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Understanding Small-Business Loan Programs that Help Ease Financial Hardships Caused by COVID-19

April 2020


Many small businesses have turned to financial assistance from the federal government in the form of small-business loan programs to stay afloat amid the coronavirus pandemic.

 

Two of the most popular programs are the Small Business Administration’s (SBA) Economic Injury Disaster Loans (EIDLs) and Paycheck Protection Program (PPP).


Both programs are currently unable to accept new applications because of a lack of funds, but Congress is expected to pass a $484 billion coronavirus stimulus bill soon that will replenish the PPP with about $310 billion and around $60 million will go towards EIDLs.


Overview of PPP loans

Small businesses apply for PPP loans through financial institutions (Find Eligible Lenders here)


Funds from the program are provided in the form of forgiven loans when at least 75 percent is used for payroll costs and the remaining for operating expenses. Businesses can receive up to $10 million at a one percent interest rate.


Businesses with 500 or fewer employees are eligible (some businesses in certain industries with more than 500 employees are also eligible) and accepted applications will provide small businesses with funds for up to eight weeks of payroll costs including benefits. Companies must have been in business as of Feb. 15, 2020, to receive a loan and the first payment is deferred for six months.


Scroll through our News page to check out a previous blog post we wrote on the PPP, titled New Federal Program Helps Small Businesses Retain Workers, Pay Bills.


Overview of EIDLs

The EIDL program provides disaster assistance loans and grants. Interest rates are set at 3.75 percent for small businesses while nonprofits have 2.75 percent interest rates on EIDL loans. A business must have no more than 500 employees to be eligible. Additionally, sole proprietorships, independent contractors, gig-economy workers and self-employed individuals can also apply.


To qualify, a business must have suffered a substantial economic injury. The SBA determines a business’ “actual economic injury” and bases its loan on this amount, up to a maximum $2 million. Funds can be used for payroll, rent, mortgage payments or other operational costs. 


Businesses that need immediate help can also request an emergency grant advance of up to $10,000. However, to ensure the greatest number of applicants can receive assistance, the amount of your Advance will be determined by the number of your pre-disaster employees (as of Jan. 31, 2020). The Advance is forgiven when spent on paid leave, maintaining payroll, mortgage or lease payments.

Businesses can apply for an EIDL through Dec. 16, 2020, in most states. The first payment is deferred for one year.


NOTE: Business can apply for loans through both the PPP and EIDL program; however, the funds from each loan must be used for different expenses.


Learn More

Learn more about SBA Relief Options https://www.sba.gov/funding-programs/loans/coronavirus-relief-options 


Questions?

Contact Anthony Hoffmaster, CPA, CES, MST, by phone 919-435-4413 or email [email protected] to discuss the best loan option for your small business.


8 Things You Need to Know about the New July 15 Tax Deadline

April 2020

Whether you missed the original April 15 tax deadline, or you’ve already filed your 2019 taxes, the new July 15, 2020, deadline for federal and North Carolina state taxes offers many benefits to taxpayers.


In response to the coronavirus pandemic, both the Internal Revenue Service (IRS) and the North Carolina Department of Revenue (NCDOR) extended the federal and state tax deadline from April 15 to July 15. Individuals, regular corporations (C corps) with a calendar-year end and others now have until July 15 to file income tax returns without having to file an extension. 


Here are eight other things taxpayers need to know about the new summer deadline:


1. The new date to file federal and state tax returns and pay 2019 income taxes is July 15, and while the IRS won’t charge penalties or interest, the NCDOR will still charge interest to state taxes not paid by April 15. 


2. Taxpayers do not have to file an extension if they plan to file their taxes by the new July 15 deadline. The three-month delay is automatic. Those not ready to file by July 15, can file for an extension until Oct. 15. However, it’s important to note that the October extension only prolongs the tax return filing date and any taxes owed must still be paid by July 15 to avoid penalties charged by the IRS.


3. Self-employment taxes, such as Social Security and Medicare taxes, paid by self-employed individuals are deferred to July 15.


4. First-quarter estimated tax payments aren’t due until July 15, but the current deadline for second-quarter tax payments remains June 15.


5. The due date for gift tax returns filed on Form 709 and generation-skipping transfer taxes (for trusts) is postponed until July 15; however, estate tax returns were still due on April 15.


6. Already filed your 2019 federal tax return but haven’t yet paid your federal owed taxes? No problem—just pay by July 15.


7. Individuals have more time to make Individual Retirement Account (IRA) contributions for 2019. You can contribute up $6,000 to your IRA for 2019, while individuals who were age 50 and older in 2019 can contribute up to $7,000.


