Blog Layout
SPECIAL FEATURE - Understanding the Coronavirus Aid, Relief, And Economic Security Act
Dan Pilla • Apr 28, 2020
Critical Help for Individuals and Businesses
On March 27, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This is a massive stimulus package designed to mitigate the horrific economic damage inflicted by the COVID-19 pandemic. The bill provides for about $2.2 trillion in spending, cash rebates and loans to businesses intended to help keep them afloat during this time of unprecedented upheaval to our social and economic culture.
In addition to providing loans (some forgivable, as discussed below), the package provides money for the IRS to carry out new administrative duties under the law. The IRS’s funding looks approximately like this:
• $293.5 million for IRS taxpayer services,
• $170 million for IRS operations support,
• $78.7 million for the Treasury Department’s Bureau of the Fiscal Service,
• $38 million for the Social Security Administration, and
• $37.2 million for IRS enforcement.
Let’s examine some of the key elements of CARES as it relates to individuals and businesses.
Economic Impact Payments
The Centerpiece of CARES
The centerpiece of CARES is the so-called “economic impact payment” that will be handed out to most Americans. This combination stimulus/relief payment is intended to provide families with immediate cash to hold them over while businesses are closed because of the “stay-at-home” orders in effect throughout the nation.
The IRS stated on March 30 that the distribution of checks will begin by mid-April, and as of this writing, money is being deposited into bank accounts. It is estimated that 165 million people, or 93% of all tax return filers, will get some cash. About 140 million will get the full amount of $1,200. The payment is actually considered a credit against your 2020 income tax liability. As such, it is not subject to being taxed. Even if you don’t owe taxes, you could get cash because the pay-ment is considered a “refundable” credit. As such, it’s treated just like the Earned Income Tax Credit.
You must have a Social Security number to get paid. That includes the SSN of the taxpayer and his spouse, and the SSNs of any dependents. Without a valid SSN, you will not receive a payment. See: new code §6428(g).Here’s what you can expect in the way of payment. If your adjusted gross income (AGI) is less than $75,000 for a single person, or $150,000 for a married couple filing jointly, you’ll get $1,200 per individual. Plus, you get an additional $500 for each child under 17. A family of four will get a check for $3,400. There is no limit to the number of children to which the $500 applies. See new code §6428(d).If your AGI exceeds the above amounts, the credit is phased out. Under the phase-out rules, the credit is gradually reduced to zero by the point at which AGI exceeds $99,000 for individuals, $146,500 for heads of household, or $198,000 for joint filers.
The rebate is based on your 2019 tax return or your 2019 Social Security statement, if Social Security is your only income. If you haven’t yet filed the 2019 return, the rebate is based on your 2018 return. As you know from last month’s Pilla Talks Taxes, the filing deadline for 2019 returns is moved to July 15, 2020 (see my update on this article below). The best bet is to get the return filed as soon as possible, especially if your 2019 income is lower than 2018 such as to impact the amount of the rebate you’re entitled to. The IRS will process the rebate checks through the end of 2020.
The IRS intends to deliver the checks via direct deposit. They will put the money in the account indicated on the tax return to which the tax refund payment was made. If no bank account information was provided, you should provide that information to the IRS to get your money as fast as possible. The has a portal on its web site al-lowing individuals to provide their current bank account information. If there simply is no bank account available, the IRS will mail you a check.
If you filed neither your 2018 tax return, nor your 2019 return, you need to get busy. It appears that you will not get a rebate check if both of these returns remain unfiled through 2020.
Earlier in the week of March 30, the IRS said that if a person didn’t file a return because their income was too low to require filing, that person would have to file an “abbreviated” return to get the payment. I don’t know what an “abbreviated” return is. I assume the IRS meant you must file a return to prove you don’t have to file a return, for the purposes only of providing proof of your income and bank account information. Those receiving only Social Security payments might fall into this category.
As of April 1, the Treasury reversed itself on that point. The most recent guidance states that, at least for SS recipients, some veterans and others not otherwise required to file, no return is necessary. The IRS will simply deposit their checks directly into their bank accounts where the SS or other federal benefits are paid. There now is no need for these people to file an “abbreviated” return, whatever that is.
