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.
Starting a non-profit organization is a very fulfilling way to earn a living while giving back to your community. Whether you decide to help people, animals, or the environment, your non-profit is sure to have a positive impact on the world around you. But launching and growing a non-profit can be complicated. Soliciting help from financial service organizations like Northeast Financial Strategies is a great place to start! Here are some other tips and resources for organizing a successful launch.
Lay the Groundwork
Before getting too deep into launching your non-profit, take the time to do market research, structure your business properly, and ensure that running a charity is the right path for you.
- Do some market research to find out if there is a need for your services in your community.
- Make sure running a non-profit is the right move for you.
- Structure your business as an LLC to give credibility to your services and limit your personal liability.
Keep Everything Legal
Non-profit organizations have to navigate a sea of complicated legal regulations. Get everything set up right from the beginning so you can avoid legal issues in the future.
Secure Adequate Funding
Earning funding for your non-profit will be one of your main jobs. As you prepare for the launch of your organization, start soliciting donations to cover your startup costs.
If you’ve always wanted a career focused on benefiting society rather than earning profits, launching a non-profit could be a great move. The startup process can be tricky, so take it day by day and try not to get overwhelmed. Keep these resources close at hand so you can reach for answers whenever you run into a roadblock.
Professional services can make it easier to launch and grow your startup. For help with tax preparation, money management, accounting, or payroll, reach out to Northeast Financial Strategies today.