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CARES Act: What Small Businesses Need to Know

CARES Act: What Small Businesses Need to Know

The Coronavirus Aid, Relief and Economic Security (CARES) Act is an estimated $2 trillion federal relief package designed to combat the harmful economic effects of the COVID-19 pandemic. The law looks to provide cash infusions to individuals, businesses, health care organizations and state/local governments through payments, loans and tax credits.

The CARES Act, which congressional leaders put together and sent to the president’s desk in essentially warp speed, is designed to help businesses stay afloat — and, crucially, afford to continue to pay employees — during coronavirus-mandated shutdowns.

Pie chart showing the amount of estimated funding included in the Coronavirus Aid, Relief and Economic Security (CARES) Act, and where it is going. The share for individuals is 560 billion dollars, big corporations will receive 500 billion dollars, small businesses 377 billion dollars, state and local governments 340 billion dollars, public health will receive 154 billion dollars and 70 billion dollars will go to education and other unspecified funding.

Still, there are already questions about specific program details and concerns that more aid will be needed.

This isn’t the end of the road. Agencies are thinking about things that they can do themselves. There is already talk about a fourth stimulus bill. Pension funding relief may be on the horizon, which could bring additional changes to retirement plan rules in a year that’s already experienced sweeping legislation under the CARES and the SECURE acts.

As Washington continues to consider additional economic aid and relief measures,  we want to highlight some of the CARES provisions that we believe will be of interest to small businesses.

 

What small business owners need to know

 

If you are a small business owner, self-employed or working for a small company, here are three key things to be aware of:

 

1. Paycheck Protection Program Loans

 

Businesses with fewer than 500 employees — including sole proprietors, independent contractors, “gig economy” workers and anyone otherwise self-employed — can apply for loans of up to $10 million, or 2.5 times total payroll expenses for the loan period. Sole proprietors and independent contractors should be eligible to apply. However, many large national banks are already reporting to be at or near lending capacity.

Those who are able to access funds can use them to help pay for payroll costs and other expenses, such as mortgage payments, rent, utilities and other debt service from February 15 to June 30. At least 75% of the loan must be payroll, and payroll costs (salary, wages, commissions and tips) are capped at $100,000 for each employee.

The loans are fully guaranteed by the federal government through the end of 2020 and can have a maturity of up to 10 years. Business owners will be able to apply for these loans at any lending institution approved to participate in the program through the existing U.S. Small Business Administration’s 7(a) lending program.

Other notable provisions to the loan program:

  • The portion of the Paycheck Protection Program Loan that was used for the first eight weeks of payroll costs, interest on mortgage obligations, rent and utilities is eligible for permanent forgiveness.

 

  • Payments of principal and interest can be deferred for at least six months and for no more than one year. The interest rate is capped at 4%.

 

  • Businesses that laid off workers from February 15 to April 26 can be eligible for credit for loan forgiveness as long as those jobs and salaries are reinstated by June 30.
    501(c)(3) charitable organizations with fewer than 500 workers can qualify as well. All entities must have been in operation as of February 15, 2020.

 

2. Expansion of the SBA Disaster Loan Program

 

This expansion enables sole proprietors to access disaster loans and enables them to receive a working capital loan to overcome the temporary loss of revenue. Entities that apply for a disaster loan can get an immediate advance of up to $10,000 to maintain payroll, and the advanced $10,000 does not have to be repaid even if the full loan application is later denied.

 

3. Other benefits for businesses

 

The employer’s portion of Social Security payroll tax payable in 2020 may be deferred until January 1, 2021, with the first half of the deferred 2020 payment due at the end of 2021 and the second half due at the end of 2022.

Employers may be eligible for up to one year of credit against the employer’s 6.2% share of Social Security tax for a business that is fully or partially suspended due to government orders, or where revenue in a quarter in 2020 is less than 50% of the revenue in the same quarter last year.

Employers may be eligible for more flexible net operating loss rules for access to an immediate refund.

Are you on track for retirement?

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is just one part of your journey to the retirement of your dreams. A Certified Financial AdivisorTM can help you navigate the complexities of financial planning. Talk to a Financial Advisor>

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Organize Your Finances With A Spring Clean This Year

Organize Your Finances With A Spring Clean This Year

Believe it or not, spring is in the air. With most people spending more time at home due to shelter in place orders, this is the perfect time for spring cleaning. 

More often than not, spring cleaning is often talked about in terms of your house or personal habits — but your finances can also undergo a dedicated, deep spring clean.

How can you best organize your finances this season? The first step is to get a certified financial planner involved. Keep the vacuum in the closet for a bit longer and concentrate on cleaning up your finances in the following five ways.

A certified financial planner can help organize your finances by consolidating your accounts

The first step to simplifying your financial plan is by consolidating your accounts. Consolidating your accounts into one place is a great way to add organization and ease not only to your financial plan but also to the whole financial process.