8. Individuals and families with a high-deductible health plan with a health savings account (HSA) also have until July 15 to fund their HSA. Individuals can input up to $3,500 in HSAs, while up to $7,000 can be contributed to family HSA plans for 2019.


If you have questions, contact Anthony Hoffmaster, CPA, CES, MST by phone 919-435-4413 or email [email protected]. Hoffmaster CPA clients are asked to please have all tax information and documents to Anthony no later than June 15 to meet the new July 15 tax deadline.


Tax Relief for Employers Amid Coronavirus Pandemic

April 2020

In addition to disrupting our daily lives and routines, COVID-19 is also taking a financial toll on many businesses and individuals. The government is hoping to ease some of the financial burdens in the form of stimulus checks, loan programs and tax credits.

In this blog, we’ll discuss some of these new tax credits, which can turn into valuable savings for employers.


Here are a few of the tax relief and tax credit options available to employers because of coronavirus, including some changes to payroll taxes under the Coronavirus Aid, Relief and Economic Security (CARES) Act and the Families First Coronavirus Response Act (FFCRA).


Employee Retention Tax Credit for Small Businesses

To incentivize employers to keep employees on their payroll, the United States Department of Treasury and the Internal Revenue Service (IRS) have created the Employee Retention Tax Credit.


Employers of all sizes are eligible to receive the credit except for state and local governments and their instrumentalities and businesses who accept Small Business Loans. Employers must meet at least one of the following two requirements to qualify for the tax credit.


  1. The employer’s business is fully or partially suspended by the government due to coronavirus during the calendar quarter.
  2. The employer’s gross receipts are below 50 percent of the comparable quarter in 2019. (Once gross receipts exceed 80 percent of  a comparable quarter in 2019, they are no longer eligible for the credit after the end of that quarter).


If eligible, the tax credit amount for employers is 50 percent of all wages paid to employees between March 13 and Dec. 31, 2020 up to $10,000. Qualifying wages depend on the business’ average number of employees in 2019. 


For businesses with less than 100 employees, the credit is calculated from wages paid to all employees, regardless of if they worked or not.


If an employer averages more than 100 employees in 2019, the tax credit is only allowed for wages paid to employees who didn’t work during the calendar quarter. 


Learn more about the Employment Retention Tax Credit, including how to receive payments, on the U.S. Department of Treasury website https://home.treasury.gov/system/files/136/Employee-Retention-Tax-Credit.pdf

 

Employer Social Security Tax Deferrals

Employers and self-employed individuals can choose to defer all 6.2 percent of their Social Security tax payments on wages paid from March 27 through the end of the year. Half of the deferred amount will be due to the U.S. Treasury on Dec. 31, 2021, with the other half due on Dec. 31, 2022. 


Employers who receive Small Business Act loans under the CARES Act are not eligible for this payroll tax deferral. Additionally, employers must continue to deposit employees’ Social Security tax payments in a timely manner.


Refundable Payroll Tax Credits for Paid Sick and Family Leave


Small and midsize employers (with fewer than 500 employees) who provide paid sick and family leave to employees affected by COVID-19 from April 1, 2020, through Dec. 31, 2020, are eligible for refundable tax credits.


The tax credits reimburse employers for the cost of providing paid sick and family leave wages to employees who are unable to work for reasons such as being under a federal, state or local quarantine or isolation order related to COVID-19 or if a health care provider advises the employee to self-quarantine because of coronavirus concerns.


Eligible employers can claim the tax credits on their federal employment tax returns, or they can quickly receive these tax breaks by reducing their employment tax deposits. If there aren’t enough federal employment taxes to cover the amount of the credits, employers can submit a new Form 7200 to the IRS to receive an advance payment of the credits. 


Read more about COVID-19 tax credits for paid sick and family leave here https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs.


Looking for More Information?


Visit the IRS COVID-19 web page www.irs.gov/coronavirus for information and frequently asked questions on tax relief options due to coronavirus.


We know this is a lot of new information and we want to help you from feeling overwhelmed. We encourage you to contact Anthony Hoffmaster, CPA, CES, MST, by phone 919-435-4413 or email [email protected] if you have any questions.


New Federal Program Helps Small Businesses Retain Workers, Pay Bills

April 2020

New Federal Program Helps Small Businesses Retain Workers, Pay Bills

Small businesses have been some of the hardest hit financially amid the coronavirus pandemic. In an effort to support small businesses impacted by COVID-19, the Department of Treasury has created assistance in the form of the Paycheck Protection Program.