The Paycheck Protection Program
Guaranteed and Forgivable Federal Loans
If the $1,200 refundable credit for individuals is the centerpiece of the CARES Act, the Paycheck Protec-tion Program (PPP) is a close second. And for small businesses, it will very likely prove to be much more valuable than the $1,200 credit. This is especially true since small business owners with AGI above certain limits aren’t getting the $1,200 credit anyway.
The PPP authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. That’s right. I said “forgivable” loans. In fact, not only are the loans forgivable assuming you use the proceeds as provided by law, but further, there is no personal guarantee or collateral required by a business owner to obtain the loan. And what’s more, the Small Business Administration (SBA) “shall have no recourse against any individual share-holder, member, or partner of an eligible recipient of a covered loan for nonpayment of any covered loan” except to the extent that the proceeds were used for a purpose other than those authorized under the law. See: CARES Act §1102(a)(1).
Let me say all this another way. The loan doesn’t have to be paid back if you use the proceeds as authorized. You don’t need to personally guarantee the loan. You don’t have to put up any collateral. You can’t be sued for not paying the loan. Furthermore, it is not necessary to first seek a loan from some other source before applying for a PPP loan. The SBA waived the usual requirement that you seek funding from other sources before coming to the SBA. To top it all off, if the loan is forgiven, the forgiveness does not constitute “income” for tax purposes. And, there’s already talk about adding another $250 billion to the pool of resources available for these loans.
The Paycheck Protection Program is effective for loans made from February 15, 2020, through June 30, 2020. The loan terms are the same for everyone.
WHO QUALIFIES FOR A PPP LOAN?
Any type of business qualifies, including nonprofits, veterans organizations and Tribal businesses. Quali-fied businesses also include sole proprietorships, self-employed individuals and independent contractors. As long as your business has 500 or fewer employees, you can apply. Even certain businesses with more than 500 employees might qualify if they meet applicable SBA employee-based size standards for specified industries. Check the SBA’s website for more details on this.
AUTHORIZED USES OF LOAN PROCEEDS
The loans issued under the PPP will be forgiven as long as you use the proceeds for specifically authorized purposes. The law describes the following as authorized uses of loan proceeds:
• Payroll costs;
• Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
• Employee salaries, commissions, or similar compensation;
• Payment of interest on any mortgage obligation (but not prepayment of, or payment of principal on a mortgage);
• Rent (including rent under a lease agreement);
• Utilities; and
• Interest on any other debt obligations that were incurred before “the covered period.” See CARES Act §§1102(a)(1), amending §7(a) of the Small Business Act, 15 U.S.C. 636(a).
The “covered period” is defined as the period beginning on February 15, 2020 and ending on June 30, 2020.
WHAT CONSTITUTES PAYROLL COSTS?
Payroll costs include any of the following items:
• Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
• Employee benefits including costs for vacation, parental, family, medical, or sick leave;
• Allowances for separation or dismissal benefits;
• Payments required for the provisions of group health care benefits including insurance premiums;
• Payment of any retirement benefits; and
• State and local (but not federal) employment taxes assessed on compensation.
Sole proprietor self-employed persons and independent contractors are included in this program, even if they pay no wages to other employees. For this purpose, commissions earned by, or net earnings from self-employment (as reported on Schedule C), are considered “payroll costs.” Such earnings are capped at $100,000 on an annualized basis for each self-employed person.
Payroll does not include employment taxes imposed under the Internal Revenue Code, compensation paid to an employee who lives outside of the United States, qualified sick leave wages for which a credit is allowed under the Families First Coronavirus Response Act, or qualified family leave wages for which a credit is allowed under the Families First Coronavirus Response Act.
What we are talking about here are the payments due and made to employees for their services to your company.
HOW MUCH CAN YOU BORROW?
PPP loans are based on your average monthly pay-roll costs for the preceding twelve months from the date of application. The amount of the loan is equal to the monthly payroll average, multiplied by 2.5. For example, if your 12-month average payroll costs from February 2019 through January 2020 equal $10,000, your loan amount is $25,000 (10,000 x 2.5). The total amount available to any one business under the PPP is $10 million. The lender determines the precise loan amount you will receive based on the documents you provide.
Payroll costs are limited to $100,000 annualized for each employee. So, for example, if you have an employee who earns $120,000 a year, the amount of “payroll” for this calculation is capped at $100,000, or $8,333 per month. This applies to self-employed and independent contractors as well.
