CARES Act Developments and Observations – Business Edition

This article is a brief update on what I’m seeing regarding how the CARES Act that passed less than two weeks ago is impacting businesses and self-employed individuals. As with everything I write these days, this is probably all obsolete before the ink dries on the screen. But here we go all the same…

Paycheck Protection Program (PPP)

Of the various programs intended to provide cash flow for small businesses and self-employed folks, the Paycheck Protection Program (PPP) loan has emerged as the leader of the pack. The eligibility criteria are broad, no guarantees or collateral are required, no fees, generous repayment terms including possible forgiveness, etc.

To say this program has had a rough rollout over the last few days is putting it mildly. Critical definitions are still being debated, some lenders haven’t yet rolled out the program on their end, application information is varying from lender to lender, some lenders were/are accepting applications only for current customers, etc.

If you’re interested in this loan, I advise taking a look at it sooner rather than later. Although the program is open through June, at some point the $350B in allocated funds will be depleted. I certainly hope to see further, meaningful financial assistance provided to small businesses, but we’ve seen how slowly Congress moved on this one. Reminder: Read the fine print, know what you’re agreeing to.

Emergency Economic Injury Grant (EEIG)

This is the up-to-$10,000 advance on the Economic Injury Disaster Loan (EIDL) that was supposed to be issued within 3 days of EIDL application. The first 3-day window has passed a few days ago and I haven’t heard of anyone receiving this payment. Word on the street is that, due to popularity, the advance is being limited. This doesn’t seem like Treasury’s intent, but it does seem how SBA is interpreting things.

Unemployment

The CARES Act expanded unemployment to cover self-employed individuals. States are still trying to figure this out, along with other unemployment-related components of the law. In my state of Georgia, the state Department of Labor has some information available, including a clear order for self-employed folks to not file just yet and that more information will be available Friday, April 10.

As a business owner/self-employed individual, can you apply for a PPP loan AND claim unemployment? This is currently unclear, but it may ultimately depend upon your state. Is it reasonable to need both a loan to cover your/your employees’ payroll while also needing unemployment benefits to help cover, well, everything else? I think it is. Reminder: Unemployment benefits are taxable. Have some income tax withholding on your unemployment benefits or it could be super painful later.

Internal Revenue Service

Over the last couple of weeks, the IRS has really expanded the information at https://www.irs.gov/coronavirus. Keep this on your radar as you have tax-related questions. (And, if you’re a client, of course ask me.) Know that IRS FAQs are not authoritative guidance, but for many concerns, they are the best we’re going to get for a while.

With IRS offices and phone lines mostly closed, don’t expect them to resolve outstanding issues in the near future. They’re processing tax returns and issuing refunds and economic relief payments, but not too much else.

Takeaway

To the extent you’re able, exercising persistence, diligence, and patience with your financial and tax options will pay dividends. (Pun intended)

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