Nearly $350 billion is now available to small businesses and eligible nonprofit organizations, Veterans organizations, and Tribal businesses described in the Small Business Act, as well as individuals who are self-employed or are independent contractors, to help with job retention and other expenses.


Paycheck Protection Program Overview

Starting April 3, 2020, small businesses and sole proprietorships can apply https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf. Independent contractors and self-employed individuals can apply starting April 10 and all are encouraged to apply quickly because there is a funding cap. The program is open until June 30.


Funds from the program are provided in the form of forgiven loans when used for payroll costs, interest on mortgages, rent and utilities. Forgiveness is based on employers maintaining or quickly rehiring employees and maintaining salary levels and will be decreased if either declines or decreases.


Businesses with 500 or fewer employees are eligible (some businesses in certain industries with more than 500 employees are also eligible) and accepted applications will provide small businesses with funds for up to eight weeks of payroll costs including benefits. 


The loans will be processed through financial institutions, including existing Small Business Administration 7(a) lenders or through any participating federally insured depository institution, federally insured credit union, and Farm Credit System institutions. However, individuals are encouraged to consult with their local lenders. Each lender will provide the same loan terms to borrowers.


Additional Resources

Learn more about the Paycheck Protection Program https://home.treasury.gov/system/files/136/PPP%20--%20Overview.pdf, which is part of the recently passed $2.2 trillion economic relief package.


Read the Department of Treasury’s borrower information guide https://home.treasury.gov/system/files/136/PPP--Fact-Sheet.pdf) containing additional details for those interested in applying for the program. 


The Department of Treasury also has provided a lender information sheet https://home.treasury.gov/system/files/136/PPP%20Lender%20Information%20Fact%20Sheet.pdf) containing details such as who is eligible to lend and how lenders will be compensated.


Here is the Paycheck Protection Program borrower application form https://home.treasury.gov/system/files/136/Paycheck-Protection-Program-Application-3-30-2020-v3.pdf)


Still have questions?

Contact Anthony Hoffmaster, CPA, CES, MST, by phone 919-435-4413 or email [email protected] 

Coronavirus Stimulus Checks: How Much Will You Receive and When?


April 2020

In an effort to stay healthy and protect others from the coronavirus pandemic, many Americans are practicing social distancing and following stay-at-home mandates issued by authorities.

Unfortunately, these safety measures have resulted in lost income and jobs for many people. To help ease some of the financial strain caused by the virus, the United States government recently passed a $2.2 trillion coronavirus stimulus package that will directly pay some Americans and assist corporations, small businesses, and hospitals and health care providers.


How much money should you expect to receive?

$1,200
  • Individuals who make up to $75,000 per year
  • Heads of household who earn up to $112,500

$2,400

  • Couples who earn up to $150,000 in combined income

Americans whose annual gross income exceeds those limits, will have their check reduced by a rate of $5 for every additional $100 of income. This means adult taxpayers who earn up to $99,000 annually, married couples and joint filers who earn up to $198,000 and heads of household who earn up to $146,000 will be eligible for some form of government assistance. Parents will receive an additional $500 for each child age 16 and younger. 


People who are 18 or older and are claimed on someone else’s tax return as a dependent will not be eligible for an individual or child stimulus payment.


The stimulus bill also includes $350 billion in small business loans.

When can you expect to receive your check? 


Treasury Secretary Steven Mnuchin would like for Americans to start receiving stimulus checks within two to three weeks after the stimulus package was signed into law on March 27, but some experts are saying that the Internal Revenue Service (IRS) will likely not send any checks until at least May 2020. 


Individuals who have previously provided their direct-deposit bank account information to the IRS when filing taxes will receive their checks much quicker than those waiting for their check by mail. 


If you’re interested in learning more about stimulus checks, check out these Fortune https://fortune.com/2020/03/25/stimulus-check-coronavirus-relief-bill-when-checks-sent-who-qualifies-how-much-retirees-taxable-direct-payment-faq/, Fox News https://www.foxnews.com/politics/stimulus-checks-approved-to-ease-impact-of-coronavirus-restrictions-heres-how-to-access-them and CNN https://www.cnn.com/2020/03/29/politics/treasury-secretary-steve-mnuchin-stimulus-checks/index.html) articles.


Our last blog focused on the tax deadline that was extended from April 15 to July 15. Anthony Hoffmaster, CPA, CES, MST is busy preparing tax returns and will accept clients’ tax information and documents until June 15. Contact him by phone 919-435-4413 or email [email protected] with any questions.