The Coronavirus “Loan” Programs for Businesses and Self-Employed Individuals

The Coronavirus “Loan” Programs for Businesses and Self-Employed Individuals

The “Paycheck Protection Program” for Businesses and Self-Employed Individuals

Who Is Eligible for a Loan Under the Program?
  • Businesses with 500 or fewer employees are eligible to receive a loan.  A business in the food industry with more than 500 employees, but that employs 500 or fewer employees at each of their restaurants, can receive a loan for each of their restaurant locations.  If you are a franchisee that owns multiple franchise locations, you will be eligible for a loan for each of your locations, regardless of how many other franchise locations you may own
  • If your business is NOT in the food industry and you are NOT a franchisee, rules similar to the “controlled group” rules apply, meaning if multiple businesses are under “common ownership,” all of the employees of all of the businesses will be aggregated and counted together to determine whether this “controlled group” employs 500 or fewer employees (and thus, is eligible for a loan).
  •  Nonprofit 501(c)(3) and 501(c)(19) organizations are also eligible for the loan.
  • Note, any 501(c) organization that is NOT a 501(c)(3) or 501(c)(19) organization is NOT eligible for a loan (e.g., 501(c)(4) and 501(c)(6) organizations are NOT eligible)
  • Self-employed individuals are also eligible to for the loan.
What Is the Maximum Amount of the Loan for Most Businesses?
  • If you are a business, and you were operating during 2019, the maximum amount of your loan will likely equal the following amount:
  •    250% of your monthly “payroll costs” during February 15, 2019 and June 30, 2019.  So, for purposes of applying for the loan, you are going to need your payroll and other expense records from 2019.
  • If you are a business, and you were NOT operating during 2019, the maximum amount of your loan will likely equal the following amount:
  •    250% of your monthly “payroll costs” during January 1, 2020 and February 29, 2020.
  • “Payroll costs” for a business include (1) salaries, wages, or commissions paid to employees (but limited to the first $100,000 of amounts paid to each employee prorated over the February 15th to June 30th time period), (2) cash tip equivalents (if applicable), (3) your employer contributions for health benefits, (4) your employer contributions for retirement benefits, (5) the cost of leave (e.g., vacation, family, and sick leave), or (6) the payment of State or local taxes assessed on employee compensation.
  •    Again, you are going to need your payroll and other expense records from 2019 (or 2020 if you are a new business).
What Is the Maximum Amount of the Loan for Self-Employed Individuals?
  • If you are a self-employed individual, and you were operating during 2019, the maximum amount of your loan will equal the following amount:
  •    250% of the amount of your own compensation that you generated for yourself during February 15, 2019 and June 30, 2019 up to $100,000 (which would be a prorated over the February 15th to June 30th time period).
  • If you are a self-employed individual, and you were NOT operating during 2019, the maximum amount of your loan will equal the following amount:
  •    250% of the amount of your own compensation that you generated for yourself during January 1, 2020 and June 30, 2020 up to $100,000 (which would be a prorated over the February 15th to June 30th time period).
If You Are a Business, What Can You Use The Loan to Pay For?
  • You can use your loan to pay your business’s “payroll costs” (described above) during February 15th and June 30th.  The loan can also be used to pay your business’s mortgage interest, rent, utility bills, interest on other debt, and premiums for COBRA for the employees you terminated/laid off during February 15th and June 30th.
If You Are a Self-Employed Individual, What Can You Use The Loan to Pay For?
  • You can use your loan to cover your own compensation during February 15th and June 30th.  You can also use the loan to pay mortgage interest, rent, utility bills, or interest on other debt during February 15th and June 30th.
Are There Time Limits?
  • You may apply for a loan up until June 30th.  The loan amounts can be used to pay the above stated costs that started back on February 15th.  Remember, the loans can only be used to pay the above stated costs incurred during February 15th and June 30th.
What Else Should You Know?
  • To be eligible for the loan, you must certify, among other things, that “the uncertainty of current economic conditions makes necessary the loan request to support the ongoing operations,” and you must acknowledge that “funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments.”
  • A bank making the loan is required to allow you to defer any loan repayments for up to 6 months, but not more than 1 year.  Interest on the loan cannot exceed 4% for the period of loan (which again, is February 15th to June 30th).
  • You do not have to show that you have credit elsewhere to be eligible for the loan, and there are no fees for applying for the loan.

