04/06/2020
SBA'S COVID-19 LOANS/GRANTS AND OTHER RELIEF MEASURES --
If you are either engaged in a business that you own, are its chief executive/operating officer, or are involved in another role that has significant influence on its day-to-day operations, then this post is certainly for you.
There has been so much in the news regarding COVID-19 mandates, and even more about the federal and state governments’ responses. Even though this is still the most intense part of tax filing season, I have had to take considerable time away from processing returns to devote attention to all that is coming out of DC and, for the Michigan clients, Lansing. Fortunately, the US Department of Treasury and Michigan’s governor have both deferred the filing deadlines. I have worked diligently to peruse every email that hits my inbox to snag those special emails that I find to be a very good analysis of the situation. When I find them, I have them posted to our website – www.davidduffycpa.com – and here on our page. It has been a challenge because so much has come out in so little time. And, because there is so much that is good information…and because I have so many returns to process…I have not felt it to be practical to provide my own written analyses. It would only duplicate what is already out there.
I want to share what are the biggest questions and concerns that clients are asking me….deadlines, the $1,200 stimulus payment, unemployment, and the CARES Act Payroll Protection Program (PPP) loan through the Small Business Administration (SBA).
NEW FILING DEADLINES
The deadline for filing those types of returns that normally involve a tax, as opposed to ‘information’ returns, is now July 15.
The deadline for paying taxes that are owed on those returns is July 15.
The deadline for the 2020 first quarter estimate is July 15. The deadlines for all of the other estimates remain the same as before. Yes, Q2 must be paid before Q1.
Detroit and most other cities, if not all by now, are required to be filed and paid by July 30.
STIMULUS PAYMENTS
I won’t repeat all of the details that have been in the news for a couple of weeks now. However, there are a couple of items that are not well-known. If you are eligible, you will receive a payment…regardless if you have a balance owed from prior tax debt. The idea of this payment is in the name…stimulus…to put money in consumers’ hands. At first, the Treasury stated that you had to have filed a return during 2018 or 2019, and that, if you weren’t required to file in those years, you should file one to get on the program’s radar. They just changed that yesterday. If you are on social security, you do not have to file a return. Your enrollment will provide the Treasury with the necessary information. The Treasury is also urging direct deposit so as to get the money in everybody’s hands quickly. If you did not use direct deposit on your return or for your social security entitlements, the Treasury has put a website up for citizens to enter that information.
UNEMPLOYMENT
I urge all employers to get familiar with the expanded rules for unemployment due to COVID-19 in your respective states. In Michigan, such claims are not charged against the employer’s account since the Governor’s executive order required a reduced work force. Also, it has been expanded to include a certain sector of workers that was not eligible before…the self-employed. In addition, the federal CARES Act injects another $600/week for up to 4 months on top of the state benefit. The Michigan Department of Labor and Economic Opportunity has issued an announcement a few days ago that discussed Governor Whitmer’s expanded unemployment. You can read that discussion here -- https://lnks.gd/l/eyJhbGciOiJIUzI1NiJ9.eyJidWxsZXRpbl9saW5rX2lkIjoxMDEsInVyaSI6ImJwMjpjbGljayIsImJ1bGxldGluX2lkIjoiMjAyMDAzMzAuMTk1MDM2NTEiLCJ1cmwiOiJodHRwczovL3d3dy5taWNoaWdhbi5nb3YvY29yb25hdmlydXMvMCw5NzUzLDctNDA2LTk4MTU4LTUyMzQ1MC0tLDAwLmh0bWw_dXRtX21lZGl1bT1lbWFpbCZ1dG1fc291cmNlPWdvdmRlbGl2ZXJ5In0.PrLaFEZQ9pC7SLjssvOVPwtWi5vHCH9oYBU-YkvZkRA/br/76803843002-l.
SBA PAYCHECK PROTECTION PROGRAM (PPP) LOAN…AND MORE
Perhaps the biggest topic is the SBA’s PPP. This loan may be used for payroll purposes and certain other operating expenses such as rent. Before I get into specifics, I encourage every business client to apply for this loan. Here’s why. There is a limit on the amount of funding…$349 billion. This will go quickly. Get in while you can. The money is cheap at 1% per SBA interim final rules as of April 3, with some of it potentially forgivable. It’s better to have it and not need it, than to need it and not have it. If, after the dust settles, you find that you have more than you need, there is no prepayment penalty. Simply pay down some of the balance.
