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Paycheck Protection Program Update

Paycheck Protection Program Update

The U.S. government has extended The Paycheck Protection Program (PPP). Here’s a brief overview of what you need to know.

 

Paycheck Program Basics

 

Authorized by the CARES Act and administered by the Small Business Administration, the PPP helps employers cover the cost of their payroll so more people can remain employed during the COVID-19 pandemic. The new deadline to apply is August 8, 2020, with applications reopened on July 6.

Eligible companies have fewer than 500 employees, or meet a revenue-based size standard for their industry, or have a tangible net worth of $15 million or less AND the average net income (excluding carry-forward losses) for the preceding two years was $5 million or less. 

Independent contractors and sole proprietors are eligible. Seasonal businesses are as well, as long as they were either operating on 2/15/20 or in 8 weeks from 2/15/19 to 6/30/19. And therefore would be presumed to have done the same in 2020, absent the coronavirus.

PPP comes in the form of a loan, which may be forgiven as long as the employer meets specific criteria. Loans are offered through existing SBA lenders and additional participating institutions such as banks, credit unions, and Farm Credit Systems. 

Loans of up to $10 million are available, and businesses must spend the funds by the end of this calendar year.

If you’re interested in applying, click here for the SBA page on PPP.

Paycheck Protection Program Eligibility

 

For lenders to forgive the loan, businesses must spend at least 60% of it on payroll. Other costs that you can use the money to cover include mortgage interest, rent, and utilities. It’s available for the first 24 weeks of these costs.
The new loans will have a 5-year maturity. Those issued before 6/5/20 have a 2-year maturity. The interest rate is 1%, and you can defer payments for six months.
You don’t need collateral or guarantors for the loan. Neither the government nor the banks charge additional fees for small businesses.

 

Details on Paycheck Protection Program Forgiveness

You’ll need to submit an application to the lender to request loan forgiveness. In addition, you must meet the following criteria.

  • The 24-week timeframe

Fortunately, since not all payroll cycles sync up with the first day of loan disbursement, the SBA has an alternative payroll covered period. It begins on the first day of the pay period after the loan has been disbursed.

 

However, payments outside this timeframe are not eligible for loan forgiveness.

 

  • Payment of payroll (not just payroll incurred)

The business needs to pay their employees from the loan to be eligible for forgiveness, not just incur the payroll costs. Payments incurred during the last two weeks of the 24-week timeframe must be paid no later than the next pay period to qualify for forgiveness.

 

As a reminder, 60% of the loan proceeds must be used for payroll expenses in order for the loan to be forgiven. Sick leave and family leave costs are included in payroll. Payments to independent contractors and sole proprietors are excluded from payroll, as they can apply for PPP themselves.

 

  • Payment of non-payroll costs

Similarly, these types of expenses must be incurred and paid during the 24-week timeframe in order to be eligible for forgiveness. If they are incurred inside the timeframe but not paid until later, they must be paid no later than the next billing date to qualify.

 

The SBA has made clear that it will not forgive advance payments of mortgage interest, but as of yet has made no statement regarding such payments for rent or utilities. Double tax breaks are not allowed.

 

  • Continuation of the same number of full time equivalent (FTE) employees

Since the CARES Act did not define what a FTE is, the SBA ruled that it’s an employee who works an average of at least 40 hours per week. The loan forgiveness will be reduced, but not necessarily eliminated, if the employer doesn’t follow the rule of having the same number of FTEs during the 24-week period as it had at the beginning.

 

For part-time employees, the employer can choose one of two methods of calculating their FTE.  They must apply this method to all employees.

 

One is to calculate their average number of hours worked during the 24 weeks and divide by 40. The other is to assume that all part-timers who worked less than 40 hours on average is 0.5 FTE.

 

  • Allowable exceptions to the FTE rule

There are several exceptions to the maintenance of FTEs that will not reduce the loan forgiveness.

