ALBANY, NY – BST & Co., a financial and management consulting firm based in Albany, NY, has compiled the following guide to the numerous federal funding and relief programs available to businesses and individuals as a result of the coronavirus (COVID-19) pandemic.
“We are working closely with the business community to explain the options and to help companies get the funding they need,” said BST & Co. Managing Partner Ron Guzior. “This is a confusing time on many levels and we are here to help businesses and individuals navigate these offerings to determine the best fit for their current needs.”
Paycheck Protection Program
One of the signature initiatives of the $2 trillion Coronavirus Aid, Relief, and Economic Security Act, or the “CARES Act,” is the Paycheck Protection Program. The program is designed to provide small businesses which have been adversely impacted by the pandemic with an incentive to keep workers on the payroll. Businesses must have fewer than 500 employees per location to qualify for this funding. Most restaurants and hotels, as well as tribal businesses, veterans’ organizations, not-for-profits, independently-owned franchises, sole proprietors, independent contractors, gig economy workers and self-employed individuals are eligible.
Qualifying businesses may borrow up to 250 percent of their average monthly payroll expenses, or $10 million, whichever is less. This is meant to cover eight weeks of payroll expenses and debt obligations, including mortgage interest, rent and utilities. One of the most attractive features is that the loan will be forgiven if the funding is used to retain all employees and preserve salary levels.
Applications have been temporarily halted after the Small Business Administration announced the program has reached its maximum limit of nearly $350 billion in loans. Negotiations are proceeding in Washington to provide a new round of funding for the Paycheck Protection Program.
Economic Injury Disaster Loan
The Economic Injury Disaster Loan (EIDL) program is not new, but has been expanded through the CARES Act. The EIDL provides small businesses, non-profits, tribal businesses, sole proprietors and contractors with less than 500 employees with up to $2 million in low-interest loans from the SBA. Borrowers can also apply for an emergency grant of up to $10,000, which is said to be available in an expedited manner and will be considered an advance on the overall loan. The advance will be forgiven if it is spent on paid leave, maintaining payroll, mortgage or lease payments.
The SBA is urging eligible businesses to submit applications through its website as soon as possible. The deadline is December 21, 2020. The SBA is allowing businesses to apply for both the Paycheck Protection Program (pending its reopening) as well as an Economic Injury Disaster Loan, provided the funds aren’t used for the same expenses.
SBA Express Bridge Loans
If a small business has a relationship with an SBA Express Lender, they may be eligible to receive an Express Bridge Loan Payment of up to $25,000. These loans are processed quickly and are designed to support businesses which urgently need cash due to temporary loss of revenue. A bridge loan can also provide immediate relief to businesses which are waiting on a decision or disbursement from other sources of funding. More information is available at SBA.gov.
Deferral of Employment Tax Deposits and Payments
The CARES Act includes a provision which allows employers to defer the deposit and payment of their share of social security taxes through December 31, 2020. This provision also applies to certain taxes for individuals who are self-employed. The deferred taxes will need to be paid in two installments, with the first due by December 31, 2021, and the second due by the same date in 2022.
Employers should check with their payroll processing company for details on how to implement this deferral. Businesses which have received funding via the Paycheck Protection Program cannot utilize this option. However, businesses may take advantage of the provision up until they receive their funding.
Employee Retention Credit
Available to businesses which have not applied for funding via the Paycheck Protection Program, the employee retention credit allows employers of any size to claim a refundable payroll tax credit on their federal employment tax return. This credit is designed to encourage employers whose business is fully or partially suspended due to COVID-19 to keep their staff on the payroll. Employers can receive a maximum credit of up to $5,000 per employee. The provision is effective for wages paid after March 13, 2020, and before December 31, 2020. The average number of full-time employees in 2019 determines qualifying wages.
Businesses can take action on this credit immediately by retaining contributions rather than depositing them with the IRS. This credit can then be claimed on a federal employment tax return.
Federal Stimulus Payments
The economic impact payments – commonly referred to as stimulus checks – are another element of the CARES Act designed to get money directly into the hands of Americans who may be experiencing financial difficulty as a result of the pandemic.
