This update is long but it contains a great deal of information for small business owners, the self-employed, or unemployed. The US Senate finally passed the two trillion dollar stimulus package (let’s call it emergency funds as it’s not really a stimulus) late Wednesday night.
(Remember: I am doing a Facebook Live at 1pm EDT/10am PDT every M–F to keep you updated. And if someone forwarded you this newsletter, you can sign up at www.PlanningShop.com.)
The overall bill is called the CARES Act standing for Coronavirus Aid, Relief, and Economic Security Act. The goal of this act is, simply, to save the economy but ensure that both individuals and companies can survive the time of the coronavirus pandemic.
Forgive a personal rant, but I know how desperately individuals and businesses need money right now. This bill was almost killed by four Republican Senators who, scrooge-like, thought unemployment benefits were too generous for the lowest-paid workers. If any of the following are your Senators, remember they were willing to let your small business—not to mention tens of millions of Americans—go without vital, pressing help rather than give janitors, child care workers, restaurant employees a few hundred dollars more: Lindsey Graham of South Carolina, Ben Sasse of Nebraska, Tim Scott of South Carolina, and Rick Scott of Florida. Bah humbug!
(Important to note: the House of Representatives must still pass the legislation. Speaker Nancy Pelosi has called for a voice vote on Friday.)
THE CARES ACT IS UNLIKELY TO BE THE ONLY RECOVERY/STIMULUS BILL. Speaker Pelosi has said she wants additional cash grants for all Americans and more grants for small businesses, so be certain to stay informed and make your voice heard to your Congressperson and Representative.
Here are key provisions likely to affect you:
DIRECT CASH SUPPORT FOR ALL
First things first. Most Americans will get direct cash support to help them weather the immediate financial impact, and a family of four would likely get $3400.
Here’s how that is figured:
- $1200 per adult earning up to $75,000 a year. Those earning between $75,000 and $99,000 will have that amount reduced by $5 for every $100 in income.
- $2400 per couple, filing jointly up to $150,000 a year. Those earning between $150,000 and $198,00 will have that amount reduced by $5 for every $100 in income.
- $1200 for a “head of household”—single parent—can earn up to $112,00 per year; with a reduced scale up to $136,500.
- $500 per child.
What qualifies as your income level
Technically, it is your 2020 income that qualifies. Since no one knows this year’s income, the government is using 2018 and 2019 tax returns. It is conceivable, though unlikely, that you could owe the money back if you go above the income threshholds in 2020 after receiving the payment, but that would not be due until April 15, 2021. You may want to know what happens if you earned more than would qualify in past years but because of business or job loss will earn less this year. I don’t know yet, but will include that in a future newsletter update and Facebook Live update.
How will you get the money
You will receive that check by direct deposit if the IRS has your bank details from your tax returns. If not, they will mail you a check.
When will you get the money
The Treasury Secretary says he wants to get this out by April 6. It is unlikely it will happen that quickly, and could take as long as eight weeks. Those getting the funds by direct deposit may get the funds earlier than those getting checks.
Is this money taxable?
UNEMPLOYMENT INSURANCE, NOW INCLUDING SELF-EMPLOYED AND GIG WORKERS
- $600 per week unemployment insurance is being made available for the self-employed, independent contractors, and gig workers who otherwise would not have qualified for unemployment.
- An additional $600 per week is being given to those who already qualify for unemployment.
- Unemployment insurance will last for four months.
SMALL BUSINESS LOANS AND GRANTS – the Keeping American Workers Paid and Employed Act
$377 billion is being made available for small businesses (under 500 employees) and self-employed/sole proprietors/independent contractors, including franchises and non-profits.
To discuss this further, join my Facebook Live session at 1 pm EDT/10 am PDT www.facebook.com/RhondaAbramsSmallBusiness.
Loans. The maximum loan amount is 250% of one month’s payroll costs (which includes wages, tips, taxes, health care, paid sick/family leave, vacation, retirement benefits). You can use loans for payroll, rent, commercial mortgage payments, utilities.
A few key provisions:
- Repayment deferral for one year, including principal and interest
- Maximum interest rate: 4%
- Fees lowered or waived
- No personal guarantees required
A small business can get their loan “forgiven”—in essence turned into a grant instead of a loan—by the percent of employees they keep on payroll (with no more than a 25% reduction in pay), and you can get additional forgiveness if you increase paid wages for those who would otherwise have received tips.
- SBA Express Loans: The maximum loan amount for SBA Express loans would be increased from $350,000 to $1 million. Express loans provide borrowers with revolving lines of credit for working capital purposes.
- Payroll tax deferment. For the rest of 2020, you can defer payment of the 6.2% federal payroll tax—paying half in 2021 and half in 2022. You will still have to pay that tax, but you will have added cash flow now. Employers who do not apply for a small business loan but keep their employees on the payroll during the crisis would be eligible for a payroll tax credit (not just deferral).
- Small Business Grants. $10 billion has been allocated for emergency grants of up to $10,000 for small businesses applying for Economic Injury Disaster Loans (EIDL).
I know this is all a lot to take in. I will discuss this further during my Facebook Live sessions and in future daily updates—sign up at www.PlanningShop.com (scroll to middle of page) if you are not already on my mailing list.
Stay well. Stay home (if you can). We’ll get through this together.
Copyright Rhonda Abrams, 2020