We’ve been talking a lot recently about the various loans provided for in the CARES Act, particularly the Paycheck Protection Program (PPP), which in less than two weeks unfortunately ran out of the $349 billion in funding money this morning. Small businesses are continuing to submit loan applications and we understand that existing applications are still pending with additional funding needed to be authorized by Congress.
Intended to stem unemployment, the PPP loans are, in effect, conditional grants provided 75% of the monies are used to cover payroll in the ensuing 8 weeks after the loan is issued. Each bank has their own procedure and requirements, but the application itself is rather straightforward. Whether you have already applied, or intend to apply, keep in close contact with your banker to keep the process moving so you are in a good place once the program is refunded.
Other Loans & Programs
The Economic Injury Disaster Loan (EIDL) is a low interest federal loan that provides up to $2 million with a maximum term of 30 years. The interest rates are 3.75% for businesses and 2.75% for non-profits. To be eligible, you must qualify as a small business under the Small Business Administration’s guidelines as modified under the CARES Act. Usually, businesses are under 500 employees (according to the size requirement of the NAICS) and not a prohibited business. Proceeds can be used for payroll, rent, utilities or mortgage interest and it isn’t necessary to demonstrate that the hardship is virus induced. There is no loan forgiveness for an EIDL, however there is an immediate advance which does not have to be repaid if you are denied. You can apply directly to the SBA, as well as apply online.
Payroll Tax Deferral (PTD) is available to businesses and sole proprietors and defers the due date of the employer portion of payroll taxes incurred from 3/27/20 through 12/31/20. Half (50%) of the deferred tax liability will be due by 12/31/21 with the remaining 50% due by 12/31/22. There is no limit or caps on the amount, and there will be no interest or penalties incurred. Businesses and sole proprietors need not demonstrate a direct adverse effect from Covid-19, however, this is not available if a PPP loan coupled with debt forgiveness, was obtained. There is no application required. The amounts are reflected in the quarterly Form 941 Payroll Tax filings.
Employee Retention Credit (ERC) is a refundable payroll tax credit. It is a cash payment equal to half (50%) of employee wages, up to $5,000 per employee. However, it is not available if a PPP loan is obtained. An ERC requires a full or partial shutdown of the business, or a reduction of gross receipts of 50% or more. An ERC is available to employers averaging less than 100 employees in 2019, and includes all qualified wages. For employers over 100 employees, there are restrictions on what constitutes qualified wages. No application is required, and the amounts are reflected within the Quarterly payroll Tax filings.
Estimated Tax Payments & Tax Retuns
The Internal Revenue Service (IRS) recently issued Notice 2020-23 which provides new guidance regarding extensions for several tax form filings and payment obligations that are due between April 1, 2020 and July 15, 2020. Specifically, the new notice postpones all quarterly estimated income tax payments that are normally payable between April 1, 2020 and July 15, 2020 until July 15, 2020. As a result of this and prior guidance, a Taxpayer’s 1st and 2nd quarter estimates will now BOTH be due on July 15, 2020.
Remember, if you haven’t already filed your 2019 Individual Tax Returns, the deadline is now July 15, 2020 without an extension. As always, please don’t hesitate to reach out if you have any questions, and don’t forget to connect with us on our website, Facebook, LinkedIn, or Twitter.
Stay safe, and stay healthy, and thank you for being part of the Garibaldi Group family.