HOW MUCH OF THE LOAN CAN BE FORGIVEN?
Forgiveness of the loan is tied directly to how you use the money. The loan will not be forgiven if you use loan proceeds for anything other than payroll costs, mortgage interest (not principle), rent, and utilities payments over the eight-week period after getting the loan. The loan will likewise not be forgiven if you don’t maintain your staff and payroll.
The loan forgiveness amount is reduced if you decrease your full-time employee headcount. Likewise, you will not be forgiven if you reduce salaries and wages by more than 25% for any employee that made less than $100,000 annualized over the past twelve months. If you lay off workers, you have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
WHAT IF THE LOAN IS NOT FORGIVEN?
If the loan is not forgiven, the remaining balance is nevertheless guaranteed by the SBA. It then converts to an amortized loan payable within two years at an interest rate of 1%. Loan payments are deferred for six months.
WHEN TO APPLY
Small businesses (corporations, partnerships, etc.) could submit applications starting April 3, 2020. As of April 10, 2020, independent contractors and self-employed individuals can apply for PPP loans.
WHERE TO APPLY
Apply for a PPP loan through any existing SBA 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 PPP loans once they are approved and enrolled in the program. Check with your business bank right away to see whether it offers PPP loans. If it participates with the SBA in any way, it is likely already participating in this program. Go to sba.gov for a list of SBA lenders.
HOW TO APPLY
You must complete the Paycheck Protection Program loan application. It gets submitted to your PPP lender. Include the documentation sought in the form. The application must be submitted so that it can be processed by June 30, 2020. Included here is a copy of the application. You can take out just one loan under this program.
Note that the application, page 2, requires several “certifications.” You must certify “in good faith,” that:
• Current economic uncertainty makes the loan necessary to support your ongoing operations;
• The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments;
• You have not and will not receive another loan under this program;
• You will provide the lender with documentation to verify the number of full-time equivalent employees on payroll and the dollar amount of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting a PPP loan;
• All the information you provide in your application, and all supporting documents and forms, are true and accurate;
• Knowingly making a false statement to get a PPP loan is punishable by law;
• You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submit;
• You affirm that the tax documents are identical to those you filed with the IRS; and
• You also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.
SUPPORTING DOCUMENTS REQUIRED
You will need documents to prove,
1) the number of full time employees on your payroll,
2) the dollar amount of your payroll costs,
3) covered mortgage interest payments, or covered rent payments, and
4) covered utility costs for the eight-week period following the granting of the loan.
As to the number of employees, the Forms W-2 that you submitted to the Social Security Administration for 2019, and the Forms W-4 submitted to you by your employees, will help prove that issue. Also, your internal payroll records, including checks issued to employees for January and February 2020 will prove this point.
As to the dollar amount of the payroll, Forms 941 for all quarters of 2019 and the first quarter of 2020 will prove this, as well as current payroll data for the second quarter 2020.
Interest on loans, rent and utility bills can be document-ed from information on hand for each of these items.
Note that interest on any loans, rent or utilities that you cover with PPP loan proceeds must be paid pursuant to mortgage obligations, rent agreements or utilities for services which began before February 15, 2020. You can’t pay for a new loan or make rent payments per a lease agreement entered into on or after February 15, 2020.
HOW LONG DOES THE PROGRAM LAST?
The application process is open through June 30, 2020. However, there is a cap on the amount of money appropriated by Congress for these loans. Once the money is gone, it’s gone, unless Congress appropriates more, which is distinctly possible. In the meantime, you should apply as quickly as possible.
HOW TO REQUEST LOAN FORGIVENESS
A request for loan forgiveness is submitted to the lender servicing the loan. The request must include documents to verify that the money was used only for authorized purposes. You must prove the number of full-time employees and their pay rates, and, of course, that you paid those wages. You must also prove the payments you made on eligible mortgage interest, lease, and utility bills. You must declare under penalties of perjury that you used the loan proceeds to keep employees on staff and to make eligible mortgage inter-est, rent, and utility payments. To the extent that you used the money for other purposes, the loan will not be forgiven and there may be other legal consequences for misusing the money.
The lender must make a decision on the forgiveness within sixty days. In the meantime, the interest rate is 1% and is fixed. You must begin paying interest on the loan after six months, which is the deferral period. However, interest accrues during the deferral period. The loan must be paid within two years. It can be paid in full earlier as there are no prepayment penalties or fees.
