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New Relief Package Provides New PPP Funding for Small Businesses

Posted: 20 Dec 2020 09:19 PM PST

After months of partisan wrangling, on December 20, 2020, Congressional negotiators finally agreed on a new $900 billion Covid relief package, which includes an additional $284 billion for the Paycheck Protection Program (PPP) for small businesses, created under the original Coronavirus Aid, Relief, and Economic Security Act (or CARES Act) in March.

This new package provides additional funding for those businesses that did not receive PPP money in the first round, especially minority- and women-owned businesses. In addition, it allows businesses a second chance at PPP money if they can show significant losses in 2020 over their 2019 revenue. The exact percentages are yet to be determined.

The bill also addressed what was probably the biggest outstanding issue with PPP: the deductibility of expenses paid for with the forgivable loan. The Trump Administration position to date, largely led by Treasury Secretary Steven Mnuchin, was that businesses could not deduct the expenses paid for with PPP funds as they ordinarily would because the loan is forgivable and not taxable income. The Administration's view was taking the tax deductions would be "double dipping" on top of the grant. The business community was up in arms about this adverse tax consequence, which is now corrected.

How small businesses will benefit from new relief package

In addition to the tax fix, the new bill provides the following aid to small businesses:

  • Funds for businesses that received the first round of PPP funds but can qualify for another bite at the apple if they can show significant losses in 2020 over 2019
  • Funds earmarked for non-profits and news outlets that weren't eligible in the first round
  • $15 billion for live venues, independent movie theaters, and cultural institutions
  • $20 billion for targeted grants through the Economic Injury Disaster Loan program through the Small Business Administration (SBA)
  • Tax deductions for business meal expenses
  • Funds earmarked for "very small" businesses and lending through community-based lenders like Community Development Financial Institutions (DDFIs) and Minority Depository Institutions (MDIs). This includes $9 billion in U.S. Treasury capital investments in CDFIs and MDIs and $3 billion for the CDFI fund to support low income and underserved communities.

PPP loan forgiveness

The PPP program closed on August 8, 2020, after approximately 5.2 million businesses applied for and received the loans. If businesses use the funds according to the regulations, which include spending at least 60% on payroll to keep people employed and the additional funds on rent, utilities, mortgage payments, and interest on existing debt, they can apply for forgiveness and have the loan convert into a grant that does not need to be repaid. Notably, due to confusion and concern around the program, approximately $130 billion dollars in funds were left unused at the August closing.

Most businesses that did receive PPP loans have begun to apply for forgiveness. The process includes applying through the lender who provided the loan and supplying documentation that the funds were used appropriately. For most businesses that means documenting payroll through reports most payroll companies provide expressly for this purpose and receipts for expenses. The lenders have 60 days to review and approve the application before submitting it to the SBA for its review. The SBA has 90 days to approve the application or request more information from the borrower.

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On October 8, 2020, the SBA along with the Treasury Department issued new guidance allowing borrowers with PPP loans of $50,000 or less to self-certify they used the money appropriately and receive complete forgiveness. While this latest Interim Final Rule addressing the PPP loans still required borrowers to provide documentation, such as a payroll provider report, it offers a new, simplified form and a "check the box" process for forgiveness. Borrowers can use new SBA Form 3508EZ for their application or wait for their lender to update their online application portals.

The SBA justified this easing of requirements as the majority of PPP loans were less than $50,000. According to the SBA, there are 3.57 million outstanding PPP loans of $50,000 or less out of the 5.2 million issued, totaling approximately $62 billion of the $525 billion in PPP loans.

This exemption was long sought by lenders and the business community, albeit at a higher level. Initially, these interested parties sought "check the box" forgiveness at $1 million or in the $250,000 to $500,000 range. Those numbers proved too ambitious and the SBA settled on the $50,000 level.

Evaluating "economic uncertainty"

Businesses that received loans in excess of $2 million are not so lucky. The SBA all along has stated that these borrowers will be subject to an audit. But, on October 26, 2020, the SBA issued a draft Form 3509 requiring borrowers to document their economic uncertainty at the time they applied for the PPP loans. On the initial applications, all borrowers had to attest that "the current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant." Ordinarily, with SBA loan applications borrowers must show they do not have sufficient liquidity or credit elsewhere, and thus the loan is necessary. SBA did not require that for PPP and now it appears certain borrowers will need to document their need retroactively, or perhaps be denied forgiveness and suffer legal consequences.