The one-time payments, which are based on the adjusted gross income reported on 2018 and 2019 tax returns, could be as much as $1,200 for an individual and $2,400 for a couple. People with children are also eligible to receive $500 per child under the age of 17. Individuals who make $99,000 or more and couples whose joint income is more than $198,000 are phased out and not eligible for the stimulus check program. Because the payment is an advance of a tax credit to be reportable on the 2020 income tax return, individuals who don’t receive a payment now could potentially receive the credit when the 2020 tax return is filed if their income has decreased below the phase-out.
If you included your direct deposit information in your tax filings in 2018 or 2019, the payment will be automatically deposited to your bank account. The first wave of payments has already started hitting accounts. The next round of payments is expected to take place this month to social security beneficiaries who don’t file tax returns and receive their benefits by direct deposit. Paper checks will be issued as soon as May to taxpayers who don’t receive their return through direct deposit. Individuals whose income falls below the threshold to file a tax return should visit IRS.gov to complete an application for their payment.
The CARES Act widely expanded unemployment benefits for individuals who have lost their job or had their hours reduced as a result of the pandemic, including extending these benefits to part-time employees, contractors and gig workers. Individuals who had their workplace close or had to quit their job; are caring for someone whose school or other facility closed; or had a job opportunity fall through because of the COVID-19 are also eligible to receive unemployment benefits. State benefits are supplemented by a $600 weekly increase for up to four months.
In New York, the Department of Labor recommends filing a new claim through its online system which is accessible at https://unemployment.labor.ny.gov/login. The Department of Labor also advises individuals to file as soon as they lose their job, otherwise they may miss out on benefits.
Income Tax Deadline Deferrals
The U.S. Treasury and the IRS have extended the federal income tax filing deadline to July 15, 2020. This means that individuals have three additional months to file and pay their income taxes. Many states have also extended their tax deadlines to align with the new date, including New York.
It’s important to note that tax refunds do not impact one-time economic impact payments for those who are eligible to receive a stimulus check. The extension to July 15 is automatic, meaning that no action is required and no penalties will be imposed for those who file by the new deadline.
Student Loan Deferrals
The CARES Act also includes a section which provides an automatic suspension of principal and interest payments on certain federally-held student loans through September 30, 2020. Individuals with federal student loans do not need to take any action to initiate this suspension nor is any fee imposed. Numerous private student loan lenders are offering forbearance options or payment suspensions and are required to send written notification of these benefits to all loan holders. If individuals have not received this information, they should contact their student loan provider directly and as soon as possible to understand their full range of options.
Mortgage and Rent Payments
The government has imposed protections for homeowners with federally-backed mortgages, including the option to ask for a mortgage forbearance, which allows the lender to pause or reduce payments for a limited time. These payments will still need to be made in the future. Homeowners must contact their mortgage lender to request a forbearance and should not be required to submit any documentation providing proof of hardship. Individuals who do not have a mortgage backed by the federal government should contact their lender for their options.
Additionally, the CARES Act prohibits lenders from foreclosing on homeowners for 60 days.
The CARES Act also provides protections for renters, which prohibits evictions for nonpayment of rent for 120 days on properties with a federally-backed mortgage. After the 120-day period ends, the landlord cannot require the tenant to vacate without first providing a 30-day notice. Additionally, New York State has mandated a stop on evictions on all residential and commercial properties through at least June 20, 2020.
Retirements Savings Withdrawals
Under the CARES Act, individuals who have been impacted by COVID-19 have access to up to $100,000 of their 401(k) without the standard 10 percent penalty that would be imposed for making a withdrawal before the age of 59 ½.
This new rule applies to any individuals who themselves or their spouse or dependent have been diagnosed with COVID-19; has experienced “adverse financial consequences” due to being quarantined or furloughed; who cannot work due to childcare; or business owners who cut operating hours or shut down completely due to the pandemic.
For more information about these and other programs enacted as a result of the COVID-19 pandemic, visit www.bstco.com. BST & Co. is headquartered in Albany, NY, at 26 Computer Drive West.
About BST & Co., LLP
BST & Co. CPAs, LLP is as multi-disciplinary financial and management consulting firm headquartered in Albany serving the needs of closely-held companies, family-owned businesses, not-for-profit and governmental entities, and high-net worth individuals. BST offers a broad portfolio of accounting and auditing, tax, consulting, outsourced accounting, and human resources services; as well as wealth management services, valuations, forensic accounting and litigation support.