 

If an employee voluntarily resigns or asks to reduce hours, or if they’re fired for cause, the FTE reduction rule does not apply.

 

If the employer reduced FTE between February 15 and April 26 of this year, but restores the FTE before the end of the year, that temporary reduction doesn’t count against them.

 

Another exemption is based on employee availability and must be documented by the employer to avoid a reduction in forgiveness on the PPP loan. One factor is if the employer is unable to rehire former employees who are qualified or hire qualified ones for unfilled positions by 12/31/20.

 

The other is if the business can’t return to its activity level as measured on 2/15/20 due to guidance from OSHA, CDC, or HHS during the period from 3/1/20 to 12/31/20.

 

  • Maintaining same rate of pay for salaries and wages

A reduction in salaries and wages of 25% or more results in a loan forgiveness reduction.

 

However, if that reduction occurred between February 15 and April 26 of this year and pay was restored to its previous levels by the end of the year, there is no forgiveness reduction.

 

  • Eligibility of bonus and hazard pay

The CARES Act includes salary, wages, commissions and similar compensation in its definition of “payroll costs”. Therefore, hazard payments and bonuses (as supplements to wages) are eligible for loan forgiveness as long as the employee’s total compensation is equal to or less than $100,000 annually.

 

The $100,000 limit on employee compensation is limited to “cash” compensation and does not include benefits such as employer retirement contributions.

 

  • Retain loan documents for six years

After the loan is either paid in full or forgiven, the SBA retains the right to examine the loan documents for the following six years.

 

If you’d like to discuss your business finances, give us a call at 619.255.9554 or send us an email. We’d love to hear from you.

 

Prevent Social Media Overwhelm

Prevent Social Media Overwhelm

It’s easy to get lost in the rabbit hole of social media. Especially when we’re still practicing social distancing and businesses aren’t all open yet.

You think you’re going to get caught up with some friends from high school. Next thing you know, you’re arguing about what kind of potato you are two hours later. Or you run your own business and you’re trying to keep up with all the latest channels that people say you “have” to be on!

Here are some tips for avoiding the overwhelm.

 

Give yourself a break

 

It’s not entirely your fault that you find social media addicting. If you’ve been beating yourself up about the time you spend on the platforms, stop. They have been specifically designed to be addicting.

You may be under the false impression that social media platforms exist to connect people with other people. They don’t.

Their business model is to keep people on the platform so they can get as many ads in front of as many eyeballs as possible. The fact that you can catch up with your high-school friends or see your niece’s wedding dress is entirely incidental to what the channels are all designed for, which is to make money for advertisers.

That’s why you find it so easy to get sucked in and waste hours in front of the screen. The designers created it to be that way.

 

Turn off notifications on your phone

 

In the course of designing platforms that will keep us glued to them for hours, the developers also know quite a bit about neuroscience and use that to their advantage.  Definitely to most users’ disadvantage!

You probably know that humans are social animals, and we have a need to fit in somewhere or belong somewhere and have some friends. Introverts included. They just need fewer friends than extroverts do to feel they belong.

Our brains also like novelty. That’s why the app designers have all those beeps and buzzes to let you know when you have a notification. Your brain releases a little hit of dopamine, a happy neurochemical,  when this novelty hits you. That’s your brain saying Yeah! More of this!

The notification leads you to open up the app so you can see where someone liked or commented on your post. More feel-good neurochemicals, because you’re getting social validation with the likes and comments, you social animal you.

Still think you need to leave them on? Studies have been done on how long it takes you to start concentrating again once you’ve been interrupted. The answer may surprise you – it’s 23 minutes.

If you’re trying to focus on your work and you pause to see that someone liked your Facebook post, you’ve just wasted more than 20 minutes. Just on the few seconds that it took you to check the notification.

Even if your business is on social media, you don’t necessarily need to keep your notifications on. Unless you’re selling through the channel, in which case you might. Most of the social media platforms allow you to set up a FAQ where you can answer the questions that you often get.

