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The CARES Act Has Passed: What Relief is Available to You, Your Family, and Your Business

On March 27, 2020 President Trump signed into law a roughly $2 trillion coronavirus response bill intended to speed relief across the American economy. This is the third aid package from Congress and is meant to keep businesses and individuals afloat during an unprecedented freeze on the majority of American life.

What everyone wants to know is how does this stimulus package help me. Here’s a look at some of the key provisions included in the bill and what that may mean for you:

 INDIVIDUALS (Click on each topic for further information)

• Economic Impact Payment
• Enhanced Unemployment
• Retirement Provisions
• Student Loan Relief
• Enhanced Tax Benefit for Charitable Contributions
• Mortgage Relief

BUSINESSES (Click on each topic for further information)

• Paycheck Protection Program/Loan
• SBA Disaster Loans
• SBA Economic Injury Disaster Advance Grant
• Small Business Debt Relief Program
• Further Resources

DIRECT PAYMENTS TO AMERICANS – ECONOMIC IMPACT PAYMENTS

Direct payments of up to $1,200 each to millions of Americans ($2,400 for joint taxpayers), with additional payments of $500 per child. The rebate phases out at $75,000 for singles, $112,500 for heads of household, and $150,000 for joint taxpayers at 5 percent per dollar of qualified income, or $50 per $1,000 earned. It phases out entirely at $99,000 for single taxpayers with no children and $198,000 for joint taxpayers with no children.

You do NOT need to apply for this.  Checks will automatically be sent to those who qualify.  2019 or 2018 tax returns will be used to calculate the rebate advanced to taxpayers, but taxpayers eligible for a larger rebate based on 2020 income will receive it in the 2020 tax season. Taxpayers with higher incomes in 2020 will see the over-payment associated with their rebate forgiven.

Those who qualify include persons receiving social security benefits and SSI.

Taxpayers started to receive payments on April 15^th, if direct deposit was available.  It will taker longer for paper checks.  To check on the status of your stimulus check please log onto the IRS portal here.

For more information on who qualifies and how much you will receive you can access the Tax Foundation’s FAQ Page here.

If you receive a check but are NOT ELIGIBLE you must return the payment.  The IRS has provided guidance on how to do this on their FAQ page.

ENHANCED UNEMPLOYMENT AID

The CARES Act extends unemployment benefits for 13 more weeks and also includes an additional $600 a week on top of state unemployment benefits for up to four months.  Self-employed workers, independent contractors and those who typically don’t qualify for unemployment benefits would also be eligible. The government would also partially make up wages for workers whose hours are scaled back, in an effort to encourage employers to avoid layoffs. Also eligible for unemployment: anyone who becomes sick and is ordered to be quarantined.

To apply for regular AND enhanced unemployment benefits, visit your state’s unemployment website.  However, be patient. You may only be able to apply for regular unemployment at this time. Many states are not ready to process the enhanced feature of the program.

MA Update as of 4-9-2020:  The Massachusetts DOR has already begun implementing the program for regular claimants. The $600 will be added to all eligible weeks of benefits retroactive to March 29, 2020 and continuing until July 31, 2020. Disbursements will begin immediately in Massachusetts for those who are currently collecting, retroactive to March 29, 2020 .

For Self-employed workers, independent contractors, and gig workers the platform is expected to begin accepting claims on or around April 30, 2020. Eligible claimants under will be retroactively compensated with this benefit beginning February 2, 2020, or the first week a claimant was unable to work as a result of COVID-19, whichever date is later. The last week this benefit is payable is the week ending December 26, 2020.

To apply for unemployment in other states click here…

OTHER STATES

For more information you can access the Tax Foundation’s FAQ Page here.

RETIREMENT PROVISIONS

The following apply to qualifying individuals including those who are diagnosed with COVID-19, have a spouse or dependent who is diagnosed with COVID-19 or experience adverse financial consequences as a result of COVID-19, including quarantines, layoffs, business closures or child care responsibilities.