The “Loan” Forgiveness Program

What Is It?
  •  All or a portion of the loan provided through the Paycheck Protection Program may be 100% forgiven.  In other words, the business or the self-employed individual would NOT be required to repay the loan, instead, the Federal government would repay the bank the amount of the loan that is forgiven.
What Portions of the Loan Are Eligible for Being Forgiven?
  • The following portion of loan may be forgiven:  Amounts paid for (1) salaries, wages, or commissions paid to employees (but limited to the first $100,000 of amounts paid to each employee prorated over the February 15th to June 30th time period), (2) cash tip equivalents (if applicable), (3) your employer contributions for health benefits, (4) your employer contributions for retirement benefits, (5) the cost of leave (e.g., vacation, family, and sick leave), or (6) the payment of State or local taxes assessed on employee compensation.
  • Loan amounts used to pay for mortgage interest, rent, and/or utility payments may also be forgiven.
Are There Limitations on How Much of the Loan Can Be Forgiven?
  • The amount of the loan that may be forgiven will be reduced by the number of employees the business laid off during the period between February 15th and June 30th.
  • In addition, if the business reduces the wages of an employee who makes less than $100,000 by more than 25% during the period between February 15th and June 30th, the loan amount that may be forgiven will also be reduced.
  • If, however, the business re-hires the employees that were laid off prior to – or during – February 15th the June 30th and/or the business restores the salary for those employees that may have seen a wage reduction, the loan amount that is eligible to be forgiven would correspondingly be increased.
Are There Time Limits?
  • Remember, the loan can only be used to pay for the above described costs incurred during February 15th and June 30th.  Under the Loan Forgiveness Program, you can choose an 8-week period of the allowable costs – incurred between February 15th and June 30th – to be forgiven.  For example, you could choose to go back to February 15th as the starting point for the 8-week period even though you did not get your loan until some time in April or May.
How Can I Get My Loan Forgiven?
  • To be eligible for the loan forgiveness, the business must, among other things, (1) verify the number employees on payroll and the amount of salaries, wages, and commissions paid to these employees, (2) verify the mortgage interest, rent, and/or utility payments, and (3) certify that the documentation used to “verify” things is true and accurate.  Without this “verification,” the business would NOT be eligible for the loan forgiveness.
  • Presumably, a self-employed individual must make similar “verifications” about their compensation and the expenses like mortgage interest, rent, and/or utility payments to be eligible for the loan forgiveness.
  • For the loan to be forgiven, the business and self-employed individual must apply to the lending bank asking for all or a portion of the loan to be forgiven.  As a result, all of the above information must be presented to the lending bank with the application asking for the loan forgiveness.
  • Any portion of the loan that is NOT forgiven will be amortized over 10 years with a 4% interest rate.  Again, payments of principal and interest on the loan may be deferred by 6 months, but not more than a year.

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IRS Economic Stimulus Payments

IRS Economic Stimulus Payments

 

Seniors do not need to file a short return

Earlier this week, the IRS released IR-2020-61, which includes a statement that “some seniors and others who typically do not file returns will need to submit a simple tax return to receive the stimulus payment.” Knowing that this directly conflicts with wording in the CARES Act, NATP contacted IRS Commissioner Rettig and key members of the House Ways and Means Committee to request clarification.

As of last night, the U.S. Department of the Treasury and the IRS announced that Social Security beneficiaries who are not typically required to file tax returns will not need to file an abbreviated tax return to receive the economic impact payment. Instead, payments will be automatically deposited into their bank accounts. The IRS will use information from the Form SSA-1099 and Form RRB-1099, and recipients will receive these payments as a direct deposit or by paper check, just as they would normally receive their benefits.

Please note, since the IRS would not have information regarding any dependents for these people unless they filed a tax return, each person would receive $1,200 per person, without the additional amount for any dependents.

First stimulus payments expected to go out week of April 13

According to our sources on the Hill, the Treasury Department and IRS officials have told the House Ways and Means Committee that the initial wave of payments will go out the week of April 13. The payments will automatically deposited into the same bank account reflected on the 2019 or 2018 return filed. In the coming weeks, the Treasury plans to develop a web-based portal that will allow individuals who have not recently submitted banking information to the IRS to do so, enabling them to receive payments immediately as opposed to waiting for a check to arrive in the mail.

Taxpayers in the first wave have direct deposit information on file with the IRS from their 2018 or 2019 tax returns. Paper checks would start going out in May to people who don’t have direct deposit information on file with the IRS. About 5 million checks will be sent weekly, and it could take up to 20 weeks to distribute all of them. People with the lowest incomes will get their checks first.

We’ve heard that the IRS anticipates creating a “Where’s my Economic Impact Payment?” tracker, similar to the “Where’s my refund?” system.

Payments are available throughout 2020

If someone who normally doesn’t file a tax return contacts you, let them know 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.

The IRS plans on releasing the “simple tax return” in the upcoming weeks. That form is expected to ask filers for their names, Social Security numbers, information on dependents and deposit information.

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 through Dec. 31, 2020.

There is no qualifying income requirement, but there is a phase-out for payments

There is no qualifying income requirement. Individuals with $0 of income are eligible for the payment provided they are not the dependent of another taxpayer and have a work-eligible SSN. 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 and up to $500 for each qualifying child.

