*4/23/20 Update: EIDL and PPP
EIDL and PPP checks are flowing. Remember, the EIDL check you receive is a tax-free grant. Make sure you annotate clearly on your books as something like EIDL – Other Income so your accountant can exclude it from taxation. The PPP should probably be booked initially as a short-term liability. When you receive loan forgiveness, this amount is also not taxable, so you would shift it to PPP- Other Income and exclude from taxation. Any PPP loan that remains gets booked as a long term liability. Special thanks to Gil Vollmering, CPA for providing this information.
*4/15/20 Update: Stimulus Checks
Stimulus checks are flowing. Here is the link to the IRS website to check the status on your stimulus check and provide bank information if needed: https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments?fbclid=IwAR2qr1OKAdrMSDRzPsc5Y7JBk_M1pT0yrO724gBNcOLJOv5UyFFRkQxx5Iw
The fiscal response to the coronavirus pandemic has been swift and massive in terms of dollars available to aid in recovery. It’s critical that these funds quickly get disseminated into the economy so that we can recover as soon as possible. Austin and I have put together this resource page to help you find the information you need so you can participate in this recovery.
As new information becomes available we will update this page so make sure you bookmark the web link that goes directly to our web page. If you have specific questions, you can email Austin or I. Or, you can join our Facebook page Thoughts on Things Financial where we are regularly fielding questions concerning these points.
*4/10/20 Update: Notarized Document Temporary Suspension of Requirements – TEXAS
Governor Abbott suspended the requirement that wills and their associated documents be notarized in person. Here are the temporary provisions:
- A notary public shall verify the identity of a person signing a document at the time the signature is taken by using two-way video and audio conference technology.
- A notary public may verify identity by personal knowledge of the signing person, or by analysis based on the signing person’s remote presentation of a government-issued identification credential, including a passport or driver’s license, that contains the signature and a photograph of the person.
- The signing person shall transmit by fax or electronic means a legible copy of the signed document to the notary public, who may notarize the transmitted copy and then transmit the notarized copy back to the signing person by fax or electronic means, at which point the notarization is valid.
*4/9/20 Update: Main Street Lending Program
The Fed today unveiled a massive expansion of lending and liquidity programs that includes a new program targeted to small to mid-size businesses they are calling the Main Street Lending Program. This program is for businesses with up to 10,000 employees and less than $2.5 billion in revenues for 2019. Principal and interest payments are deferred for one year. The program will be offered through banks and are expected to carry an interest rate in the range of 2.5% to 4%. The minimum loan amount will be $1 million with a maximum of $25 million or even more if underwriting guidelines are met. 95% of the loan will be purchased by the government with 5% being retained by the lending institution.
This is an important step. The word from my banking and small business sources was that any lending other than that associated with the PPP had all but come to a screeching halt recently.
Economic Injury Disaster Loan – EIDL
*Update: 4/5/20: Still, nobody has received this and they changed the rules. Now, businesses will receive $1,000 per employee up to a maximum of $10,000.
*Update: As of Friday, April 3rd I do not know of anyone actually receiving the initial $10,000 grant or any loans that have been processed.
If you are a small business and have been impacted in any way, you should definitely consider applying for a EIDL thru the U.S. Small Business Administration (SBA). Go to this website to apply: https://covid19relief.sba.gov/#/ The website states that it will take 2 hours and 10 minutes to complete the application. Random, right?? I know people who have completed it in 10 minutes so don’t let that dissuade you. Once you complete the application, you will be immediately eligible for a $10,000 grant. Even if, after processing, you are denied a loan or decline it, the grant will stand.
*Update: I talked to a client on April 2nd who had already received her stimulus check.
Most Americans will receive a stimulus check or direct deposit from the U.S. Treasury in the coming weeks. There are income limits that will exclude high wage earners. If you have not filed your 2019 taxes, the stimulus will be based upon your 2018 tax return. If you are retired, Social Security counts as income.
