CARE Act Preview for Small Businesses

March 27, 2020


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Hello, it is March 26 then I want to give you an update on the latest and greatest on the coronavirus relief acts that are going on. First, we have a bill that has now passed the Senate and is expected to be voted on tomorrow in Congress and the president assumes that that’s going to pass pretty well right now and will be signed into law pretty quickly. We do expect this bill to look essentially what it looks like today when it comes in law. So let me give you a little update. I’ve been scouring through this. It’s been a tough road, but I spent most of the night last night looking through this bill and trying to scour through what is going to affect our clients the most. So I’m gonna give you a little update and a couple of bullet points here. First off the, one of the big factors we have been talking about so far, the SBA loans for disaster recovery.

I’m gonna tell you, you probably want to put a little hold on any efforts to go after that loan right now because they’re expected to be some new loans available through this act that are going to have some better things happening. These are going to be loans that are going to be managed and backed by the SBA 100%, which means that they will be administered by anybody who can do SBA loans. So your local community banks are going to be the primary sources of lending and they are expected to bypass all eligibility that you would normally have to go through for the SBA loans. So when we were talking about the disaster loans, those can take a couple of weeks to get through. You have to have good credit, you have to go through, jump a lot of hoops. You have to provide collateral. This is kind of forming an express way to help get money to small businesses quickly without as much bureaucracy, if that can possibly happen these days.

Okay, but so they’re going to go through community banks and seven, eight lenders for the SBA and the banks are going to basically be looking at their own processes to determine eligibility. So if you’ve got a great relationship with your local bank, this is gonna really be helpful at this point in this process, the loans are going to also have a factor that’s going to allow for forgiveness of debt. So the forgiveness will be an amount equal to the payroll costs and costs related to debt obligations for the period of March 1st, 2020 through June 30th, 2020. Now, the real question I have there from a technical aspect is what is a debt obligation? I’m expecting that to be things like rent because you signed that contract before March 1st of 20. You’ve got an obligation to pay it. If you have any loans, credit cards, I would also expect to be included in there.

I’ve got some technical questions about you know, what, if those have balances are continuing to grow, a lot of different issues there, but I would expect that those would be included. And ultimately I believe that the forgiveness looks like it’s going to be judged by your community bank again at the end of this process. Okay. Now, one of the kickers is if you lay off people during that timeframe between March 1st and June 30th your forgiveness is going to be proportionally reduced. Now, I don’t know exactly how that calculation works as well. Can you just reduce hours for an employee? Does that hinge or hurt? Is it based on the hours are full time equivalent? I don’t know the answers to that yet. We’ll have to wait for some more interpretation. But there are some good things happening it looks like with that loan forgiveness that could be very beneficial.

The other outstanding question that I don’t see in the bill is will that loan forgiveness be taxable in the future? But I will ultimately say if you got, didn’t have to pay back a loan and you had to pay tax on the forgiveness, I’d much rather pay the tax than pay the loan. Okay. So we’ll guide you through as details become available about that. All right, so that deals with the small business loans. Now the next factor that was included in this bill are the rebate checks to folks. Those are coming in the form of $1,200 for single. If you’re married, it would be $2,400. They would also increase $500 for each child. Those are going to be based on your 2018 taxes. There was some confusion whether 19 will be included from the looks of this bill. It would be based strictly on 2018 income and it would be based on your adjusted gross income.

It begins to phase out after $75,000 single or $150,000 married filing joint goes on up to 150 is the highest level of. So if you’re single on your income, adjusted gross income is over 150,000. There is no rebate or over 200,000 for joint filers. Alright. More details will come on that we’re actually working on a calculator for our website to help you calculate what rebate amount you should expect. Those are supposed to be in their words, they said they were willing to be very rapidly deploying that. I’m not sure what rapid means from the IRS standpoint. That could be a long time, but we’re hoping they’re going to get that out pretty quickly. There’s also been some talk about people saying, well you have to reconcile that and repay it if he got too much kind of like we did in that old previous rebate.