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.

Taxpayers with a lower 2020 AGI will receive a credit

The payment is actually an advance on a tax credit claimed on the 2020 tax return. If a taxpayer’s income is lower in 2020 than in 2019, any additional credit for which they are eligible will be refunded or will reduce the tax liability when the 2020 tax return is filed. As it stands, if your 2020 income is higher than the thresholds and you received the payment, you will not need to pay back any part of the payment.

Taxpayers who owe back taxes will still receive the payment

While the IRS has not officially provided guidance on this, the Senate Finance Committee stated that the bill turns off nearly all administrative offsets that ordinarily may reduce tax refunds for individuals who have past tax debts, or who are behind on other payments to federal or state governments, including student loan payments. The only administrative offset that will be enforced applies to those who have past due child support obligations that the states have reported to the Treasury Department.

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Massachusetts Announces State Income Tax Filing Deadline Being Extended to July 15

Massachusetts Announces State Income Tax Filing Deadline Being Extended to July 15

On March 27, 2020 Governor Charlie Baker, Lt. Governor Karyn Polito, Senate President Karen Spilka and House Speaker Robert DeLeo announced an agreement to extend the 2019 state individual income tax filing and payment deadline from April 15 to July 15 due to the ongoing COVID-19 outbreak. This income tax relief is automatic and taxpayers do not need to file any additional forms to qualify.

“Massachusetts will move the state personal income tax filing and payment deadline to July 15, consistent with the federal government, in order to provide additional flexibility to filers during this crisis,” said Governor Charlie Baker. “In partnership with our colleagues in the Legislature, we are committed to providing this flexibility to taxpayers in a way that protects the Commonwealth’s strong fiscal footing that we have all worked hard to develop over the past several years.”

“We are proud to work with the Legislature to provide meaningful relief to people throughout the Commonwealth during this public health emergency,” said Lt. Governor Karyn Polito. “This extension will afford taxpayers additional time to file their Massachusetts individual income tax returns as we carry out the historic response to the COVID-19 outbreak.”

“The top priority during this public health crisis is to address the immediate needs facing our residents,” said Senate President Karen E. Spilka. “Our message is clear: residents should stay home and avoid social contact to be safe. Extending the tax deadline helps us accomplish that goal and provides peace of mind. I want to thank Chair Rodrigues, as well as our partners in the House and the Administration for their continued collaboration in confronting the challenges facing our Commonwealth.”

“The House, in partnership with the Senate and the Administration, agreed to an extension of the state tax filing deadline to ease the burden on individuals while agreeing to borrowing measures that would protect the Commonwealth’s revenue stream,” said House Speaker Robert A. DeLeo. “Thank you to Chair Michlewitz for his leadership in ensuring the Commonwealth’s fiscal viability while providing tax relief to those unduly effected by this crisis.”

Today’s announcement will move the state income tax filing deadline to match the July 15 deadline for filing federal individual income taxes. Legislation will be filed in the near future to finance the extension, and accompanying administrative changes will be implemented through the Department of Revenue. Specifically, the legislation will authorize the Commonwealth borrowing flexibility to manage deferred revenue this fiscal year and repay it in the next fiscal year, which starts July 1, 2020.

Individuals with questions or concerns regarding taxes can contact the Massachusetts Department of Revenue at (617) 887-6367 or send a secure e-message through MassTaxConnect.

The Commonwealth will continue to update the public on further developments and individuals are encouraged to consult both the Department of Public Health and the US Centers for Disease Control and Prevention websites for the most up to date information.

The latest information and guidance regarding COVID-19 is always available at mass.gov/COVID19.

 

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COVID-19 Unemployment, as it Relates to Massachusetts Filers

COVID-19 Unemployment, as it Relates to Massachusetts Filers

There is lots of information is swirling around on filing for unemployment during the COVID-19 pandemic. The latest news reports put last week’s national unemployment clams at over 3.3 million new claims, the most since the 2008 recession.

We are fielding questions hourly on unemployment from our clients – here are some answers to frequently asked questions about filing for unemployment during the COVID-19 emergency from both an Employer and Employee standpoint in Massachusetts –

 

Employer Unemployment FAQ: COVID-19

 

Employee Unemployment FAQ: COVID-19

 

One thing to note if you are an employee filing, make sure that the name of your employer matches the exact name on the W2 you received from your employer. If these names do not match, the DUA will be unable to match up the records and your claim will be delayed.

In addition to the state unemployment, the new $2 trillion stimulus package passed in the Senate Wednesday evening would allow people to receive an extra $600 a week in unemployment benefits for up to four months — on top of the amount they get from the state.

Please contact our office if you have any further questions.

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