The loan application process opened to businesses on Friday, April 3. It will be available to sole proprietors, independent contractors, and gig workers on Friday, April 10.
It's an SBA loan, but you need to initiate the loan process with your bank. Banks and other SBA-approved financial organizations such as credit unions may begin processing loans on Friday, April 3. While documentation requirements will vary between institutions, I have seen some lenders include some of the items from the following list:
• Spreadsheet of your calculation of the 2.5 months of payroll, showing the components -- gross payroll per Box 5 of all W-2s; employee health insurance premiums; employer retirement payments (matchings, but not employee withholdings); state and local unemployment taxes
• Copies of W-2s/W-3s
• Copies of Forms 941 for all of 2019
• Copies of 1099-MISCs that you issued
• Support/receipts for any other payroll-related costs
You will each have different experiences when you apply to your lender for the PPP loan…
• The larger banks will likely have you apply online only.
• Some banks will not be quite ready yet.
• Some lenders will have a minimum loan amount since they are paid by the SBA to process the loan based on a % of the loan amount, and have calculated the minimum loan that it would take to cover their costs.
• Some lenders will not be asking for your personal financial information since the loans are 100% guaranteed by the SBA and have no personal guarantees.
• Some lenders might not assist you with a loan if you did not have an account with them prior to the disaster.
• Some lenders might quote rates that vary from the 4% maximum.
Since the loans are 100% guaranteed by the SBA, and because there is no underwriting, there is no need for requests for personal information.
There is some debt-forgiveness of this to the extent that you use at least 75% of the funding for payroll purposes such as salaries and wages, paid time off, health insurance, and retirement, and no more than 25% for rent, utilities, and mortgage interest payments.
One very important feature of the PPP loan is that I may be listed by you as 'Agent', someone who assists you with the process before, during, and after. Also, it grants me permission to communicate with the lending institution on your behalf in instances where necessary. I’ve already been in contact with many clients who are looking for some answers to their questions. If I don’t know an answer, I know where to find it for you. If you would like to list me as ‘Agent’, you are welcome to do so, and I encourage it. Disclosure – I will be compensated by the lender for helping you with this, and the lender will be reimbursed by the SBA. I have invested much of what would have been my tax-preparation time in hard, diligent research into this relief program. By listing me as Agent, The SBA will ultimately compensate me for helping you so that you don't have to...so it's important that you do list me as Agent. You will have to formally notify the lender at the beginning of the loan process after you have submitted your SBA application to them, providing my name and address. This helps me to be able to help you.
There are so many more details to this program that I again have to resort to providing a link to another article that I found that is quite informative on the PPP. Please take the time to read it, won’t you? https://www.chapman.com/insights-publications-SBA_Paycheck_Protection_Program_Guidance_COVID-19.html
Also on the table is an advance loan of $10,000 that could turn out to be a grant in reality. It starts with an application on SBA.gov for an Economic Injury Disaster Loan (EIDL). EIDL is the Small Business Administration’s garden-variety disaster assistance, but Congress expanded the program in its COVID-19 response bill. Sole proprietors, with or without employees, are eligible. That can include landlords, vendors, or self-employed contractors. If you have already submitted your EIDL application, you really need to go back and do it again, and ask for the $10,000. In essence, they’re telling you to do that. https://covid19relief.sba.gov/ #/
I am urging all business clients to apply for both right away. They are NOT exclusive of each other. If you do get an EIDL loan, it will be, in a sense, wrapped into your PPP loan.
The Michigan Economic Development Corporation also has a Small Business Relief Program that offers grants and loans. You may apply for either, but not for both. The program is administered on a county-by-county basis, so you’ll need to navigate to your county once you’re in their website. https://www.michiganbusiness.org/about-medc/covid19/.
I hope this is helpful. If you need more information, there is an abundance of articles in the cosmos of the internet. Please spend some time researching. More importantly, and I can’t stress it enough, please apply! This is money that the government wants you to have to keep you in operation, and to keep your employees in as good a financial health as possible.
I aggressively advocate for the welfare of my clientele, and will continue to work for your well-being. I wish you all of the success that you can glean out of this unprecedented time in our lives.
Be safe. Be healthy.
With my very best regards,
David
David Duffy, CPA is an accounting firm located in Royal Oak, MI and Swartz Creek, MI; serving clients in the Detroit Metro Area and the Flint Area. One of the hallmarks of David Duffy, CPA is a high level of personal service. Throughout the organization, Managing Member, David Duffy, has built the f...