I don’t see any indication of that right now either. So these would be a once and done, not included in taxable income and reconciled later. All right, so also if you have not filed your 2018 taxes yet, you will not get this rebate check. There’s some question about how quickly you could file that. Typically it does take the IRS of several weeks, so I doubt that this could get on file because that would have to be a paper filed and processed return with the IRS and I don’t believe their staffing is gonna be able to get that in there in time for this calculation. So always want to make sure you got filed on time in cases like this, but not one that anybody could predict. All right, next up. The other aspect is if you owe estimated payments for taxes it appears that all estimated payments will be pushed off until after October 15th without penalty.

No cap on that amount. So basically anybody who is required to make estimated payments you should be able to conserve your cash flow and keep those on hand until at least October 15th at this point. Again, this is a proposed bill, so I’m going to treat everything as if it has passed. It’s expected to pass, but wait for final indications before you take action. Next up retirement funds, you may use up to a hundred thousand dollars from distributions in qualified retirement accounts if it’s for coronavirus related purposes. Now that means basically that if you are have coronavirus or if you have a spouse or dependent diagnosed or a, and this, I’m going to read to you who experienced adverse financial consequences as a result of being quarantined. Furloughed laid off, having work hours were reduced, being unable to work due to a lack of childcare closing or reduction of business hours or operate or operated by the individual due to COVIT 19.

So I think pretty much we can use that as the answer for any distribution out of a 401k. So we’ll waive the 10% penalty. You will also be allowed to put that money back in without regard to that current year’s capital on putting contributions in. So theoretically, if you took $100,000 out of your 401k plan to use for coronavirus purposes right now to keep your business alive and running, you could put that money back in over the next three years to make your shelf whole. And you would have to pay any 10% penalty or tax it appears. If you took that money out and never intended to repay it, you’re going to be subject to the tax over three years. Again, I don’t have a whole lot of details there as to how that timing will work, but you would just pay the tax on it as that money came back or did not come back into the 401k.

All right, so that should provide some ways for relief there. The one thing you want to make sure you’ve got in order is we gotta make sure you have all your financials up to date for the loans from the banks. If you’re working with us, we’ll have you ready to go for that and be more than prepared to help you get through that. One other thing, let me just verify. Oh, one more piece. This is kind of tucked in the bottom with a business provisions. It appears that you’re going to be allowed to not pay in the employee, your share of social security taxes, the 6.2% you can defer that and pay it over the following two years with half of the money being required to pay by December 31st, 2021 and the other half by December 31st, 2022. I haven’t heard a whole lot of talk about that one, but that will also be another helpful thing if you’ve got employees and you’re paying those taxes or if you are in fact an employee yourself.

All right. And the one last part, if you’ve had net operating losses in 2018 19 or 20, those will be allowed to be carried back for five years. Yes my dog is here, both of them and they, she’s growling at that, so she apparently doesn’t like that part, but if you have those losses in 2018 or 19, we’ll be looking to carry those back and then we can offset other income sources from five years for to recoup some of the refund. All right, I think that about does it for this point. We will continue to be on this like nobody’s business and keep you up to date with where the latest and greatest is. So thank you very much for your attention. Pass this along. If you have other business owner friends. Also, if you know of other businesses who are going to need their financial information caught up today so that they can take advantage of that, please have them get in touch with me ASAP. I’ll be more than happy to see what we can do to help them. We are all in this together and we need to make sure that we help our fellow business owners all stay alive and kicking for this is going to end one day soon and we all want everybody to come out stronger and healthier and be able to survive this challenge. Thank you very much. I’m Donna Bordeaux.

Donna Bordeaux, CPA with Calculated Moves

Creativity and CPAs don’t generally go together.  Most people think of CPAs as nerdy accountants who can’t talk with people.  Well, it’s time to break that stereotype.  Lively, friendly and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux.  They have over 50 years of combined experience as entrepreneurial CPAs.  They’ve owned businesses and helped business owners exceed their wildest dreams.   They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.