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Economic Impact Payments – What you need to know

Check IRS.gov for the latest information: No action needed by most people at this time

IR-2020-61, March 30, 2020

WASHINGTON – The Treasury Department and the Internal Revenue Service today announced that distribution of economic impact payments will begin in the next three weeks and will be distributed automatically, with no action required for most people. However, some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.

Who is eligible for the economic impact payment?
Tax filers with adjusted gross income up to $75,000 for individuals and up to $150,000 for married couples filing joint returns will receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds. Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.

Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child.

How will the IRS know where to send my payment?
The vast majority of people do not need to take any action. The IRS will calculate and automatically send the economic impact payment to those eligible.

For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The economic impact payment will be deposited directly into the same banking account reflected on the return filed.

The IRS does not have my direct deposit information. What can I do?
In the coming weeks, Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online, so that individuals can receive payments immediately as opposed to checks in the mail.

I am not typically required to file a tax return. Can I still receive my payment?
Yes. People who typically do not file a tax return will need to file a simple tax return to receive an economic impact payment. Low-income taxpayers, senior citizens, Social Security recipients, some veterans and individuals with disabilities who are otherwise not required to file a tax return will not owe tax.

How can I file the tax return needed to receive my economic impact payment?
IRS.gov/coronavirus will soon provide information instructing people in these groups on how to file a 2019 tax return with simple, but necessary, information including their filing status, number of dependents and direct deposit bank account information.

I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment?
Yes. The IRS urges anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.

I need to file a tax return. How long are the economic impact payments available?
For those concerned about visiting a tax professional or local community organization in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.

Where can I get more information?
The IRS will post all key information on IRS.gov/coronavirus as soon as it becomes available.

 

Coronavirus Aid Relief and Economic Security (CARES) Act

Coronavirus Aid Relief and Economic Security Act (CARES Act) Paycheck Protection Program Information:

In addition to the expansion of the Economic Injury Disaster Loan (EIDL) Program enacted in earlier Coronavirus relief legislation the federal government has, through the passage of the CARES Act, expanded the Small Business Administration (SBA)’s 7(a) Loan Program and created the Paycheck Protection Program (PPP). Between February 15, 2020 and June 30, 2020, the new law allows the SBA to provide a total of $350 billion in loans to eligible small businesses. A direct comparison of the two programs can be seen below this overview.

Eligible small businesses include most businesses, not-for-profits, veteran’s organizations, and tribal organizations with 500 or fewer employees. The purpose of these loans is to help pay operational costs such as payroll, rent, health benefits, insurance premiums, utilities, etc. Loan amounts can be forgivable, subject to certain conditions, and the forgiven amounts, for federal tax purposes, are excludable from gross income. The following is an overview of the new Paycheck Protection Program.

Loans made under the Paycheck Protection Program will have a maximum interest rate of 4% and a maximum loan amount of the lesser of $10 million or 2.5 times the average total monthly monthly payroll costs for the one-year period before the loan is made, or for seasonal employers, the average monthly payroll costs for the 12 weeks beginning either on February 15, 2019, or from March 1, 2019 to June 30, 2019.

 

These loans will require no collateral or personal guarantee and the lender will have no recourse against any individual, shareholder, member, or partner of an eligible loan recipient for non-payment as long as the business uses the loan proceeds only for authorized purposes.

As part of the application process a good-faith certification must be made stating that the loan is needed to continue operations during the COVID-19 emergency; proceeds will be used to retain workers and maintain payroll or make mortgage, lease, and utility payments; the applicant does not have any other application pending under this program for the same purpose; and from February 15, 2020 until December 31, 2020, the applicant has not received duplicative amounts under this program.

