By now every one has heard mixed messages about what is or isn’t in the CARES act. My good friend Rayanne is a tax accountant (if we’re friends on Facebook you may have seen us fishing together in Florida recently) and has took it upon herself to read and digest into an easy chart what the opportunities are for individuals and businesses. This act is 800 pages long. What follows is the reading of the first 200 pages. Please note that as the reading continues and as congress continues to pass bills that clarify amend, supersede or otherwise change this bill these things could change. And don’t forget that although we like to provide you business content we are not tax professionals. Please don’t act upon this information without checking with your tax and legal services provider first.
As we receive word of updates and clarifications we’ll continue to provide them to you. I hope that you find this information useful.
First we’ll look at the benefits for individuals. Below that is the information for businesses
Let’s look at individuals because it is likely that you will want to provide this information to your employees. Here is a handy chart.
|Recovery Rebates for Individuals|
|Who is Eligible?||All Individuals are eligible |
– Nonresident alien
– Dependent of another
– Estate or Trust
|How much is the rebate?||$1,200.00 per eligible individual plus $500 per qualifying child under age 17. Married couples will receive $2,400, plus $500 for qualifying children under age 17.|
|Will I get the full amount of the rebate?||Rebate amounts are limited by your 2019 Adjusted Gross Income. For every $100 that your AGI is over the limit, your rebate check will be reduced by $5.00|
|What are the income limits?||The Rebate will be reduced when AGI exceeds: – $150,000 for a joint return|
– $112,500 for head of household
– $75,000 all other filing statuses
|Is there a calculator I can use to determine my rebate?||https://www.forbes.com/advisor/personal-finance/stimulus-check-calculator/|
|I have not filed my 2019 income tax return yet, will I still get a rebate?||If your 2019 return has not been filed, the IRS will use your 2018 income to determine eligibility.|
|My income in 2019 was unusually high. I do not expect to make that much money in 2020, can I still receive a rebate?||The actual rebate is based on your 2020 income. When you file your 2020 income tax return, your 2020 income will determine if you are entitled to an increase in rebate.|
|If my 2020 income is outside the rebate limits will I have to pay the rebate back?||Quite possibly. It will be added into your tax return to reduce any refund or add to the balance owed.|
|I have not filed a tax return in years because I am on Social Security/Disability. Will I receive a rebate?||Yes. Social Security Administration will communicate your information to the IRS.|
|I have a child in college who is my dependent. Who will get her rebate?||Likely no one. $500 per child only applies to children under age 17. Dependents of others are not eligible for the rebate.|
|Do I need to apply to receive payment?||No. There is no application process. If the IRS has yourbank account on file, you will receive a direct deposit. Otherwise, you will receive a paper check in the mail.|
|When will payments arrive?||The Treasury Secretary expects to begin issuing payments within three weeks.|
|I recently moved from the address that was on my last tax return. Will I still get a rebate?||Please complete Form 8822 to inform the IRS of your new address as soon as possible. https://www.irs.gov/pub/irs-pdf/f8822.pdf|
|My income tax refund was garnished because of student loan default. Will I still receive a rebate?||Yes. The bill suspends almost all garnishments, including student loans, back taxes, and all wage garnishments, EXCEPT child support. If you owe back child support, your rebate will go to the child’s other parent.|
Section 2102 – Unemployment Assistance
Covered period: January 27, 2020 through December 31, 2020
Eligible people: – workers able to work, or – unable to work for COVID-19 related reasons – Self-employed – Those without sufficient work history or otherwise would not normally qualify
Excluded people: – Individuals who can telework with pay – Individuals receiving paid sick leave or other paid benefits
Duration: 39 weeks of unemployment benefits
Amount: Determined by state law, plus $600
Retirement funds – Up to $100,000 in distributions without early distribution penalty for COVID-19 related distributions. Have up to 3 years to recontribute the money back to the plan (a 3-year interest free loan from your 401k or IRA). If you do not recontribute within 3 years, the distribution is taxable, but not penalized. And, that income can be spread over three years
Loans from Qualified Plans increase to $100,000, up from $50,000.