CONCLUSION
Assuming you use the money as specifically dictated by the terms of the PPP program under the CARES Act, this loan is in fact a gift. There’s $349 billion (and likely more) available in bailouts to small businesses under this program.
_______________________________________________________________________________________________________________
Learn more about Dan and your rights as a taxpayer at www.taxhelponline.com
Reading Time 3 mins 43 secs – Are you happy right now? Or are you feeling a little grumpy, or negative, or sorry for yourself? We’ve all been there. Years ago, I had one of those months. Yes, I said months , not days. I was negative. I was feeling sorry for myself. The weight and pressures of life and certain situations were bearing down on me. For some reason, during that time, I went to a conference I really didn’t feel like going to, and the speaker got up and said he was going to talk about being thankful. Great , I thought. Just what I want to hear. What I really wanted was for someone to join me in my pity party. But that wasn’t happening. Because God knew that wasn’t what I needed. He knew I needed someone to tell me the truth. See, I had taken my eyes off of all of the blessings of God. I had stopped remembering all of the amazing times He had come through for me. I had taken my focus off of His promises and put it on my problems. That message was just what I needed. The Holy Spirit dealt with me right then about my heart and how I had been ungrateful. I had to repent. God set me free that day. Here’s the thing: studies show that when you’re happy and thankful , you have 17% more friends. When you’re happy, you live longer and you have less health problems like heart attacks, strokes, colds, the flu, and even pain. Being grateful also strengthens your emotions, makes you more optimistic and less self-centered, improves your sleep, increases your self-esteem and your energy, helps you bounce back after a setback, reduces feelings of envy, helps your marriage, makes you look better, and makes you more productive. Proverbs 17:22 (KJV) says, “ A merry heart doeth good like a medicine: but a broken spirit drieth the bones .” See that? Happiness is like medicine. Discouragement sucks the life out of you. Are you reading this and thinking, “ Gary, you don’t know what I’m going through. I have serious problems” ? I understand. But here’s the thing: happiness is not circumstantial. Happiness is a choice you make. I hear it all the time… “Gary, you don’t understand. I hate my house.” Sell it. “Gary, you don’t get it. I hate my job.” Quit it. Find a new one. “Gary, I just hate my life.” CHANGE it. You’re not stuck. You have options. Every single day, you make choices to do something or NOT do something. And you have plenty of reasons to be happy. Stop thinking you can only be happy when everything seems “perfect.” Because “perfect” is really rare, and I do mean really rare. In fact, odds are there will always be something in your life that isn’t “perfect.” The good news is, no matter what you go through or deal with in life, you can still be thankful and happy, because you can always trust God despite your circumstances. Philippians 4:6 (NIV) says, “Do not be anxious about anything, but in every situation, by prayer and petition, with thanksgiving, present your requests to God .” Wait. Did you see what that said? Notice it didn’t say, “Only be anxious about the big things you can’t handle on your own.” Nope. It says don’t be anxious about anything . It also says by prayer—and with thanksgiving —present your requests to God. That means you should be thanking Him for all He’s already done and for what He’s about to do in your situation. You should be thanking Him before your answer shows up, because He’s faithful and good. Look at Judges 20:19–25. There, we see the nation of Israel suffering great loss after a huge battle. They had lost 22,000 men. 22,000. Can you even imagine? I’m sure you’ll agree that that was a really bad day. Then, on the second day of battle, they lost 18,000 more men. 40,000 men lost in two days. The Bible tells us they took a day off at that point. They stopped and regrouped. Then, in verse 26, we see that the entire army presented offerings of thanksgiving to God. Things had gone really wrong, and they needed to remind themselves that God was for them, that He is good and faithful, that He was with them. And the next day, they went out and won the battle. So, what about you, friend? Do you need to stop? Do you need to take your mind off the negative and remind yourself that God is for you, that He is good and faithful, and that He is with you?
