Economic Impact Payments( so-called Stimulus check)
As of May 9th, a total of about $217 billion of stimulus checks has been disbursed. Remaining $33 billion will be disbursed as soon as possible.
If you have not, you have until May 13th to set up a direct deposit on the IRS website.
Some people have been getting the “Payment Status Not Available” message. IRS "get my payment portal" has been updated and continuously improved and If you do think you qualify, you should check once a day to see if there is any update.
The portal asks you to enter either refund amount or the money owed amount. People who overpaid but chose to apply the overpayment to next year should enter refund “0”.
The stimulus checks are the tax credits on 2020 tax returns that the government pays you in advance.
Taxpayers whose income was over the threshold in 2019 filed returns might still qualify to get the money (in the form of tax credits) on the 2020 tax returns if their 2020 income is below the threshold.
What happens if the taxpayers received the stimulus check, but their 2020 income is above the threshold. Do they need to pay the stimulus check back? As of now, I do not think that will happen.
Stimulus check is not taxable.
Covid-19 Unemployment benefits and PUA for self-employed/freelancer
Business owners, self-employed, independent contractors, or gig workers who typically do not qualify for the Unemployment benefit now might be eligible for the so-called Pandemic Unemployment Assistance(PUA). For more detail, check out EDD Pandemic Unemployment Assistance.
If your employers offer you the job back(especially after they receive the PPP loan), you need to accept the job. The employees who reject offers of re-employment may forfeit eligibility for continued unemployment compensation.
Many of our clients have received EIDL advance up to $10,000. The advance will not have to be repaid provided you spend the money properly. You do not need to apply loan forgiveness separately.
Unless you are in agricultural business, SBA won’t accept new applications now.
Proceeds from any advance up to $10,000 on the EIDL loan will be deducted from the loan forgiveness amount on the PPP loan.
The actual EIDL loan(not the advance) is payable in 30 years. If you have applied before April and have not heard anything back, call SBA’s Disaster Customer Service at 1-800-659-2955 to check the status of your loan application.
PPP(Paycheck Protection Program) -Second round of funding
The first round of 349 billion funding ran out quickly already. The second round of funds of 320 billion kicked in on April 27th, and as of May 8th, nearly 188 billion of the fund was awarded. The good news is there are more smaller sized loans during the second round, so hopefully, the remaining fund is going to stretch further.
As of today, there are less than 15 banks I know of might still accept the applications even you do not have a banking relationship with them. Let me know if you need a list of them.
Many applicants applied the loan based on the PPP Interim Final Rule published on April 2nd, 2020. It did not give guidance on how to calculate payroll costs for self-employed (Sch C filer) with employees. It was also unclear regarding how to calculate the partnership loan amount (Do you include the partners' self-employment income). Most applicants and banks only used employee payroll costs to calculate the maximum loan amount. The updated guidance “How to calculate PPP loan amounts” effective April 24th indicates: For self-employed and have employees, you should include your Sch C, line 31 net profit amount to calculate your payroll costs. For partnership, you should include general partners’ self-employment income to calculate payroll costs. This means the loan amount might be a lot bigger than what you have applied. According to US Treasury PPP FAQ as of May 6th, 2020, Question 17, if the above happens, borrowers and lenders may rely on the laws, rules, and guidance available at the time of the relevant application. However, borrowers whose previously submitted loan applications have not yet been processed may revise their applications based on clarifications reflected in these FAQs. This seems quite unfair to me. AICPA (The American Institute of CPAs) is working with SBA to find a way of remedy right now. If you can talk to your lender directly, that would be very lucky. Most lenders won’t have time to talk to you or have any answers.
Many of our clients have already received the loan. Now how do we make sure we utilize the loan correctly so the PPP loan can be forgiven. There are many questions: What if I can’t reopen my business right now due to shut down? Do I have to use up the fund within 8 weeks? Are 8 weeks mean payroll period, or do I have to pay within 8 weeks? My employees rather take unemployment benefit and refuse to come back to work due to Convid-19. What’re the implications? Can I prepay the rent? Can I deduct all those expenses if the loan is forgiven? How to calculate the FTE(full-time equivalent) There is very little guidance on this as of today. In my next post, I will try to answer those as much as I can and update as we know more.
Read Some Clarifications on the CARES Act Tax. It may answer some of your other questions regarding the CARE ACT.
Find out more about Financial Reliefs for Business due to COVID-19.
Most importantly, contact us if you have more questions.
Circular 230:The articles are for general information only. In accordance with IRS Circular 230 they are not considered tax opinions for purposes of relying on such statements in any challenge of the reporting of the above transaction by the IRS. If a full tax opinion is required certain procedures must be met . Also there is a significant cost for a full tax opinion to meet the requirements of Circular 230.