The new form would require disclosures such as gross revenue, cash on hand, dividends and distributions, outstanding debt, and compensation of highly paid owners and employees. Despite the fact that for many businesses providing the government with this information is less than desirable, it also begs the question as to how the SBA will evaluate "economic uncertainty" at the start of the Covid pandemic. While some businesses pivoted, survived, or even thrived, they could not have predicted the economic impact of Covid in March of 2020. Now heading into seemingly another period of lock downs and restrictions, along with the passage of this new relief package, the SBA will be hard pressed to find businesses undeserving of PPP loans and subsequent forgiveness.

The Associated General Contractors of America filed a lawsuit against the SBA and the Office of Management and Budget on December 8, 2020, arguing that these new forms and disclosures are both procedurally wrong and a violation of due process. The procedure argument is based on the fact that the SBA did not publish the new forms with time for comment. The due process argument, which likely has more merit, is based on the fact that businesses should not be held accountable for successfully weathering the Covid storm after they self-certified the need for PPP money. Many interested parties will be monitoring this litigation closely.

While the new relief package is surely welcomed by small businesses and is much needed, it remains to be seen if the money will go to the small businesses that truly need it to survive or the same well-equipped, larger businesses will lap up the funds. And, as has occurred all along, we can expect new and evolving regulations, likely in the very near future.

RELATED: SBA Easing Forgiveness of Paycheck Protection Program Loans of $50,000 or Less

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How to Get Your Second Stimulus Payment Direct Deposited to Your Bank Account

Posted: 20 Dec 2020 04:15 PM PST

Congressional leaders have agreed to a roughly $900 billion economic relief packages that includes a second round of stimulus payments, pursuant to the "Emergency Coronavirus Relief Act of 2020."

The second stimulus payment will be:

  • A onetime stimulus payment of $600 for each individual
  • A onetime stimulus payment of $1,200 for married or joint filers
  • A onetime stimulus payment of $600 for certain dependents

In order to qualify for the second stimulus payment, you will need to have earned (in 2019) less than $75,000 (for individuals) or $150,000 (for married/joint filers). If your income is higher than those limits, then the stimulus payment is reduced by 5% of your adjusted gross income above those limits. This was the formula and income threshold under the first stimulus payment bill.

How can you make sure you get the second stimulus payment quickly if you do qualify? The key is for the IRS to have direct deposit account information for your bank account. Otherwise the payment will be sent by mail and could be delayed significantly.

How to get your stimulus payment direct deposited

Depending on your situation, here is what you need to do to get your stimulus payment direct deposited to your bank account:

1. If you have already filed your 2019 tax return with the correct deposit information

If you have already filed your 2019 tax return with the IRS with your correct direct deposit information, you don't need to do anything more.

2. If you haven't yet filed your 2018 or 2019 tax return

If you haven't filed your 2018 or 2019 tax return with the IRS, you need to file either one electronically with the IRS (unless you are exempt as a Social Security benefits recipient as discussed below). There are some free websites that allow you to file your return electronically. See the sites recommended by the IRS at www.irs.gov/filing/free-file-do-your-federal-taxes-for-free. Make sure to include your direct deposit information in this filing (where it asks if you want any refund sent by direct deposit).

3. If you are not required to file income tax returns for 2018 or 2019

You are not required to file federal income tax returns for 2018 and 2019 if:

  • Your income is less than $12,200.
  • You're married and filing jointly, and together your income is less than $24,400.
  • You have no income.

If you are not required to file a federal income tax return, then you will probably have to wait for the IRS to open up the "Non-Filers: Enter Payments Info Here" tool to submit the information to get your second stimulus payment. (You cannot use this tool if you can be claimed as a dependent on someone else's tax return.)

