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Thursday, 09 April 2020 15:32

New Pro Training Series Opens with 'COVID-19 Stimulus Package – What’s in the New Law for Small Businesses'

Written by
Hunt Demarest Hunt Demarest

Index

The IRS will prioritize low-income individuals who are most impacted by the coronavirus situation.

 

“There’s no way to update them with direct deposit information currently,” Demarest said.

 

Demarest warned to be careful providing that information to anyone claiming to be the IRS, as scams and identity theft have become prevalent in this unfortunate situation.

 

"For those who don’t know, the IRS doesn’t call you---that’s not how they work---so if something seems off or too good to be true, don’t believe it.”

Another aspect of the CARES Act allows individuals the option to withdraw tax-free money from a retirement account, such as an IRA or 401K, which must be paid back within the next three years.

 

“No matter what you decide to do, you should evaluate all your options, but I would encourage you to use this as a last resort since there are stiff penalties if you don’t repay it,” Demarest cautioned.

 

The government is also offering new student aid flexibilities for students, parents and borrowers. All federally-backed student loans are automatically being deferred for six months in an attempt to “stimulate the economy and make sure people have cash in their pockets,” Demarest said.

 

“While this might not affect your family personally, you should be aware of it because it is affecting your customers.”

 

Demarest said everyone should at least apply for the Economic Injury Disaster Loan (EIDL) and the accompanying $10,000 grant, because it's an option.

 

“Most of the form is fairly routine, and it only asks for basic financial information: the business’s sales and cost of goods sold for last year," Demarest said. "For most shops, this isn’t going to fix all your problems, but it could help get you over the hill.”

 

There are two parts of the CARES Act Demarest recommended only as a last resort, since they both make shops ineligible for the Payroll Protection Program (PPP.)

 

Employers with significantly reduced volume that maintain their employees will be eligible for the Employee Retention Credit. Businesses also have the option of deferring payroll taxes for a full year, beginning payment at the end of 2021.

 

“This is not a grant,” Demarest stressed. “It’s not free money or forgiving taxes. You’ll still owe this money, and the last thing we want is to come out of this and have a payroll tax issue that puts us back to where we are now.

 

"You are ineligible for the PPP if you use either of these options, so I’m advising everyone to use these as an absolute last resort. I believe the PPP loans is what will push shops through this crisis.”

 

The PPP loans are being processed through local banks and backed by the SBA. Demarest encouraged shop owners to contact their banker to find out how to get started because, while the money is unlikely to run out tomorrow, he expressed doubts it will still be available by the end of April.

 

“If the coronavirus hasn’t impacted you yet but you know it’s coming, take all the steps to prepare yourself,” he urged, warning many banks are not processing PPP loans for new customers. He said Kabbage has been accepting new customers for this purpose.

 

There are no personal guarantees on the PPP loans. Instead of looking at available credit or cash flow to determine eligibility, the business is signing for its own credit. Participating banks will disperse the funds directly, and the SBA will reimburse them at a later date.