The Paycheck Protection Program has run out of money for most borrowers before its planned May 31 end, the Small Business Administration said.
Going forward, the program will only accept new applications from community financial institutions, which typically serve minority borrowers, as about $8 billion in funding was set aside for such businesses.
The SBA will continue to fund outstanding approved PPP applications from other lenders but won’t accept any new applicants.
The exhaustion of funds, which was announced Tuesday, comes just weeks after the PPP was extended through the end of May to allow borrowers more time to apply for the forgivable loans. While many lenders and borrowers thought that the program would likely run out of money ahead of the May 31 deadline, the exact timing wasn’t known.
“We did get caught off guard a little bit,” said Sam Sidhu, vice chairman and chief operating officer at Customers Bank, a subsidiary of West Reading, Pennsylvania-based Customers Bancorp. The bank, which was processing about 20,000 PPP loans per week, still has thousands of borrowers who are now stuck in the pipeline, Sidhu said.
Other lenders also have backlogs awaiting SBA approval, and more applications they could have submitted.
Chris Hurn, chief executive of Fountainhead Commercial Capital, a nonbank lender, said he has a backlog of more than 60,000 applications pending validation from the SBA, and nearly 35,000 more that could be submitted if the portal wasn’t closed.
“Everybody’s going to be waiting now to see what the SBA does, if anything,” said Hurn.
Small business owners with certain forgiven federal loans during the COVID-19 pandemic can now exclude those funds from their gross taxable income in Massachusetts.
Gov. Charlie Baker signed into law Thursday afternoon legislation that makes enables “pass-through entities” with forgiven Paycheck Protection Program loans to get the same tax benefits that corporations do.
The congressional stimulus package in December allowed businesses with forgiven PPP loans to exclude the funds from gross taxable income while still claiming the deductions for expenses they paid using the PPP money, which tax experts and critics have described as a “double benefit.”
In Massachusetts, corporations got the same benefits because the state’s corporate tax code conforms to the federal corporate tax code automatically. But the state has a fixed individual tax code, meaning lawmakers had to pass legislation to ensure small businesses could get the same relief.
Residents who received unemployment benefits won’t be taxed on the first $10,200 if they live below 200% of the federal poverty level.
The new law also freezes the unemployment insurance rate for the calendar years 2021 and 2022, slowing the annual employer UI contribution rate. The rate was expected to increase hundreds of dollars per employee.
“This legislation takes a thoughtful and comprehensive approach in delivering critical relief to facilitate economic recovery for the people of Massachusetts,” Baker said in a letter to lawmakers.
While employers get a reprieve from UI rate hikes, the new law authorizes the state to issue special obligation bonds to repay federal advances and get the trust fund out of the red.
The bill also creates a $75 million COVID-19 emergency paid sick time program similar to the federal COVID leave benefits, requiring employers to give workers a week’s paid leave if they are infected with, isolated or quarantined due to COVID-19.
The paid leave also extends to those getting vaccinated or caring for family members who fit those same criteria.
“The mandate aptly addresses needs — immunization, isolation, and quarantine — that were not contemplated when the state’s Paid Family and Medical Leave program was designed,” Baker said.
WASHINGTON – To help taxpayers, the Internal Revenue Service announced today that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan.
The legislation, signed on March 11, allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers. The legislation excludes only 2020 unemployment benefits from taxes.
Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.
For those taxpayers who already have filed and figured their tax based on the full amount of unemployment compensation, the IRS will determine the correct taxable amount of unemployment compensation and tax. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.
For those who have already filed, the IRS will do these recalculations in two phases, starting with those taxpayers eligible for the up to $10,200 exclusion. The IRS will then adjust returns for those married filing jointly taxpayers who are eligible for the up to $20,400 exclusion and others with more complex returns.
There is no need for taxpayers to file an amended return unless the calculations make the taxpayer newly eligible for additional federal credits and deductions not already included on the original tax return.
For example, the IRS can adjust returns for those taxpayers who claimed the Earned Income Tax Credit (EITC) and, because the exclusion changed the income level, may now be eligible for an increase in the EITC amount which may result in a larger refund. However, taxpayers would have to file an amended return if they did not originally claim the EITC or other credits but now are eligible because the exclusion changed their income.
These taxpayers may want to review their state tax returns as well.
According to the Bureau of Labor Statistics, over 23 million U.S. workers nationwide filed for unemployment last year. For the first time, some self-employed workers qualified for unemployed benefits as well. The IRS is working to determine how many workers affected by the tax change already have filed their tax returns.
The new IRS guidance also includes details for those eligible taxpayers who have not yet filed.
The IRS has worked with the tax return preparation software industry to reflect these updates so people who choose to file electronically simply need to respond to the related questions when electronically preparing their tax returns. See New Exclusion of up to $10,200 of Unemployment Compensation for information and examples. For others, instructions and an updated worksheet about the exclusion were available in March and posted to IRS.gov/Form 1040. These instructions can assist taxpayers who have not yet filed to prepare returns correctly.
President Biden on March 30 signed into the law the bipartisan Paycheck Protection Program (PPP) Extension Act of 2021 (HR 1799), which moves the application deadline to May 31, 2021. The PPP application window was originally set to expire the next day on March 31.