In all likelihood, you have income streaming in from many different sources which can add complexity to your financial plan— this where a certified financial planner can help. Consolidating your accounts can help you:

  • Understand the full scope of your investments
  • Create a better tax plan
  • Reduce costly fees and charges

Understanding the full scope of your investments will help you track and visualize all of your investments in one place. It will ensure you aren’t over or under-exposed in certain areas in your portfolio. You will also be able to select investments that meet both your long-term and short-term goals.

Understanding your investments will also make rebalancing and asset allocation simpler because all of your investments live in one place. An example could include the transfer of funds from an old 401k into an IRA.

By consolidating your accounts, you will also be able to create a better, stronger tax plan with your certified financial advisor. With your investments housed in one place, your certified financial planner will be better able to help you implement tax-efficient strategies to your investments.

Last, but certainly not least, you can reduce the risk of added costs and fees by consolidating your accounts. Expensive fees can drag anybody down— especially when they are unnecessary and completely avoidable. When your investments are housed under multiple providers, it can hinder your returns and increase your fees. Consolidating your accounts can create a more effective planning experience that can ultimately save you time and leave you more educated about your financial holdings.

Sweep away old spending habits

It is always hard to admit when something needs to change, but now is as good of a time as any to take another look at how you are spending money. In some ways Coronavirus has helped us to prioritize and cut away excess spending. 

Write down what negative spending habits you’ve formed over the years and reevaluate which spending habits to keep and which to throw out.

It’s important to be intentional with your spending. When you spend your money in a way that is reflective of your goals and values, you will be more likely to spend it on the people, places, and things that really matter to you and will help further your goals.

Organize your finances by deep cleaning your budget

First, if you don’t have a budget detailing your monthly expenses, now is the time to create one. It doesn’t have to be fancy, all it needs to include is what you spend monthly and how much each expense costs. This can easily be done in Excel or Google Sheets.  

Budgets are living documents that should change and evolve as your needs do. Take some time to sit down and evaluate your current budget. While doing so, ask yourself the following questions:

  • Is your budget working for you and your financial health?
  • What areas need to be changed for you to be able to reach your goals?
  • How can you better track your spending and be aware of your budget in practice?

A strong budget leads to more organized finances. After you’ve created a strong budget, re-visit it every month and adjust as needed. A budget is just an estimate, so don’t be afraid to increase or decrease certain areas of spending (just don’t increase any area too much!).

We’ve created a budget spreadsheet to help you evaluate your cash flow.

Triple check your beneficiaries

Life can change in an instant and when those changes happen, it’s vital to have the correct beneficiaries on your accounts. Updating your beneficiaries on your bank, investments, and insurance accounts are important especially as you move into new phases of your life.

While you’re updating your beneficiaries, be sure to select both primary and contingent beneficiaries. Your certified financial planner can help ensure that you haven’t missed anything.

Talk with a certified financial planner

At Platt Wealth Management, we handle your finances as if they were our own so you, your family, and your assets are protected from any unforeseen financial circumstances.

Our certified financial advisors are here to answer any questions you may have about consolidating your accounts, creating budgets, and/or updating the beneficiaries on your accounts. 

At Platt Wealth Management, we put our client’s needs first and provide completely transparent services so you are in better control of your financial health. Take some time this year to spring clean your finances and bring back organization and structure to your financial life. Are you ready to take control of your financial health? Give us a call at (619) 255-9554 to set up a complimentary review or email us here. Let us help you succeed!

The CARES Act Required Minimum Distribution Updates

The CARES Act Required Minimum Distribution Updates

The CARES Act has suspended Required Minimum Distributions (RMD) for 2020.

This update applies to qualified retirement accounts, IRAs, and inherited IRAs. If you have already taken a distribution and you don’t need the money, you may be able to undo your distribution if you meet two rules:

 

  • Distributions must be rolled back into the account within 60 days of the distribution.

 

  • You must meet the once-per-year rule. If you receive a distribution, you cannot roll that distribution into an IRA tax-free within 12 months of another distribution that was rolled over into an IRA.

Generally, RMDs cannot be rolled over back into retirement accounts. However, the CARES Act was retroactive to the beginning of 2020. Since RMDs are suspended, distributions are no longer considered RMDs and are eligible for rollover treatment.

Beneficiaries of inherited IRAs that have already taken distributions are out of luck. They cannot undo the distribution. Inherited IRAs are not eligible for rollovers unless the sole beneficiary is the surviving spouse of the deceased account owner.

RMDs and the two rules for rolling distributions back can be complex with serious tax consequences. Please call your advisor if you have questions or want to discuss your options.

 

Are you on track for retirement?

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is just one part of your journey to the retirement of your dreams. A Certified Financial PlannerTM can help you navigate the complexities of financial planning. Talk to a Financial Planner>

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

Find Out How The CARES Act Affects You

Find Out How The CARES Act Affects You

What is the CARES Act?