Turn off your notifications and notice how peaceful life is all of a sudden.

 

If you use social media for business, curate and use technology

 

There are a lot of people out there, who may or may not refer to themselves as social media coaches or gurus or superstars, who will insist that anyone worth their salt must be on platform A or B. And some will advise you to be on all of them. But unless you have full-time social media staff, that is just not possible.

Do you need to have your business on social media? Some people argue that you don’t, but those are the people who made their names early on. They don’t need social media to amplify their bylines.

For most of the rest of us, though, we do need to be out there. After all, the platforms are free. You just need to pick the one or two that match your demographic and that you personally can bear to deal with.

The demographic information for all the social medic channels is widely available (here, for example) if you don’t already have a general idea which channel you should focus on.

One rule of thumb that you probably should abide by is to have a LinkedIn profile if you sell business-to-business or B2B. If you’re B2C, selling direct to the retail customer, it may not be necessary. Instagram and Pinterest both skew female and are visually oriented.  Twitter posts do better when paired with pictures but is mainly a text-based platform.

In order to automate your social media as much as possible, you can find a scheduler where you input all your posts and they’re sent out to your platforms at the time that you choose. That way you don’t have to spend so much time on the channels themselves. Although they do reward organic or non-scheduled content.

You can create video from a blog post using technology now as well. See where you can use systems to your advantage.

 

Give yourself a break, part 2

 

And sometimes, you may just need to avoid social media for a little while. During this time, there’s a lot of misinformation and partisan positioning that can rapidly become overwhelming. If you have a business on social media, look only at your business page and nothing else.

On your personal platforms, you can let everyone know that you’re taking a break. You might even find while you’re off that you don’t want to get back on! If you want to stay in touch with friends and family, you can do that via phone calls and web chats. They’re more effective than social media anyway for maintaining social ties.

 

Focus on offline

 

Before you sit down in front of the screen, it might be worth asking yourself if you’ve done everything else first. Did your kids, pets, and/or spouse spend time with you today? Did you exercise in some fashion, even if it was just a dance party for one? Is there a craft or a hobby that you keep wishing you have more time for?

Spending too much time online makes people more lonely and depressed. It’s healthy for you to spend time offline. Especially when you’re spending it thoughtfully by working on a craft or something else that you really love.

Or talking to friends you haven’t spoken to in a while, or catching up with family. Or taking the whole family for a walk after dinner (staying 6 feet away from other people exercising in the great outdoors). Or whatever behavior is healthy, fun, and lights you up… because social media won’t, in the long run.

 

Are you concerned about your financial health while we deal with COVID-19? We’re working remotely (technology for the win!) so please feel free to give us a call at 619.255.9554 or email us.

 

Midyear Economic Outlook

Midyear Economic Outlook

The decade-long economic expansion did not end with a whimper. The coronavirus brought it to a screeching halt.

 

U.S. gross domestic product (GDP) fell 5% in the first quarter, and a steeper decline is likely in the second. Consumer spending, which accounts for about two-thirds of the U.S. economy, slid 13.6% in April, the steepest decline on record.

 

More bad news lies ahead in the short term, starting with the tragic human cost. Historic unemployment will likely have a lasting impact on the economy, and many businesses are failing. The path to economic recovery will depend on the course of the virus and public health response, and stock markets may bounce around for an extended period until the economy finds firmer footing.

 

With that said, our three-year view is very optimistic. We see a lot of long-term investment opportunities present themselves in this environment.

 

The chart shows U.S. GDP growth from the first quarter of 2019 through the first quarter of 2020, then depicts three potential recovery scenarios based on estimates from Capital Group U.S. economist Jared Franz. The first scenario, labeled as “not likely,” depicts a V-shaped recovery with a sharp acceleration of growth from the recession in mid-2020 and strong growth in 2021. The second scenario, labeled as “likely,” depicts a U-shaped recovery with a longer period of time in recession before more modest growth in 2021. The third scenario, labeled as “possible,” depicts a W-shaped recovery with peaks and valleys. All three scenarios indicate positive growth in the fourth quarter of 2021. First quarter 2020 GDP growth is the advanced estimate released by the Bureau of Economic Analysis on May 31, 2020. Sources: Capital Group, Bureau of Economic Analysis, Refinitiv Datastream.