Reading Time 2 mins 13 secs – In John 6, we read the story of Jesus feeding 5,000 people with five loaves of bread and two fish. Do you know it? It’s where we see Jesus teaching the disciples how to release the Kingdom of God into the earth realm. Basically, a large crowd was following Jesus, listening to Him teach, and watching Him perform miracles. It got to a point where the people needed to eat, and Jesus asked the disciples what they planned to feed the people. Of course, Jesus knew the disciples would freak out. They couldn’t feed 5,000 people. In fact, they started talking about how it would take more than half a year’s wages to buy just a bite for that many people. Jesus was teaching the disciples, and He was teaching us— the Kingdom of God has all the answers you need . How can you release the Kingdom of God into your life? Here are the five steps Jesus took. 1. Look at what you have. Jesus asked the disciples what they had to feed the people. What do you have in your life that you can give God to work with? Jesus multiplied bread into bread and fish into fish. What do you need multiplied in your life? Find some of it. That’s your seed. Also, remember that money can be named. You don’t sow money to believe for more paper or digital money. Money represents your life and can be named to be the thing you need multiplied. 2. Make sure you’re in faith. “To have faith is to be sure of the things we hope for, to be certain of the things we cannot see” (Hebrews 11:1, GNT). You have to know how to judge whether or not you’re in faith. How? Do you have the right picture? When you close your eyes, what do you see? Do you see yourself with the thing you’re believing for? Can you defend your position? Why do you believe it? Prove it! Because you can be sure that between the “Amen” and the “There it is!” the enemy is going to contend for it, so you better be able to defend it. Do you have joy, expectancy, and peace? Are you in agreement with your spouse? 3. Confess over what you have, and release it in faith. Be specific. Say exactly what you’re believing for and release the seed to God. 4. Get the plan from God. Be ready for new direction, new ideas, and new concepts by revelation from the Holy Spirit. Carry a notepad and a pen. Write everything down. 5. Act quickly! When God gives you the plan, MOVE! It’s wise to have counselors and get wisdom, but you need to act swiftly on any direction you receive from the Holy Spirit.
Reading Time 2 mins 34 secs – How can you make sure you’re equipped for the growth coming your way this year? Here are my 10 steps to posture yourself for opportunity and success. 1. Ask yourself how you’re handling your current responsibilities. Don’t run from your responsibilities. No matter where you are or what you’re doing, you should be a success. People will still see the evidence of God even if you think you’re in the wrong spot. 2. Detox your life of the things that keep you from having time to think. We live in a fast-paced world. There are plenty of things that can keep you distracted. But it’s in the moments that you stop to think that you’ll find ways to solve problems, and that’s where the opportunities are. So figure out what is consuming your time. Start saying no to some things. Find time to think. 3. Don’t hang around people who are always losing. I know people hit rough spots, but if the people in your life are chronically losing, it’s time to expand your circle. Hang around people who are better than you are, who don’t see things as impossible, and who have vision. It may be uncomfortable for you, but their influence will cause you to think differently. 4. Write down EVERY idea that you have, no matter how strange it seems. Most people filter opportunities and ideas through what they perceive their ability to be. This means most people discard ideas by the dozens because they don’t think they can do them. But God isn’t limited to what you know how to do. The ideas He gives you might seem so weird to you that you can’t process them fully. Write them down so you have time to think about them. 5. Research. Research. Repeat. You don’t need to know how to do something; you need to know how to learn how to do it. Research until you find what you’re looking for. 6. Count the cost before you jump. A lot of Christians hear God and jump out too soon, resulting in catastrophe. There are seasons for everything. God will prepare you for where He wants you to go. Be patient. 7. Always be in agreement with your spouse. Never, ever march out into battle without your spouse being in total agreement and your faith aligned. 8. Ask God for direction. Ask Him to help you, to show you where to go, and what to do. And always remember that prophecy from other people shouldn’t lead you; it should only confirm what God has already said to you. 9. Commit to never quit. Quitting is not an option. Once you’ve moved, don’t move again until God speaks to you. Stay with it. Walk it out. Don’t quit. So many people have so much potential, but they get uncomfortable and they quit. If you want to win, you should always be stretching. 10. Get ready to embrace bigger things. Your ability to see the big picture will keep growing as you change and grow on the inside. You’ll pick up on even more opportunities. For more principles, check out this FREE video on success.
As an author, speaker, television host, and successful entrepreneur for more than 27 years, Gary Keesee has helped thousands of families and individuals realize their God-given potential.
MAILING ADDRESS:
FAITH LIFE NOW
P.O. Box 779
New Albany, OH 43054-9802
(888) 391-LIFE
© 2024 All Rights Reserved | Gary Keesee Ministries | Privacy Policy