 

The CARES Act is a 2 trillion-dollar coronavirus economic stimulus bill signed into law on March 27, 2020. It is designed to offer relief for businesses, families, and individuals who have been negatively impacted by COVID-19.

From direct payments to unemployment to student loan relief and more, the bill is aimed at combating the economic ramifications of the coronavirus. Let’s take a closer look at some of the highlights.

An overview of CARES Act provisions

There are many provisions associated with the CARES Act. Below is a list of the top changes that could impact you.

Direct payments to Americans

Probably the most widespread aspect of this bill is its stipulation to make direct payments to American citizens. All taxpayers will receive $1,200 if they filed single or $2,400 for married couples, with an additional $500 per child. There is an income threshold for direct payments which is $75,000 or under for those who filed single and $150,000 or under for those who are married and filed jointly. If your AGI is above those numbers, the payments begin to phase out.

Unemployment

The CARES Act provides an additional $250 billion for extended unemployment insurance programs. It expands eligibility while also providing qualified workers with an additional $600 per week for 4 months. Unemployment benefits will also be extended through December 31, 2020. 

Who does this apply to?

  • W2
  • self-employed
  • contractors
  • gig economy workers

The CARES Act and your retirement funds

The bill waives the 10% early withdrawal penalty for distributions up to $100,000 for coronavirus related purposes. This applies retroactively to distributions as early as January 1, 2020. Even though the penalty tax is waived, you will still need to pay income tax on the withdrawals, but it is spread over a three year period. 

The 401(k) loan limit has also increased from $50,000 to $100,000.

• There will be no Required Minimum Distributions (RMDs) for retirement accounts in 2020. Read our updates regarding RMDs.

Charitable contributions

To further incentivize charitable contributions, the CARES Act establishes a new above-the-line deduction for cash contributions up to $300 made in 2020 to be put on next year’s filing. The limits on deductions for charitable contributions are also changing which especially impacts individuals who itemize deductions.

Business owners

Business owners have had a difficult time navigating the changes to their business in light of the coronavirus. The bill allows employers to delay the payment of their portion of 2020 payroll taxes until 2021 and 2022.

The bill also provides $350 billion dollars to help prevent layoffs and business closures. Companies with 500 employees or less who remain in business are eligible for up to 8 weeks of cash flow assistance.

Several other pieces of the CARES Act impact larger businesses and corporations as well. 

Hospitals and healthcare

With the potential for our health care system to be overwhelmed, the bill provides $140 billion in appropriations to the US health system. $100 billion+ will go directly to the hospitals while the remaining amount will be allotted for providing equipment, testing, Medicare, and other health initiatives.

Coronavirus testing

All coronavirus testing and potential vaccines will be covered to patients at no cost.

State and local government

These branches of government, including tribal governments, will receive a total of $150 billion for education institutions ($30 billion), disaster relief ($45 billion), and transit ($25 billion).

We would love to learn more about you.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

U.S. Posts Record Layoffs

U.S. Posts Record Layoffs

A business financial advisor can help you avoid costly mistakes and maximize your business returns.

We send our best wishes to you, your family, and friends during these difficult times. We are all in this struggle together and we have to support one another. It’s important to be vigilant when it comes to practicing good health habits, social distancing, and self-quarantine. By implementing these measures, the sooner we will be able to adjust to our new normal.

The recession is here. The questions are for how long and how drastic. It’s still hard to tell at this point. The Coronavirus is something we have never seen before.

For instance, initial claims for unemployment insurance surged in the week before last to 3,307,000. To put that into perspective, the week before claims were 282,000. The historic high (the DOL started tracking the data in 1967) was 695,000 in October of 1982. Even at the depth of the Great Recession the highest number of weekly claims was just 665,000. On the morning of April 2, the weekly number skyrocketed to 6,648,000. Unfortunately, we expect the number to rise even more in the next few weeks as the self-quarantine is expanded and businesses lay off more workers.

 

The good news is that the government is doing everything it can to help both business and workers during this time.

 

Congress recently passed the CARES Act which was signed into law on March 27. 

The 2 trillion-dollar coronavirus economic stimulus bill is designed to offer relief for businesses, families, and individuals who have been negatively impacted by COVID-19. Read more about the CARES Act here.

Are you on track for retirement?

Making sure you will be ready for retirement can be overwhelming. Funding your retirement accounts over the years is just one part of your journey to the retirement of your dreams. A Certified Financial PlannerTM can help you navigate the complexities of financial planning. Talk to a Financial Planner>

Dream. Plan. Do.

Platt Wealth Management offers financial plans to answer your important financial questions. Where are you? Where do you want to be? How can you get there? Our four-step financial planning process is designed to be a road map to get you where you want to go while providing flexibility to adapt to changes along the route. We offer stand alone plans or full wealth management plans that include our investment management services. Give us a call today to set up a complimentary review. 619-255-9554.

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