Here is a calculator you can use to determine how much (if any) you should expect to receive: https://www.washingtonpost.com/graphics/business/coronavirus-stimulus-check-calculator/
Suspension of Required Minimum Distributions for 2020
If you are over the age of 72 or own an inherited IRA, every year you are required to take a certain amount of funds from your IRA, SIMPLE-IRA, SEP, or 401(k) and pay taxes on it. It’s called a Required Minimum Distribution (RMD). RMD’s are suspended for 2020. This means you don’t have to cash out a portion of your beaten up portfolio while it’s down if you don’t want or need to.
If you, your spouse, or dependent has been diagnosed with the coronavirus or you have been financially impacted by the crisis, you may withdraw funds from your IRA, SIMPLE IRA, SEP, or 401(k) early without penalty. Generally, if you withdraw funds from any of these plans prior to age 59½ you must pay the taxes plus a 10% penalty. Not only is the 10% penalty waived, but you will be allowed to return the funds you withdrew over a three year period and those contributions will not be counted against your usual contribution limits or taxed. If you do not return the funds to your account, you will have to pay the taxes on the distribution within three years.
401(k) Loan Maximum Doubled
If your 401(k) plan allows loans, you generally are only allowed to loan yourself $50,000 or half of your balance, whichever is less. For 2020, you will be allowed to loan yourself $100,000 and the rule that it cannot be more than half of your vested balance has been waived.
401(k) Loan Payment Deferment
You may be granted by your plan sponsor a deferment of your 401(k) loan payments for up to one year.
Emergency Paid Leave and Tax Credits
Effective April 1st, employers are required to provide emergency paid leave to those either directly affected by the coronavirus, those caring for a family member who has been affected, or even those who must care for children whose school or daycare is no longer open. Small employers will receive immediate tax credits within limits as a reimbursement for what they must pay in sick or family leave. This is a complicated provision and I encourage you to seek out further guidance from your tax professional if applicable. Here is the best plain english guidance I have found thus far on this subject: https://www.dol.gov/newsroom/releases/osec/osec20200320
Paycheck Protection Program – PPP
*Update: You can find the latest most up to date PPP application here: https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf. As of the Friday, April 3rd, most of the big banks have not rolled out their programs and have been generally unresponsive to their clients requests. Smaller regional banks and credit unions have generally been more responsive and are even taking provisional applications. My banker at Frost, Brent Newsom, has been providing regular updates and bending over backwards to accommodate his clients in a very tough and fluid environment. This is great time to take stock of who’s in your corner when the going gets tough!
Basically anybody who owns a business, is self-employed, or gets paid on contract is eligible for the Paycheck Protection Program – PPP. The PPP is an SBA backed loan administered through SBA affiliated banks and includes a forgiveness of principal. Businesses and sole proprietors can apply as early as April 3rd (April 10th for independent contractors and self employed). Here is a link to a sample of the application: https://www.sba.gov/document/sba-form-2483-ppp-first-draw-borrower-application-form.
I would suggest you use the application provided by your banker. You will be eligible for a loan equal to 2.5 times your monthly payroll prior to the crisis. Many of the criteria and costs normally associated with SBA loans are waived. Once your loan is approved, you will be eligible for forgiveness of a portion of the principal loan amount. Over the next 8 weeks after approval of your loan you can add up your payroll expenses, rent, mortgage, and utilities, and apply for the total of these expenses to be removed from your loan. If your payroll contracts by more than 25% over this 8 week period, the forgiven amount will be reduced. By far the best plain english resource we have found on the PPP is provided by the U.S. Chamber of Commerce and can be accessed here: https://media2-production.mightynetworks.com/asset/9501678/023595_comm_corona_virus_smallbiz_loan_final_revised.pdf
Social Security Payroll Tax Payment Deferment
Employers will be allowed to defer employer-side Social Security tax payments until January 1, 2021. Half of the deferred payable will be owed on December 31st, 2021 and the remainder must be paid by December 31, 2022.
SBA Loan Relief
This is big. On existing SBA loans, the SBA will pay all principal, interest, and fees for 6 months. This includes 7(a), Community Advantage, 504, and Microloan programs. This is not a deferment, this is more of a grant.
Student Loan Suspension
Student loans and interest on the balances are suspended for six months thru September of this year. This suspension does NOT apply to private student loans. You can get up to date information here: https://myfedloan.org/