The bill was overwhelmingly approved in the House by a 415-to-3 vote; the Senate cleared it 92-to-7.
Additionally, the measure provides the U.S. Small Business Administration (SBA) with an extra 30 days to process loans submitted prior to June 1. However, no additional funding was provided for the program, which is expected to lapse in mid-April, according to the SBA.
Information on First and Second Draw PPP Loans can be located here.
The SBA’s March 25 PPP Data Report can be located here.
WASHINGTON – The Internal Revenue Service announced today that the next batch of Economic Impact Payments will be issued to taxpayers this week, with many of these coming by paper check or prepaid debit card.
For taxpayers receiving direct deposit, this batch of payments began processing on Friday and will have an official pay date of Wednesday, March 24, with some people seeing these in their accounts earlier, potentially as provisional or pending deposits. A large number of this latest batch of payments will also be mailed, so taxpayers who do not receive a direct deposit by March 24 should watch the mail carefully in the coming weeks for a paper check or a prepaid debit card, known as an Economic Impact Payment Card, or EIP Card.
No action is needed by most people to obtain this round of Economic Impact Payments (EIPs). People can check the Get My Payment tool on IRS.gov on to see if the their payment has been scheduled.
“The IRS continues to send the third round of stimulus payments in record time,” said IRS Commissioner Chuck Rettig. “Since this new set of payments will include more mailed payments, we urge people to carefully watch their mail for a check or debit card in the coming weeks.”
Following enactment of the American Rescue Plan Act on March 11, the IRS moved quickly to start delivering the third round of Economic Impact Payments. The IRS initiated the first batch of the $1,400 stimulus payments, mostly by direct deposit, on March 12.
Today marks the second batch of payments, with additional payments anticipated on a weekly basis going forward. The vast majority of taxpayers receiving EIPs will receive it by direct deposit. In addition, the IRS and the Bureau of the Fiscal Service leveraged data in their systems to convert many payments to direct deposits that otherwise would have been sent as paper checks or debit cards. This accelerated the disbursement of these payments by weeks.
Watch the mail for paper checks, EIP Cards
Taxpayers should note that the form of payment for the third EIP may be different than earlier stimulus payments. More people are receiving direct deposits, while those receiving them in the mail may get either a paper check or an EIP Card – which may be different than how they received their previous stimulus payments. IRS and the Treasury Department urge eligible people who have not received a direct deposit to watch their mail carefully during this period.
Paper checks will arrive by mail in an envelope from the U.S. Department of the Treasury. For those taxpayers who received their tax refund by mail, this paper check will look similar, but will be labeled as an “Economic Impact Payment.”
The EIP Card will come in a white envelope prominently displaying the seal of the U.S. Department of the Treasury. The card has the Visa name on the front and the issuing bank, MetaBank, N.A. on the back. Information included with the card will explain that this is an Economic Impact Payment. Each mailing will include instructions on how to securely activate and use the card. It is important to note that none of the EIP cards issued for any of the three rounds is reloadable; recipients will receive a separate card and will not be able to reload funds onto an existing card. EIP Cards are safe, convenient, and secure. EIP Card recipients can make purchases online or in stores anywhere Visa Debit Cards are accepted. They can get cash from domestic in-network ATMs, transfer funds to a personal bank account, and obtain a replacement EIP Card if needed without incurring any fees. They can also check their card balance online, through a mobile app, or by phone without incurring fees. The EIP Card provides consumer protections against fraud, loss, and other errors. The EIP Card is sponsored by the Bureau of the Fiscal Service and is issued by Treasury’s financial agent, MetaBank, N.A. The IRS does not determine who receives a prepaid debit card.
More information about these cards is available at EIPcard.com.
Taxpayers will have more time to get their taxes in order this year.
The Internal Revenue Service has pushed back the deadline for the tax filing season about one month to May 15 from April 15.
This will give taxpayers additional time to file their 2020 tax returns and pay any amounts owed to the IRS. Because May 15 falls on a Saturday, the final deadline for filers may be the following Monday.
The move from the IRS and Treasury Department comes after calls to extend the tax season increased following the passage of the $1.9 trillion American Rescue Plan, which meant the agency was tasked with sending another round of stimulus payments while processing tax returns and refunds.
The IRS in January pushed back the start of tax season to Feb. 12. This gave the agency more time to prepare after December Covid relief bill, which included a second round of stimulus checks to Americans that the agency was charged with delivering.
At the time, the tax collector kept the typical April 15 filing deadline, even though it meant a shorter than usual filing season.
In February, the agency did extend the tax filing deadline to June 15 for individuals and businesses in Texas, which was declared a disaster area by the Federal Emergency Management Agency after winter storms left residents without power.
At the time of this extension, we are still unaware of which states will follow suit with the IRS and extend their individual filing dates as well. This means that although your federal tax returns aren’t due on April 15th, your state returns may still be.
Keep an eye out for more details from NFS. As we find out more, we will let you know.
UPDATED 03-19-2021: MASSACHUSETTS Department of Revenue Announced they will follow the IRS extending due date of individual tax filings and payments to May 17th, 2021.