full principal amount of qualifying loans. You need to maintain your workforce and pay them for a period of time after the loan origination date. This is an incentive to maintain your workers. Who should consider this loan: Small businesses with employees on the payroll who receive W-2’s. Other notes: In their guidance, the treasury has clarified that independent contractors do NOT count as employees. Technical Planning Notes: The CARES act also introduced the employee retention credit worth up to $5,000 per employee. You cannot qualify for both the PPP loan forgiveness and the employee retention credit. If you are an employee, you need to figure out which is better for you.

  4. Unemployment for Self Employed: As part of the new law, they have established an unemployment fund for self employed individuals. Can I apply for this now? Not in Massachusetts - they are still working on the mechanism to get the Unemployment for Self Employed individuals set up.

  5. Paid Sick Leave & Paid Family Leave Tax Credit: There is a new credit established for paid sick leave and paid family leave. Who is this for: This credit impacts both self employed individuals & businesses and is a credit against payroll tax/self employment tax. If I am self employed, what do I need to do to claim this credit? You should start tracking the days you are unable to work due to sickness, quarantine, or caring for someone in quarantine. Note: The rules on this provision are fairly complex and there is no IRS guidance. tion credit. If you are an employee, you need to figure out which is better for you.

  6. Unemployment for Self Employed: As part of the new law, they have established an unemployment fund for self employed individuals. Can I apply for this now: Not in Massachusetts - they are still working on the mechanism to get the Unemployment for Self Employed individuals set up.

  7. Paid Sick Leave & Paid Family Leave Tax Credit: There is a new credit established for paid sick leave and paid family leave. Who is this for: This credit impacts both self employed individuals & businesses and is a credit against payroll tax/self employment tax. If I am self employed, what do I need to do to claim this credit: You should start tracking the days you are unable to work due to sickness, quarantine, or caring for someone in quarantine. Note: The rules on this provision are fairly complex and there is no IRS guidance.

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