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?

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.

IRS Tax Deadline Changes

IRS Tax Deadline Changes

Recently announced IRS changes.

 

In response to the pandemic, the IRS moved the federal income tax filing deadline back three months from April 15 to July 15. The July 15 deadline applies to:

  • Filing income tax returns
  • Payment of income taxes due
  • Payment of estimated taxes due for the first quarter of 2020
  • Funding retirement account contributions for 2019
  • Funding Health Savings Account contributions for 2019
  • In addition, this 3-month period will be disregarded for calculating interest, penalties, and additional taxes for failure to file returns or pay taxes.

The new deadline applies to individuals, trusts, estates, partnerships, associations, and companies and corporations.

For California residents, the Franchise Tax Board also extended tax deadlines to July 15. You can delay filing and payment of taxes (including second and first quarter estimated payments), LLC taxes and fees, and non-wage withholding payments. California is also waiving interest and penalties for individuals and businesses.

Taxpayers that are entitled to a refund.

You are encouraged to file as soon as possible in order to get your refund more quickly.

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.

When Will Mortgage Rates Drop?

When Will Mortgage Rates Drop?

 

So, the Federal Reserve Bank lowered interest rates to a range of 0% to 0.25%. Why aren’t mortgage rates following? Well, time to dust off that old college economics book. Let’s answer that by following the chain of economic reactions to the Fed’s actions and the principals of supply and demand.

 

How is the benchmark federal funds rate related to mortgage rates?

 

The rate that the Fed cut is the benchmark federal funds rate.
This is the short-term interest rate banks charge other banks for overnight lending and borrowing. So, bank to bank loan deals.

 

The Fed dropped this rate on March 15 for the second time in 2020 in response to the economic disruption caused by the Coronavirus. When the target federal funds rate decreases, banks typically follow by lowering their prime interest rates. The prime interest rate is used to set variable interest rates.

 

So, that new credit card application you just got in the mail might have a lower rate than your current credit card. Lowering the prime rate will cause other consumer interest rates tied to the prime rate to decrease as well. Businesses will have access to short term loans with lower interest rates to help with cash flow needs.

 

How does the federal funds rate and prime rate affect mortgage rates?

 

Mortgage rates are different from other consumer interest rates. Generally, mortgages rates don’t track the Fed’s movements. Mortgage rates are long-term loans, versus the short term variable rate we talked about earlier. So mortgage rates will go up or down depending on long term bond yields. The bond market exerts more influence over mortgage rates, not the Fed.

 

When the stock market falls, investors flee to government bonds for safety and stability. When the demand for bonds goes up, the price of bonds goes up. Bond prices and yield/interest rates have an inverse relationship. So, when bond prices go up, interest rates go down. Mortgage bonds are the same. When demand for mortgage bonds goes up, mortgage rates go down.

 

When will mortgage rates drop?

 

Early in March, mortgage rates dropped because the demand for long-term mortgage bonds was high. In response to low mortgage rates, the market was flooded by consumers looking to refinance. The supply of mortgage bonds increased and the demand for mortgage bonds dropped. Within a week or two, mortgage rates rose quickly.

 

The Fed is using other tools in their arsenal to cushion the economy, including buying Treasuries and mortgage-backed securities. As the demand for mortgage bonds grows, mortgage rates will come down again. However, consumers aren’t likely to see 0% mortgage rates. Mortgage bonds are considered riskier than government bonds. Interest rates are higher to compensate for the additional risk banks take in making the loans.

 

If you are looking to refinance your current mortgage or buy a house, keep your eyes on the rates. Be ready to go when rates dip. Be aware that you won’t be the only one refinancing when rates are attractive. Mortgage brokers will be busy and lock-in periods of 60 to 90 days (or even longer) are becoming more common.

 

 

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.

Login

[ultimatemember form_id=”1899″]

×