Market recoveries have been longer and stronger than downturns

 

There will certainly be ups and downs. Because the slowdown was the result of government policy — not economic imbalances or rising rates ― we can see what recovery can look like when policies are relaxed.

 

Of course, when you’re in the middle of a downturn, it feels like it’s never going to end. But it’s important to remember that market recoveries have been longer and stronger than downturns. Over the past 70 years the average bear market has lasted 14 months and resulted in an average loss of 33%. By contrast, as measured by Standard & Poor’s 500 Composite Index, the average bull market has run for 72 months — or more than five times longer — and the average gain has been 279%.

 

Moreover, returns have often been strongest right after the market bottoms. After the carnage of 2008, for example, U.S. stocks finished 2009 with a 23% gain. Missing a bounce back can cost you a lot, which is why it’s important to consider staying invested through even the most difficult periods.

 

Long-term investors may take comfort in knowing that tough companies have often been born in tough times. Consider these examples: McDonald’s emerged in 1948 following a downturn caused by the U.S. government’s demobilization from a wartime economy. Walmart came along 14 years later, around the time of the “Flash Crash of 1962” — a period when the Standard & Poor’s 500 Composite Index declined more than 22%. Microsoft and Starbucks were founded during the stagflation era of the 1970s, a decade marked by two recessions and one of the worst bear markets in U.S. history.

 

Companies that can adapt and grow in tough times often present attractive long-term investment opportunities. Bottom-up, fundamental research is the key to separating these resilient companies from those likely to be left behind.

 

Chart showing a timeline of bull and bear markets from January 1945 through May 2020 with labels of notable companies that were founded near bear markets. The companies and year they were founded include McDonald’s, 1948; Medtronic, 1949; Hyatt, 1957; Walmart, 1962; Nike, 1964; Airbus, 1970; Starbucks, 1971; Microsoft, 1975; Apple, 1976; Adobe, 1982; AT&T, 1983; Gilead, 1987; Taiwan Semiconductor Manufacturing Company, 1987; Tesla, 2003; Facebook, 2004; Uber, 2009; and Zoom, 2011. Sources: Capital Group, Standard & Poor’s. As of 5/31/2020. The bear market is considered current as of 5/31/20. In all other periods, bear markets are peak to trough declines of at least 20%. Bull markets are all other periods.

The post-COVID market presents opportunity for selective investors

 

While the pain of the current downturn has been widespread, its impact has not been universal. With stores shuttered and consumers mostly sheltered at home, U.S. retail sales slid an unprecedented 16.4% in April, according to the U.S. Commerce Department. But that’s not the whole story.

 

A look beneath the surface of the U.S. stock market shows there has been a stark divide between winners and losers in this era of limited mobility. Not surprisingly, online retailers and grocers have enjoyed strong sales growth as consumers eat in and do their shopping in front of a screen. Providers of broadband, health care, home improvement materials and educational services have also benefited from healthy demand. Conversely, restaurants, travel and leisure companies, and aerospace companies have seen sales evaporate.

 

We are witnessing a number of exciting themes emerge during this crisis. Within health care, for example, we are seeing telemedicine come to the forefront, as elements of the national health system go online, improving efficiency for many patients. To be sure, not all companies will equally tap into rising opportunity, so selective investing will be critical going forward.