Loan repayments, including existing loans are deferred for one year
Required Minimum Distributions are suspended for 2020 for most plans
Qualified Charitable Contributions – Beginning in 2020, there will be an adjustment to income for a maximum of $300 for charitable contributions. – Temporary suspension of limitations on cash contributions
Opportunities for Businesses
Section 1102 – Paycheck Protection Program
Covered Period: February 15, 2020 – June 30, 2020
Eligibility: – businesses or self-employed individuals with less than 500 employees, or not more than 500 per physical location if NAICS code begins with 72 (Accommodation and Food Services). – Businesses in operation on 2/15/20 and had employees – Paid independent contractors as reported on 1099-MISC
Maximum Loan Amount: The Lesser of Average total monthly payroll costs for the 12-week period 2/15/19 – 6/30/19 multiplied by 2.5; or $10,000,000
Allowable Uses: – Payroll Costs – Healthcare benefits premiums – Paid sick, medical, or family leave – Employee salaries, commissions or similar compensations – Payment of mortgage, rent, utilities, and interest on any other debt obligations
Other provisions: – No application fee will be collected – No personal guarantee is required – No collateral is required – May not be combined with other economic disaster loans – May not duplicate benefits received under Families First Coronavirus Response Act
Maturity: – 10 years from the date of application for forgiveness – Interest rate not to exceed 4%
Section 1103 – Entrepreneurial Development
Covered Small Business Concern:
Supply Chain Disruptions – Quantity and Lead Time – Quality, including shortages for quality control reasons – Technology, including a compromised payment network
Staffing challenges – Decrease in gross receipts or customers – Closure
Resource Partners: – Small business development centers – 80% of funds – Women’s business centers – 20% of funds Grants will be awarded to resource partners to provide education, training, and advising of covered small business concerns.
Section 1104 – State Trade Expansion Program
Reimbursement for financial losses relating to a foreign trade mission or trade show exhibition that was canceled solely due to a public health emergency declared due to COVID-19, if the reimbursement does not exceed a recipient’s grant funding.
Section 1106 – Loan Forgiveness
Covered Loan: Section 1102 above
Covered Mortgage: – Debt incurred in the ordinary course of business, – Mortgage on real or personal property, and – Incurred before February 15, 2020
Expected Forgiveness Amount: the sum of – Payroll costs – Interest payments on covered mortgages – Rent payments – Utility payments
Amounts forgiven will be considered “canceled debt” by the lender but will be exempt from taxation.
Limits on Amount of Forgiveness: – Amounts in excess of the principal on the loan will not be forgiven. – Forgiveness will be reduced proportionately by any reduction in employees retained compared to either (i) the prior year, or (ii) the period of January 1, 2020, thru February 29, 2020 (measured based on average employees per month). – Forgiveness will be reduced proportionately by any reduction in pay of any employee beyond 25% of their prior year compensation (measured from the most recent full quarter prior to the origination date of the loan). – Payroll costs eligible for forgiveness do not include compensation paid to employees in excess of $100,000 annually.
Documentation Needed: – Verification of employment and payroll costs – Verification of mortgage interest payments, rent payments, and utility payments – Certification from borrower
Section 1110 – Emergency EIDL Grants
Covered Period: January 31, 2020 – December 31, 2020
Economic Injury must be proven
Eligible Entities: – A business with not more than 500 employees – An individual who operates under a sole proprietorship, with or without employees, or as an independent contractor – A cooperative with not more than 500 employees – An ESOP with not more than 500 employees – A tribal small business concern
Standard SBA lending rules waived: – Personal guarantee on loans up to $200,000 – In business for at least one year before the disaster, but must have been in business on January 31, 2020 – Applicant is unable to obtain credit elsewhere
Use of Funds – Loans will not exceed $10,000 – Providing paid sick leave to employees unable to work because COVID-19 – Maintain payroll/retain employees during business disruptions – Meet increased costs due to interrupted supply chains – Rent or mortgage payments – Repay obligations that cannot be met due to revenue losses
No repayment of Emergency EIDL Grants is required However, if a payroll loan is subsequently made, the forgiveness will be reduced by the amount of this advance.
Section 2301 – Employee Retention Credit
Eligible employers will receive a credit against applicable employment taxes for each calendar quarter equal to 50% of qualified wages. Total wages cannot exceed $10,000 per employee. Credit is limited to employment taxes and reduced by any credits allowed under the Families First Coronavirus Response Act. Excess credit over balance due will be refunded
Covered period: The first calendar quarter after December 31, 2019 in which gross receipts are less than 50% of the same calendar quarter in the prior year through the last day of the quarter in which gross revenue meets or exceeds 80% of the gross receipts for that same quarter in the prior year.
Eligible employer – In business in 2020 with employees – Operations are fully or partially suspended during the calendar quarter within the covered period – Gross receipts for calendar quarter are less than 50% of gross receipts for the same calendar quarter in the prior year
Qualified Wages: – Employee wages cannot exceed the amount that employee would have been paid during the 30 days immediately preceding such period. – Qualified health plan expenses
About Harbor Computer Services
Harbor Computer Services is an IT firm servicing Southeastern Michigan. We work exclusively under contract with our clients to provide technology direction and either become the IT department or provide assistance to the internal IT they already have. We have won many awards for our work over the years, including the worldwide Microsoft Partner of the Year in 2010. We’re the smallest firm to have ever won this most prestigious award. Most recently we were recognized as one of the top 20 visionaries in small business IT by ChannelPro Magazine (2015). And in 2016 as the top Michigan IT firm for Manufacturing. There are a few simple things that make Harbor Computer Services the best choice for your business. •We are Professionals •We are Responsible •We are Concerned About The Success of Your Business