On Friday, March 27th, 2020, President Donald Trump signed and passed the 2020 Coronavirus Relief Bill which included over $2 Trillion in relief for individuals, small businesses and hard-hit industries and corporations. Yes, you read that right – that’s $2,000,000,000,000!!! Even President Trump said, “I’ve never signed anything with a T on it”! In unprecedented times, things like this happen and now you need to know what this means to you and your small business.
Here at Steadfast Bookkeeping, we service small businesses in the United States so most of this blog post will focus on what you need to know about the Relief Bill and how it applies to your small business but I do want to start off with the Stimulus payments that Americans will be receiving as early as 3 weeks from now.
Money on the Way – Stimulus Payments based on Income
Most adults will get a $1,200 payment; however, you may get less based on your income. Below are the numbers we know so far:
- U.S. Residents with an adjusted gross income of $75,000 or less will receive $1,200
- U.S. Residents (Married Couples) with an adjusted gross income of $150,000 or less will receive a payment of $2,400
- U.S. Residents will receive $500 per child
- For single taxpayers, the stimulus payment will phase out at $99,000
- For married taxpayers with no children, the stimulus payment will phase out at $198,000
- The phaseout happens at $50 per $1,000 earned over the above limits.
- Example: If you are a married couple with one child, with an adjusted gross income of $175,000 you could expect a stimulus payment of $1,650 instead of $2,900
- Your income will be determined based on your latest tax return to determine your adjusted gross income.
- If your adjusted gross income that is reported on your latest tax return prohibits you from receiving the stimulus payment and your 2020 income decreases to a point that you would not have been phased out, you will be able to take that credit and receive the payment after you file your 2020 tax return.
- This payment is not taxable and can not be clawed back based on any future income increases
- You do not need to do anything to apply for or receive this payment – the IRS will be issuing these payments automatically
Next, I want to talk about a major benefit for self-employed individuals and we have never seen this happen in history, but it was included in the Relief Bill and here is what you need to know:
Unemployment Insurance Payments are now extended to Self-Employed Individuals
- Unemployment insurance now includes an extra $600 payment per week (on top of your state’s benefits) for up to 4 months
- This is going to be state-specific; however, the Federal Government is going to provide temporary full funding for the first week of unemployment and they are going to extend unemployment benefits another 13 weeks through December 31, 2020. (Most states provide 26 weeks, so with the additional 13 weeks, you may be eligible for 39 weeks – that’s almost 10 months!)
- Unemployment benefits do not apply to workers who are able to work from home, fulfilling their normal hours worked, whether part-time or full time.
- You will want to apply on your state’s unemployment website. They are trying to process claims as quickly as possible.
Refundable Payroll Tax Credits
- Employers are eligible for a 50% refundable payroll tax credit on wages paid up to $10,000 during the Coronavirus pandemic.
- This credit will only be available to businesses who have been directly impacted by the pandemic and can prove a 50% decrease in gross revenue when compared to the same quarter in 2019
- If you have more than 100 employees, the credit can only be claimed if you have employees that you retained and paid but were not actually working during the pandemic. If you have less than 100 employees, the credit applies to all wages paid
- Keep detailed records and provide all the information to your CPA at the time of filing.
Paycheck Protection Program
- Small Businesses with less than 500 employees will be able to take a loan up to $10 million and that loan may be forgiven if the funds are used for payroll, interest on mortgages, rent or even utilities.
The size of the loan is determined based on your average monthly payroll costs in 2019, or a portion of 2019 if you are seasonal. This would include wages, commissions, tips, PTO paid, payments for group healthcare or insurance premiums, payment of retirements and payment of local and state taxes.
- If you maintain the average size of your full-time workforce based on when you receive the loan, the principal balance will be forgiven and you will only be responsible for the accrued interest
- This is developing information but this publication has some really great info and FAQs
For small businesses, the application period opens on Friday, April 3, 2020, and loans will be given on a first-come, first-served basis.
Economic Injury Disaster Loans & Emergency Economic Injury Grants
- Businesses in any one of the 50 states may apply
- The max loan amount is $2 million
- The funds can be used to cover both payroll and other operating expenses that could have been met if it were not for this economic disaster
- You can apply for both the EIDL and the PPP; however, the funds need to be used for different purposes.
Deferred Social Security Payroll Tax Payments
- Employers will be able to delay their portion of social security payroll tax payments payable to the IRS
- These payments will be delayed with 50% of the payments due on January 1, 2021 and the remaining 50% due December 31, 2021
- We are not yet 100% certain how this will roll out with the myriad of payroll tax software out there. If you would like to take advantage of this, please reach out to your payroll provider and ask them what needs to be done to delay these payments.
Carryback Net Operating Losses
- Net Operating Losses earned in 2018, 2019 or 2020 can be carried back 5 years.
- 100% of Net Operating Losses can be used to offset taxable income
- This is temporary and not a permanent change to the TCJA
- If a small business incurred a NOL in those years, they should contact their CPA to see if it would be tax advantageous to amend their prior year returns to tax advantage of the temporary NOL carry back relief.
I hope this helps you understand a few of these benefits that are being rolled out to relieve small businesses during this time of uncertainty. If you have any questions or need help with payroll, applications, tax returns or more, please contact us and we will be happy to help and answer any questions you have.