 

The loan proceeds can be used to pay:

  • payroll costs such as salary, wages, commissions, etc.; paid leave; severance payments; payments for group health benefits; retirement benefits; state and local payroll taxes; and compensation to sole proprietors or independent contractors up to $100,000 in 1 year, prorated for the covered
  • Group health care benefits during periods of paid sick, medical, or family leave, and insurance
  • Payments of interest on mortgage
  • Rent or lease payments.
  • Utilities
  • Interest on other obligations incurred before February 15, 2020

Payments made in the eight-week period after the loan origination date for covered payroll costs, interest payments on mortgages, rent, and utilities will be forgiven. However, forgiveness amounts will be reduced for any employee cuts. The formula for forgiveness reduction based on employee cuts is:

  • The maximum available forgiveness under the rules described above multiplied by:
  • Average number of full-time equivalent employees (FTEEs) per month during the covered period divided by:

One of the following:

  • Average number of FTEEs per month employed from February 15, 2019 to June 30, 2019; or
  • Average number of FTEEs per month employed from January 1, 2020 until February 29,

Forgiveness is also reduced by an amount equal to any reduction in the total salary or wages of any employee during the covered period that is more than 25% of their compensation during their most recent full quarter of employment before February 15, 2020. This reduction applies only to employees who did not receive during any single pay period during 2019 a salary or wages at an annualized rate of over $100,000.

If you have already reduced your number of employees or reduced your employees’ wages, there is relief from these forgiveness reduction penalties for employers who rehire employees or make up for wage reductions by June 30, 2020.

 

For any amount of the loan that is not forgiven payments will be deferred for a period of at least six months and up to one year. There are also no penalties for early repayment of any amount of the loan not forgiven.

Participation in this loan program can make you ineligible for the employee retention credit and other credits being made available to businesses but does not disqualify you from applying for an EIDL to help cover other expenses not covered by this loan.

This program will be administered through the SBA’s network of approved lender banks. If you have a relationship with an SBA lender already, we recommend reaching out to them as they will have a list of materials they are requiring for consideration for these loans. For more information, assistance in applying for this or other loan and grant programs, or if you have any other questions please contact either the partner or accountant with whom you work.

Additional relief programs for businesses that are too large to benefit from the expanded SBA loan programs will be made available shortly, the CARES Act provided for the development of a program to provide low interest loans to businesses with 500-10,000 employees. As details of these additional programs become available, we will share them with you.

Gold Gerstein Group, LLC

SBA Economic Injury Disaster Loan (EIDL)

Paycheck Protection Program (CARES Act) (PPP)

What Businesses are Eligible?
Small Businesses, Small Agricultural Cooperatives, Aquaculture Businesses, Most Private Non-Profit Organizations Small businesses, Not-For-Profits, Veterans’ Organizations, and Tribal businesses with less than 500 employees.
Who are the Loans Administered Through?
Small Business Administration Directly SBA Authorized Lender
Are Applications Currently Available?
Yes No but anticipated to be available April 6th or before
What is the Loan Application Deadline?
Varies by state but generally December 2020 June 30, 2020
What is the Maximum Interest Rate?
For Profit Businesses 3.75%, Non-Profit Organizations 2.75% 4%
What is the Maximum Loan Amount?
$2,000,000 $10,000,000 (Capped at 2.5 times borrower’s average monthly payroll costs, defined below)
What is the Maximum Repayment Term?
Up to 30 years Up to 10 years
Are There any Collateral Requirements?
Yes None
Is a Personal Guarantee Required?
Yes, for certain loans No
How Long are Payments Deferred?
One year Six months to one year
Is There a Penalty for Pre-Payment?
No No
What can I Use the Loan Proceeds for?
Employee salaries and wages, paid medical or sick leave, insurance premiums, mortgage, rent, or utility payments Payroll costs; Group health benefits during periods of paid sick, medical, or family leave, and insurance premiums; Payments of interest on mortgage obligations; Rent or lease payments; Utilities; Interest on obligations incurred before February 15, 2020
What Amount of the Loan is Forgivable?
None Payments made in the eight-week period after the loan origination date for covered payroll costs, interest payments on mortgages, rent, and utilities will be forgiven. Forgiveness amounts will be reduced for any employee cuts and for reductions in employee salaries.
Can the Businesses Still Qualify for the Employee Retention Credit?
Yes No
Payroll costs are defined as compensation to employees such as salary, wages, commissions, etc.; paid leave; severance payments; payments for group health benefits; retirement benefits; state and local payroll taxes; and compensation to sole proprietors or independent contractors up to $100,000  per year, prorated for the covered period.
For a more detailed explanation please reach out to the Gold Gerstein Group LLC partner or accountant with whom you work.