• Elimination of Early Withdrawal Penalty: Waives the 10% early withdrawal penalty for withdrawals up to $100,000 from qualified retirement accounts for retirement plan participants who qualify for COVID-19 relief. Income tax on the distribution would still be owed but could be paid over a three-year period. Individuals could “recontribute” the funds to the plan within three years without regard to contribution limits. While the law allows for these types of penalty-free distributions, individual plans can set more restrictive policies.
• Increase in the Retirement Plan Loan Amount: Increases the amount that can be taken as a loan from a qualified retirement plan from $50,000 to $100,000 for 2020.
• Temporary Waiver of RMDs for 2020 for All Retirement Savers: Waives the required minimum distribution (RMD) requirement for retirement plans and IRAs in 2020. This provision also applies to RMDs due in 2020, but attributable to 2019. Individuals do not need to meet COVID-19 qualifying criteria to temporarily waive RMDs for 2020.

STUDENT LOAN RELIEF

• Loan Payment Suspension: Suspends payments automatically for federal student loans through Sept. 30, 2020, with no interest accruing or penalties during the period of suspension.
• Additional Provisions: Contains a variety of other emergency-relief provisions related to education, and specifically the impact of many students being sent home mid-semester. For example, it allows universities to make payments to students who were unable to complete work-study programs.

ENHANCED TAX BENEFITS FOR CHARITABLE CONTRIBUTIONS

• $300 Deduction of Cash Contributions: Ability to deduct up to $300 of cash contributions to charities, regardless of whether the individual itemizes deductions.
• Changes to Limits on Charitable Contributions:
  • Individuals: For those who itemize their deductions for charitable giving, the 50% of adjusted gross income limit is suspended for 2020.

MORTGAGE RELIEF

• Mortgage Relief for Homeowners: Requires the servicers of federally backed mortgages to postpone mortgage payments at the request of the borrower, provided the borrower affirms financial hardship due to COVID-19. The postponement must be granted for up to 180 days and extended for an additional period of up to 180 days at the request of the borrower.
• Foreclosure Moratorium: Prevents the servicer of a federally backed mortgage loan to initiate any foreclosure process for at least 60 days beginning on March 18, 2020.
• Eviction Relief for Renters: For 120 days after the CARES Act date of enactment, landlords with mortgages backed by the U.S. Department of Housing and Urban Development (HUD), Fannie Mae, Freddie Mac, and other federal entities cannot pursue eviction for their tenants. Landlords also can’t charge any fees or penalties related to nonpayment of rent.

BUSINESSES

PAYCHECK PROTECTION PROGRAM (PPP)

The Paycheck Protection Program (“PPP”) authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. All loan terms will be the same for everyone.  The loan amounts will be forgiven as long as:

• The loan proceeds are used to cover payroll costs, and most mortgage interest, rent, and utility costs over the 8 week period after the loan is made; and
• Employee and compensation levels are maintained.

Payroll costs are capped at $100,000 on an annualized basis for each employee. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

Loan payments will be deferred for 6 months.

Click HERE for a sample loan application.

When can I apply?

• Starting April 3, 2020, small businesses and sole proprietorship’s can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
• Starting April 10, 2020, independent contractors and self-employed individuals can apply for and receive loans to cover their payroll and other certain expenses through existing SBA lenders.
• Other regulated lenders will be available to make these loans as soon as they are approved and enrolled in the program.

Where can I apply? You can apply through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make these loans once they are approved and enrolled in the program. You should consult with your local lender as to whether it is participating.

Who can apply? All businesses – including nonprofits, veterans organizations, Tribal business concerns, sole proprietorship’s, self-employed individuals, and independent contractors – with 500 or fewer employees can apply. Businesses in certain industries can have more than 500 employees if they meet applicable SBA employee-based size standards for those industries.

What do I need to apply? You will need to complete the Paycheck Protection Program loan application and submit the application with the required documentation to an approved lender that is available to process your application by June 30, 2020.

What other documents will I need to include in my application? You will need to provide your lender with payroll documentation.

Do I need to first look for other funds before applying to this program? No. We are waiving the usual SBA requirement that you try to obtain some or all of the loan funds from other sources (i.e., we are waiving the Credit Elsewhere requirement).

How long will this program last? Although the program is open until June 30, 2020, we encourage you to apply as quickly as you can because there is a funding cap and lenders need time to process your loan.

How many loans can I take out under this program? Only one.

What can I use these loans for? You should use the proceeds from these loans on your:

• Payroll costs, including benefits;
• Interest on mortgage obligations, incurred before February 15, 2020;
• Rent, under lease agreements in force before February 15, 2020; and
• Utilities, for which service began before February 15, 2020.

