By N. Richard Grassano, Boca Accounting, LLC
Recent updates in relief packages and stimulus payments
Let us begin with the$ 1200/500 stimulus payments. Many of you may have received your US Treasury Check and many of you probably have not. The promised website to give you a status report on your payment or in the alternative a way to enter your bank information has begun to work more often in the last few days. As you may know, the initial rollout was an IRS level disaster. No surprise here, as we deal with that agency every day of the year. In all cases, if you are entitled to money, you will get it no later than the filing of your 2020 income tax returns, next spring.
Payroll Protection Program
Another program to assist small business in keeping their payroll intact during the shut- down, was the payroll protection program. The responsibility was given to the banks to process those loans and predictably the smaller banks did well, and the larger banks did not do as well. If you received your funding you have 8 weeks to get into a position to attempt forgiveness of this money. We strongly suggest keeping meticulous records of the spending of this money, discuss with us your strategy, and
keep in mind the same banks will be processing the forgiveness applications. The good news is the money not forgiven will be allowed very low interest rates (1%).
Economic Injury Disaster Loan
This is an ongoing SBA program that ran out of funding early in the shutdown, allowing up to$ 10,000 in emergency funding. Some clients received this funding. According to the previous program rules all eligible companies would later be able to apply for additional low interest loans. This program worked during the aftermath of Hurricane Irma in 2017, so we will remain optimistic.
Employer Retention Credit
If you failed to qualify for funding under the PPP, there is a potential credit available to help support your payroll costs and reduce layoffs. You may be eligible for a 50% CREDIT of up to $5,000 per employee, from March 13, 2020 to December 31, 2020. This is a bit complicated, but we will try and summarize. For each quarter, your business was open and your “gross receipts” were less than 50% of the same quarter in the prior year OR you were shut down by government mandate. This credit is for employers under 100 employees and can be claimed through the 941 or a new Form 7200. To be clear this is a refundable tax credit, which reduces your payroll taxes dollar for dollar. This could be significant for those who did not get their PPP.
Employer Payroll Tax Deferral
The CARES act allows deferral of the employer portion of the Social Security Tax for those not receiving forgiveness under PPP. Self-employed individuals can defer a portion of the self-employment taxes in 2020. The mechanics allow deferral for 50% of the amounts claimed to be repaid to the Treasury by December 31, 2021 and 2022. We have a couple of problems with this. As accountants our first concern is keeping track of these deferrals and making sure they are paid timely or penalties will be harsh. From a financial prospective this could benefit some clients but should wait until it is clear a forgiveness under PPP is closed.
If you received your PPP loan, great. Now you must try and get forgiveness. This may be more complicated than advertised. We are already doing spreadsheet models.
If you do not and will not get the PPP money (or get it forgiven) then the other relief provisions may be appropriate. Even a combination of them may be appropriate. STAY TUNED.