 

The line chart shows sales growth for industries in the U.S. retail sector from 2005 through April 30, 2020. One line on the chart tracks sales growth for retail industries identified as COVID-resilient; the second line tracks sales growth for all other retail industries. COVID-resilient retail industries include e-commerce, health & personal care, grocery, alcohol and home improvement. Sales growth for the two groups generally follow a similar pattern from 2005 through 2014, but sales growth for the COVID-resilient industries begins to outpace the other industries after 2014. Data in 2020 shows a sharp rise in growth for COVID-resilient industries and a sharp decline for all others. A table inset in the chart shows one-year sales growth through April 30, 2020, for select industries. They include the following COVID-resilient industries: E-commerce, 22%; grocery, 13%; home improvement, 0%; and health & personal care, down 10%. The bottom four other industries include the following: restaurants, down 49%; electronics, down 65%; furniture, down 66%; and clothing & accessories, down 89%. Top and bottom retail industries do not include those that had not reported April 30, 2020 sales growth, as of May 31, 2020. Sources: Refinitiv Datastream, U.S. Census Bureau.

Digitization of daily life is here to stay

 

Some of the recent demand activity reflects an amplification of already established trends. Cloud demand, for example, was sky-high before the COVID-19 outbreak. But the events of 2020 have kicked that theme into overdrive. In the stay-at-home era, e-commerce, mobile payments and video streaming services have soared in popularity, occasionally pushing the limits of technology. While the levels of online activity are likely to moderate, the pandemic could be a catalyst for even stronger e-commerce growth in the years ahead.

 

The response to the COVID-19 crisis — keeping everyone at home — has accelerated this powerful trend of digitizing the world.

 

Services that were already useful have in some cases become almost essential. Many people felt compelled to try grocery delivery for the first time, for example, and subscriptions to Netflix skyrocketed.

 

There’s also room to advance. While e-commerce has grown in popularity, it still represents only about 11% of U.S. retail sales last year, and mobile payments stood at similarly low levels. Given where we are now in the consumer-technology space, the growth potential is truly exciting.

 

The chart shows the penetration rate of “mobile wallet” transactions as of December 31, 2019, for four major markets. Rates are as follows: China, 35%; India, 30%; U.S., 9%; and U.K., 7%. “Mobile wallet” transactions refer to transactions at point-of-sale that are processed via smartphone applications and are estimates as of December 31, 2019. Sources: Statista, U.S. Census Bureau.

Don’t forget: A presidential election is looming

 

In an odd twist of political and economic fate, the event that everyone thought was going to be the biggest story of the year has been relegated to an afterthought. And maybe that’s the best way for investors to think about it.

 

That’s because, historically speaking, presidential elections have essentially made no difference when it comes to long-term investment returns. The U.S. stock market has powered through every election since 1933, reaching new highs over time regardless of whether a Republican or a Democrat won the White House.

 

What has mattered most is staying invested. Getting out of the market during election season has rarely paid off. It’s time, not timing, that makes the difference.

 

By design, elections have winners and losers, but the real winners have been investors who avoided the temptation to time the market and stayed in it for the long haul.

Chinese authorities deal with a rapidly spreading coronavirus, investors are raising questions about the potential impact on global economic growth and the financial markets. While much is still unknown about the extent of the outbreak — and, crucially, how long it may last — the initial drag on China and other emerging markets is starting to come into focus.

 

China’s Economy and the Coronavirus Outbreak

 

China’s economy was already growing at the slowest rate in 30 years before reports of the outbreak first emerged in the central China city of Wuhan. Since then, the Chinese government has placed a dozen cities under quarantine, shut down businesses and schools, and restricted travel in the affected regions. More than 7,700 infections have been reported as of January 30, including a small number in the U.S., Europe and other parts of Asia.

 

Given the quarantine lockdowns, it’s highly likely that the numbers of infected people in mainland China are significantly underestimated especially in rural areas where medical facilities are limited.

 

Depending on how long it takes to contain the coronavirus, there should be sizable declines in consumer spending and manufacturing activity at least through the end of February. 