The information you will need to provide includes:

  • Full name, current mailing address, and an email address
  • Date of birth and valid Social Security number
  • Bank account number, type, and routing number if you have one
  • Identity Protection Personal Identification Number (IP PIN) you received from the IRS earlier this year if you have one. Taxpayers who previously have been issued an Identity Protection PIN but lost it must use the "Get an IP PIN" tool to retrieve their numbers
  • Driver's license or state-issued ID if you have one
  • For each qualifying child during 2019: name, Social Security number or Adoption Taxpayer Identification Number, and their relationship to you or your spouse

4. If you are a Social Security recipient

The Treasury previously announced that if you are a Social Security recipient who typically is not required to file a tax return, you will automatically receive your stimulus payment directly to your bank account without having to file a tax return as long as the IRS has your direct deposit information.

5. If the bank account you put on your tax return is no longer active

If the bank account direct deposit information you provided in your last tax return is no longer active, the IRS will mail your payment to the last address it has on file for you.

The "Get My Payment" IRS tool and how to provide current bank information

The Treasury has created an online tool ("Get My Payment") where direct deposit information can be supplied to the IRS. Here is what you should do:

  • On April 15, 2020, the IRS set up an online tool that allows you to track the status of your stimulus payment, and it allows you to provide your direct deposit information. (To learn more, read IRS Launches Online Tool to Track the Status of Your Stimulus Payment and Have It Direct Deposited.)
  • Add the bank account number of your account.
  • Add the routing number of your bank.
  • Do not include a check number.
  • Double-check that you have entered the correct numbers; entering an incorrect number could result in a significant delay of payment.

You can use the "Get My Payment" tool to find out the projected date for when your deposit is scheduled to arrive in your bank account. The "Get My Payment" tool will also tell you if you're set to receive payment by paper check, along with a scheduled arrival date in the mail.

The tool, however, doesn't always work, and your inquiry may result in a "Payment Status Not Available" message.

While "Get My Payment" allows you to give direct deposit information to the IRS, you cannot change bank information with the IRS if it already has an account for you on file. This is to help protect against potential fraud. You also can't change your form of payment if the IRS has already scheduled it for delivery.

How to set up direct deposit

To set up direct deposit, provide the following information:

  • The name of your bank
  • Your bank account number, which can be up to 17 characters (see image below). On the sample check below, the account number is 2020202086.
  • The "routing number" for your bank, which must contain 9 digits (see image below). On the sample check below, the routing number is 250250025.
  • Do not include the check number (1234 on the image below).
sample check
© WASHINGTON STATE EMPLOYMENT SECURITY DEPARTMENT

Will you have to pay any income tax on the second stimulus payment?

You will not have to pay income tax on the amount of payment received.

Avoid scams targeting your stimulus payment

Criminals this year have turned their attention to stealing stimulus payments. Much of this stems from identity theft, whereby criminals file false tax returns or supply other bogus information to the IRS to divert refunds to alternate addresses or bank accounts.

Be sure to read Coronavirus stimulus payment scams: What you need to know, in which the FTC outlines to following four key points to help you avoid a scam:

  • Only use irs.gov/coronavirus to submit information to the IRS—and never respond directly to a call, text, or email.
  • The IRS won't contact you by phone, email, text message, or on social media with information about your stimulus payment, or to ask you for your Social Security number, bank account, or government benefits debit card account number. Anyone who does is a scammer phishing for your information.
  • You don't have to pay to get your stimulus money.
  • The IRS won't tell you to deposit your stimulus check and send them money back because they paid you more than they owed you. That's a fake check scam.

Report scams to the Federal Trade Commission at ftc.gov/complaint.

Related: How to Protect Yourself from the "Dirty Dozen" Tax Scams and Financial Help for Freelancers and Independent Contractors Affected by the Coronavirus Crisis

What IRS resources are available for more information?

Check these links for updated information:

Copyright © by Richard D. Harroch. All Rights Reserved

The post How to Get Your Second Stimulus Payment Direct Deposited to Your Bank Account appeared first on AllBusiness.com. Click for more information about Richard Harroch. Copyright 2020 by AllBusiness.com. All rights reserved. The content and images contained in this RSS feed may only be used through an RSS reader and may not be reproduced on another website without the express written permission of the owner of AllBusiness.com.
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