Prior to joining The Maryland and Delaware Group of Long & Foster, Sara was in the public accounting 📊 world for 15 years and continuously is learning everything there is to know about new tax legislation and this happens to be a prime time for all of that.
The new stimulus bill out, a lot of different information 📜is floating around. Below is a breakdown on how this is going to effect the average person:
For the normal individual – the stimulus payment, the recovery rebate, the free money 💵 that’s coming their way. Most people if you’re a single taxpayer, you’ll get $1,200.00. If you are married filing joint you’ll get $2,400.00 and if you have a dependent child under 17, you’ll get an additional $500.00 per child. There are phase-outs for those amounts and the amounts 💲 that they’re going to use to figure out how much to pay you is either your 2019 return if it’s been filed, if it hasn’t it’ll be your 2018 return that they are using. And some people were panicking saying that they didn’t file 2018 most mostly because they only have social security. I believe the most recent update is that you do not have to file for 2018 or 2019, if you didn’t have to, they’ll still give you the money based on your social security statement. Other than that, there is what happened before this latest legislation is they push the tax deadline from April 15th to July 15th. That includes your payment that would have been due with that return for 2019. And it also includes your first estimated tax payment for 2020, so, oddly enough you still have to pay your second quarter estimate June 15th. So you’ll pay your second before you pay your first. A couple of other items that related to individuals, is they expanded unemployment benefits. So they made it a little bit more flexible as in you don’t have to wait as long to apply and they extended the time that they’ll pay you up to 39 weeks now because the Federal Government 🏛 is going to kick in some unemployment benefits as well. You’re also allowed to apply if you are self-employed which, previous to this, that wasn’t always the case. They’ve also allowed you to take out money from your retirement account early, if you need to, up to ⬆️ $100,000.00. If you need it for basically for Covid related reasons like you can’t work or you’re in quarantine. You still have to pay tax on the distributions, but you don’t have to pay the 10% penalty and you’re allowed to spread that income tax over the next three years, which is really generous. They also waive required minimum distributions on retirement accounts for 2020. Lastly and a little smaller is they expanded the charity deduction, if you normally don’t itemize you get to take $300.00 of above your AGI is what they call it. If you do itemized you get to take basically 100% deductible against your adjusted gross income. So if you want to give all your money away that you earned this year, now is the time to do it.
So there’s a lot of programs that everybody is hearing about, if you’re a small business you can get a bunch of money 💵, but I don’t think anybody really understands how that works. Below we elaborate on the small business programs that are out right now:
The latest one in the one that everyone seems to be most excited about is the ✅✅✅Paycheck Protection Program or “PPP”. Basically, it allows you to take a loan out and the loan amount is up to two and a half times your average monthly payroll. Basically if you use it to pay your employees or your payroll you use it to pay utilities, rent and mortgage interest. Then you might be able to get it forgiven in full and it won’t be taxable. So it’s basically a roundabout way of saying it’s free money for your business to continue operating.
There’s another one that is the Economic Injury Disaster Loan. So that one is larger. It requires a little bit more paperwork. It’s administered through the SBA.But it allows you to take a large amount out for really ⬇️ low rates and over a good term pay back and there is some portions to it that would allow you to have some of it forgiven and rolled into the PPP loan potentially.
There’s also a portion of the that loan ☎️ call the Emergency Economic Injury Grant and it allows you to take out $10,000.00 almost instantly when you apply and you don’t have to pay that back even if you are not allowed to take the loan out in full. So the PPP, there’s a lot of confusion on that as to where can somebody go to get that. The PPP is actually not administered directly by the SBA. It’s administered by banks that have been approved by the SBA. There are local 🏬banks in town that have been approved but you can go on the SBA website and find their partners and they’re also resources to help you fill out all of these loans and when in doubt it’s always good to go to a local CPA.
Another part of the small business portion of all of this is they are providing various credits for retaining employees and they’re providing credits for if you have to pay people while they’re out due to quarantine or being sick 😷🤧 you get you can get some of that money back as a business owner. So they’re trying to make it so that everyone stays employed as much as possible.
Just be aware, you can’t overlap all these things so you can’t take out the ✅✅✅PPP and the other loan and say it’s all for payroll and only have paid a certain amount of payroll and trying to get the credit against that same amount.
So basically if you’re a small-business owner, don’t panic. ☎️There are resources out for you out there for you. Contact your local bank, go to the SBA website. A excellent resource for most people is your CPA. If your CPA hasn’t been knocking on your door 🚪asking you to what you need from them, then they should be. If you don’t have one, now is a great time to invest in one but there’s a lot of provisions in this law that also applied to prior years. So just make sure that you’re out there getting everything that you can to get through these times.