What counts as payroll costs? Payroll costs include:

• Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
• Employee benefits including costs for vacation, parental, family, medical, or sick leave; allowance for separation or dismissal; payments required for the provisions of group health care benefits including insurance premiums; and payment of any retirement benefit;
• State and local taxes assessed on compensation; and
• For a sole proprietor or independent contractor: wages, commissions, income, or net earnings from self-employment, capped at $100,000 on an annualized basis for each employee.

How large can my loan be? Loans can be for up to two months of your average monthly payroll costs from the last year plus an additional 25% of that amount. That amount is subject to a $10 million cap. If you are a seasonal or new business, you will use different applicable time periods for your calculation. Payroll costs will be capped at $100,000 annualized for each employee.

How much of my loan will be forgiven? You will owe money when your loan is due if you use the loan amount for anything other than payroll costs, mortgage interest, rent, and utilities payments over the 8 weeks after getting the loan. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.

You will also owe money if you do not maintain your staff and payroll.

• Number of Staff: Your loan forgiveness will be reduced if you decrease your full-time employee headcount.
• Level of Payroll: Your loan forgiveness will also be reduced if you decrease salaries and wages by more than 25% for any employee that made less than $100,000 annualized in 2019.
• Re-Hiring: You have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.

How can I request loan forgiveness? You can submit a request to the lender that is servicing the loan. The request will include documents that verify the number of full-time equivalent employees and pay rates, as well as the payments on eligible mortgage, lease, and utility obligations. You must certify that the documents are true and that you used the forgiveness amount to keep employees and make eligible mortgage interest, rent, and utility payments. The lender must make a decision on the forgiveness within 60 days.

We are awaiting further guidance from the banks and SBA regarding what the reporting for forgiveness will look like and how exactly the calculation will work.

What is my interest rate? 1%

When do I need to start paying interest on my loan? All payments are deferred for 6 months; however, interest will continue to accrue over this period.

When is my loan due? In 2 years.

Can I pay my loan earlier than 2 years? Yes. There are no prepayment penalties or fees.

Do I need to pledge any collateral for these loans? No. No collateral is required.

Do I need to personally guarantee this loan?  No. There is no personal guarantee requirement.

***However, if the proceeds are used for fraudulent purposes, the U.S. government will pursue criminal charges against you.***

What do I need to certify? As part of your application, you need to certify in good faith that:

• Current economic uncertainty makes the loan necessary to support your ongoing operations.
• The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments.
• You have not and will not receive another loan under this program.
• You will provide to the lender documentation that verifies the number of full-time equivalent employees on payroll and the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting this loan.
• Loan forgiveness will be provided for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities. Due to likely high subscription, it is anticipated that not more than 25% of the forgiven amount may be for non-payroll costs.
• All the information you provided in your application and in all supporting documents and forms is true and accurate. Knowingly making a false statement to get a loan under this program is punishable by law.
• You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submitted. You affirm that the tax documents are identical to those you submitted to the IRS. And you also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.

SBA DISASTER LOANS

Small business owners in all U.S. states and territories are currently eligible to apply for a low-interest loan due to Coronavirus (COVID-19). In order to qualify for an SBA economic injury disaster loan, a business must prove substantial economic injury – that it is unable to pay its ordinary and necessary operating expenses. The point of the loan is to help a business ride out a disaster period until normal operations can resume – it applies to situations where there is no physical damage.

These loans may be used to pay fixed debts, payroll, accounts payable and other bills that can’t be paid because of the disaster’s impact. The interest rate is 3.75% for small businesses. The interest rate for non-profits is 2.75%.

The SBA offers loans with long-term repayments in order to keep payments affordable, up to a maximum of 30 years. Terms are determined on a case-by-case basis, based upon each borrower’s ability to repay.

Click HERE to access the SBA Website for more information

Economic Injury Disaster Advance Grant (EIDL)

This advance of up to $10,000 will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application. This loan advance will not have to be repaid.

Click HERE to go directly to the application on the SBA website.

You can qualify for both EIDL and PPP as long as you use them for different costs. 

SMALL BUSINESS DEBT RELIEF PROGRAMS

FURTHER RESOURCES FOR BUSINESSES

SMALL BUSINESS ADMINISTRATION (SBA)

DEPARTMENT OF THE TREASURY

US SENATE COMMITTEE ON SMALL BUSINESS & ENTREPRENEURSHIP