Updates to PPP, EIDL, Economic Impact Payments, etc.
We hope everyone is doing well, and that you are all able to get enough food, paper products, home goods, face coverings, etc. Being at home with your children can also be stressful, we hope you are doing well with that adjustment. Surely some of you have heard my kids trying to say hello to you as well.
We have been keeping tabs on what has been going on with the above-mentioned stimulus programs. See below for updates:
The Paycheck Protection Program
As of right now, the PPP program's funds have all been exhausted. I have been hearing from clients who have been funded that the process was not very clear (our own experience was the same) and that there were snags for Wells Fargo (they hit their lending cap - put in place due to the fraud perpetrated by Wells Fargo related to opening unwanted bank accounts and charging fraudulent fees thereupon - the Treasury Department came in and increased the lending cap for Wells Fargo in the interest of the public good.) Bank of America initially denied customers the ability to apply for the loan unless they had a credit card or line of credit with BofA (it had to already have been in place on Feb 15th, 2020) - they reversed their position after pressure from the Senate, Congress, and the general public.
Two major unknowns at this time:
1. If you applied for a loan and went through underwriting, and got approved, but did not get funded, do the banks still have some funds earmarked for you, and they just need you to sign documents? I suppose this is a possibility, but I have not heard any bank confirm this.
2. Will there be another round of PPP funding? We don't know for sure, but we know that there is a lot of public pressure on the Senate and Congress to approve additional funds, and that there are a large number of small businesses that have been unable to obtain funding from this program. Our recommendation to you is to apply for a loan with your bank (if they are an SBA lender) and at least go through the process so that if there is more money available, you are ahead in line (relative to those who may wait to apply until/if there are further funds approved). I have a friend who is an Amazon seller, who applied for a loan through PayPal (they are his merchant processor) and he was able to get funded quickly. If any of you accept payments through PayPal, I would recommend you apply through them.
EIDL (Economic Injury Disaster Loan)
I spoke with a representative from the SBA today (I'm as surprised as you are - I talked to a live person at the SBA, that too on a Saturday) and asked about the status of EIDL loans, as many people have reported not having heard back from the SBA at all. The representative told me that the average turnaround time for the SBA is currently 25 calendar days, meaning that if you applied for an SBA EIDL loan on 4/2/2020, you can expect to hear back on or around 4/27/2020. A loan officer should be reaching out to you and they will ask for copies of tax returns, financial statements, etc. I was unable to get specifics from the representative as to how many years of tax returns, what financial statements will be requested, etc. If I get any further detail, I will let everyone know. They also have updated their policy on the $10,000 grant.
The lending formula (from our understanding, this is what the total loan given to you will be based upon) is based on 6 months of profits from 2018 and 6 months of profits from 2019 (if a 2019 return has been filed). This doesn't seem very clear to me (i.e. on what basis will the loan be determined - gross receipts, gross profit, cost of goods sold, etc.). The representative did not provide further clarification. The emergency grant is (as of this writing) still on the table, still a maximum of $10,000 but it is being given out as $1,000/employee. Thus, if you have 3 employees, you'll get a grant of $3,000. If you have 15 employees, you will get $10,000. The grant is offset against PPP forgiveness - meaning, if you get a PPP loan of $100,000 and use it all within the bounds of correct usage, and you also receive an EIDL grant of $10,000, only $90,000 of your PPP loan will be forgiven. This is an important factor to consider, when preparing your budgeting for the coming months. Also of note, if you get a grant, but do not receive an EIDL loan, you are not required to pay back the grant. You can apply for an EIDL loan through December 31, 2020.
Economic Impact Payment (EIP)
The Economic Impact Payment is up to $1,200/taxpayer and $500 for each dependent child.
In an earlier email, I attached a chart that goes through the calculation of the economic impact payment. People had several further questions related to this matter - here again, Treasury has not given clear and definitive guidance, but I will tell you what we have heard so far:
-The EIP is actually an advance against your 2020 federal tax due. This means, if you had too much income to qualify to receive a check/direct deposit based on either your 2018 or 2019 return, you can still get a tax credit (depending on your AGI, etc.) for 2020.
-We don't know when the "determination point" is - i.e. let's say you had too much income in 2018 to qualify for the EIP, but that you have not yet filed your 2019 return (and your 2019 income level would have qualified you for the EIP), we don't know if filing a 2019 return immediately will qualify you for a cash disbursement. This is because the Treasury is currently in the process of issuing these payments - if a determination has already been made, you might have to wait until you file your 2020 return to see the benefit. This is an unfortunate result of how the EIP bill was written.
-I have heard conflicting reports as to whether the EIP will be "clawed back" if it turns out you had too much income during 2020. If we get definitive guidance on that matter, we will let you know.
Watch out for scams
Scammers are always looking for their next victim, and stressful situations can sometimes result in people dropping their guard. If someone calls saying they are a representative from your bank, or from the SBA, IRS, Treasury, etc. be sure to identify or confirm the identity of that person. Be careful when replying to emails, voicemails, etc.
Thank a front-line person or medical professional that you know
This is a difficult and stressful time for all of us. Medical professionals, first responders, etc. continue to do their jobs day-in day-out, often without the needed PPE - we would like to thank those in the medical community. Also, we would like to thank pharmacists, grocery store employees, utility workers, etc. We have what we have in part due to their commitment to do their jobs, even in a risky time such as this.
Stay safe and healthy,
-A & P Accountancy Corporation