We’re making available a four page client reference letter with more details on the CARE Act. To request a copy, please email laura.dmdcpas@gmail.com.
Payment Protection Program (PPP) loans: Banks will begin accepting PPP loan applications on Friday, April 3. You can find the standard four page application on most bank’s commercial lending web page.
THE FOLLOWING IS A VERY EARLY HIGHLIGHT LIST OF SELECTED PROVISIONS OF THE 880 PAGE ACT. INSTRUCTIONS FROM THE GOVERNMENT AGENCIES WILL BE COMING IN THE NEXT WEEKS/MONTHS.
INDIVIDUAL CHARITY DEDUCTION: For those using the standard deduction, a new above-the-line deduction of up to $300 will be available.
WAIVING RETIREMENT EARLY WITHDRAWAL PENALTY: For those with virus-related challenges for withdrawals up to $100,000. The withdrawal will be taxed over three years. ALSO RMDs from retirement accounts may be suspended in 2020. (Contact your retirement plan administrator for more details).
BUSINESS CREDIT: If your business was fully or partially suspended due to a COVID-19 shut down order OR gross receipts declined by more than 50% compared to the same quarter in 2019: You can get a refundable 50% tax credit on wages p to $10,000 per employee based on wages paid from March 13, 2020 through December 31, 2020.
BUSINESS NET OPERATING LOSS: If you had an NOL in 2018, 2019 or 2020, that loss can now be carried back five years. This also applies to S corporations, partnerships/LLCs and sole proprietorships.
QUALIFIED LEASEHOLD IMPROVEMENTS: Businesses that made qualified leasehold improvements to their leased buildings had only been allowed to write those off under IRC Sec 179 if the business was profitable in 2018 and 2019. Congress has now fixed this glitch in the law, allowing those improvements to qualify for 100% bonus depreciation. Thus, they will be deductible whether the underlying business has a net profit or not.
MORE INFORMATION WILL BE FORTHCOMING AS THESE NEW LAWS ARE “FLESHED OUT” BY THE VARIOUS AGENCIES INVOLVED.
THE FOLLOWING IS A SUMMARY. GO TO SBA.GOV FOR MORE INFORMATION AND TO APPLY.
The Paycheck Protection Program is part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This is a nearly $350-billion program intended to provide American small businesses with eight weeks of cash-flow assistance through 100 percent federally guaranteed loans.
QUALIFICATION: This program is more extensive than the SBA disaster loan. Small businesses, sole proprietorships, independent contractors, and self-employed individuals can all qualify.
You must acknowledge that the funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments. Funds you use for other purposes will not be eligible for forgiveness.
The funds can be used for:
The SBA will ask you to provide documentation on your business’s payroll, mortgage, rent, and utility payments over the previous 12-month period. They will calculate the monthly average cost of those expenses. The maximum amount they can offer is 2.5 times that monthly average cost, but no more than $10 million.
If you are a seasonal employer, the monthly average cost will be calculated differently. The SBA will use a 12-week period beginning either February 15, 2019 or March 1, 2019, and ending June 30, 2019.
If your business did not exist before June 30, 2019, the SBA will look at your costs in January and February 2020.
Note that if you receive a loan under the Paycheck Protection Program, you may no longer be eligible for an EIDL SBA loan for the same purpose of covering payroll
In the 8 weeks following your loan signing date, all expenses related to the following can be forgiven:
When submitting your application for loan forgiveness, you must provide the following documentation (no exceptions):
The lender must make a decision within 60 days of your forgiveness application submission.
You must commit to maintaining an average monthly number of full-time equivalent employees equal or above the average monthly number of full-time equivalent employees during the previous 1-year period.
The amount that can be forgiven will be reduced…
If you rehire employees that were previously laid off at the beginning of the period, or restore any decreases in wage or salary that were made at the beginning of the period, you will not be penalized for having a reduction in employees or wages, as long as you do this by June 30, 2020.
Note: These guidelines are based on the official 880-page bill. The SBA has been given 30 days to issue official guidance regarding loan forgiveness.
Again, go to SBA.gov to file, as well as to file for the Economic Injury Disaster Loan Program (EIDLP). Remember that EIDLP loans require repayment whereas some of all of the Paycheck Protection Program loans can be forgiven.
There is a stimulus package working its way through Congress. Once it passes and is signed into law, the agencies involved will start interpreting those new laws. I recommend keeping an eye on the FEMA website and IRS.gov.
It will take about ten days after the new law is signed before we have any guidance. At that point, I’ll be posting a highlight hit-list to our web site.
Many news organizations are reporting on pieces of the bill as if they were law. They are not. Like any new legislation, there’s lots of give and take to get to a final product.
Also look at SBA.gov. The SBA already has low interest loans available with an application link on their site. HOWEVER, the stimulus package is promising a new form of small business assistance with loan forgiveness through a new agency yet to be named. You may want to wait to see how this develops prior to working with SBA.
The CA Government has exempted licensed CPA firms from the stay-at-home order. We are fully staffed and can work on your returns and accounting needs:
We’re here for you to process your returns as soon as possible and assuming a refund… get it to you as soon as possible. Call 818-701-1040 ext 12 for more details.