A Global Slowdown from the Coronavirus Outbreak

Outside China, the biggest economic impact is expected to be in Thailand, which relies heavily on Chinese tourism. Among industries, travel and tourism throughout Asia will likely take a significant hit, along with sales of luxury goods. In addition, many events associated with China’s lunar new year have been canceled. Energy stocks also have fallen sharply as investors expect oil prices to decline further amid lower demand from China.

 

Since news reports about the virus accelerated around January 17, emerging markets stocks have declined by about 4%, as measured by the MSCI Emerging Markets IMI. Chinese stocks are down more than 6% and Thai stocks slipped 7%. By comparison, the MSCI World Index declined 1.3% during the period through January 29. 

If the economy and markets continue to deteriorate, Chinese authorities are likely to launch new stimulus measures, including potential tax cuts and interest rate cuts.

 

How will the US economy be affected by the Coronavirus Outbreak?

U.S. stocks, meanwhile, have lost about 2% on worries that the outbreak could have a spillover effect on the U.S. economy, including American companies that do business in China. Starbucks has closed about half of its 4,300 stores in China. Many U.S.-based airlines are also canceling flights to the country. And there are growing concerns about supply-chain disruptions for companies such as Apple that have significant manufacturing operations there.

 

Coupled with Boeing’s recent troubles returning the 737 Max jet to service, the outlook for the U.S. economy now looks more uncertain than it did just a few weeks ago, says Capital Group U.S. economist Jared Franz. Fourth-quarter U.S. GDP growth came in at 2.1% on an annualized basis, according to Commerce Department figures released on Thursday.

 

If 737 Max production remains grounded through July, then it’s estimated the impact on first-half GDP growth will be roughly –0.5 percentage points. The economic impact of the coronavirus on the U.S. is more difficult to calibrate, but expected to be modest and mostly felt through trade disruption and financial linkages.

Assuming the outbreak is contained soon, it’s likely global economic growth will experience a V-shaped recovery characterized by slower growth in the first half and a significant acceleration in the second half of the year. The U.S. economy will probably follow the same course.

U.S. economic fundamentals remain sound, labor markets are resilient and the Federal Reserve stands ready to take action as needed. The coronavirus looks to be a modest but temporary restraint on U.S. economic activity via secondary channels of impact, but should not derail growth expectations of roughly 2% in 2020.

Coronavirus Outbreak Compared to SARS

That’s similar to the pattern shown after the SARS outbreak that hit China in 2002 and 2003. Key indicators bounced back quickly after the virus was contained. Many investors are looking at the SARS event as a template for what might happen in the weeks and months ahead — although it’s important to note that there were many other factors during that time period, including the aftermath of the 9/11 attacks and the U.S. invasion of Iraq in 2003.

 

In addition, the structure of the global economy was significantly different. The Chinese economy was largely investment-driven at that time. Consumer spending is a much larger percentage of total economic output today. Travel and tourism activity also was much lower than it is now, with Chinese tourism skyrocketing over the past decade. 

 

Investment Implications

That’s similar to the pattern shown after the SARS outbreak that hit China in 2002 and 2003. Key indicators bounced back quickly after the virus was contained. Many investors are looking at the SARS event as a template for what might happen in the weeks and months ahead — although it’s important to note that there were many other factors during that time period, including the aftermath of the 9/11 attacks and the U.S. invasion of Iraq in 2003.

 

In addition, the structure of the global economy was significantly different. The Chinese economy was largely investment-driven at that time. Consumer spending is a much larger percentage of total economic output today. Travel and tourism activity also was much lower than it is now, with Chinese tourism skyrocketing over the past decade. 

 

As with any large-scale crisis, long-term investors should look for select opportunities that may be generated by a near-term loss of confidence. This is when long-term thinking, on-the-ground research and a focus on value can make a meaningful difference.

Investment management for volatile times

 

At Platt Wealth Management we build your investment portfolio to support the future you envision for yourself. Reduce risk and see returns you can be comfortable with in volatile market conditions. Give us a call today to set up a complimentary review at 619-255-9554.

 

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.

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?

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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.

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