Coronavirus and Taxes - Part 6
State Filing Extension Date Update and the SBA Loan Programs
April 2, 2020
In my Coronavirus and Taxes Part 5 update I dealt with the stimulus payment that was created by the passing of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Before I start with an update as to the SBA Loan part of the ACT it is important to understand that this information is changing daily. Information that was shared in earlier procurements may have changed. Please use this information as a guide and it may not be the definitive rules.
State Filing Extensions
The following is a list of NEW tax return filing dates for each state for individual returns. This list is current as of this writing but can change.
Due Date State
May 15 Mississippi
June 1 Virginia
June 15 Indiana, New Hampshire, Washington, Puerto Rico
July 15 Alabama, Arizona, Arkansas, California, Colorado, Connecticut, DC, Delaware, Georgia, Illinois, Indiana, Kansas, Kentucky, Louisiana, Maine, Massachusetts, Maine, Maryland, Michigan, Minnesota, Missouri, Montana, North Carolina, North Dakota, Nebraska, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Vermont, Wisconsin West Virginia
July 20 Hawaii
July 31 Iowa
The above dates do not necessarily reflect the filing dates of business returns, sales tax returns, payroll tax returns, estates and trusts or estimated tax dates. The due date on these returns should be checked against the respective states website.
A significant part of the ACT is the expansion of existing Small Business Administration Loan programs. The goal of the SBA loan programs is to help business with their payroll, keep employees employed and assist in the paying of rent, mortgage interest, utilities and other operating expenses.
The SBA has vowed to make the application process simple.
Economic Injury Disaster Loan (EIDL) EIDL Application
The EIDL program is a program that you can apply for directly on the SBA website to get a $10,000 loan that will be treated as a grant and can be used to help you pay for your payroll, materials, mortgage / lease, utilities or other operating expenses. This application is simple and should take you no more than 15 minutes to file. The SBA says you will be funded within three days if approved.
Paycheck Protection Program (PPP) (PPP Application)
This part of the program is funded and capped at $350 billion and is aimed at providing small American businesses with eight weeks of cash flow assistance through 100% federally guaranteed loans (apply early so you don’t get shut out). If you are a small business with less than 500 employees, a nonprofit organization or 501 (c)(19) veterans organization affected by the coronavirus you may apply for this program.
The loan has a maturity rate of 2 years with an interest rate of 0.5%. First loan payment is not due for six months and no collateral or personal guarantees are required. There are no fees.
The loan covers expenses dating back to February 15 through June 30, 2020. The loan has the possibility of being forgiven turning it into a non-taxable grant.
To qualify sole proprietorships will need to submit schedules from their filed tax or to be filed tax return showing income and expenses from the sole proprietorship. Independent contractors will need to submit Form 1099 MISC. Other business types will need to submit payroll tax filing as reported to the IRS.
When you apply for the loan you must acknowledge that the funds will be used to retain workers and maintain payroll or make your mortgage, lease payments, and utility payments. Funds used for other purposes will not be eligible to be converted to a grant. The maximum amount you can received is 2.5 times your average monthly payroll cost up to a maximum of $10 million. (April 1, 2019 through March 31, 2020). Payroll costs include salaries, wages, tips, vacation, medical or sick leave, health benefits, retirement benefits, employer social security and Medicare and state and local wage taxes. It must exclude any employee and affiliated social security and Medicare taxes of any employee making greater than $100,000. If you are a seasonal employer the lender will use a 12-week period ending June 30, 2019. If your business did not exist before June 30, 2019, the lender will look at your January and February 2020 costs.
You have to apply for this loan through an SBA lender not the SBA. Check with your bank to see if they are an SBA lender. Applications can be accepted starting April 3, 2020.
To get this loan forgiven you need to keep excellent records. A recommendation is to keep these funds and expenses in separate bank account. Eight weeks after your loan signing date you may apply for loan forgiveness. The following expenses can be forgiven:
• Payroll – salary, wage, vacation, parental, family, medical or sick leave benefits;
• Mortgage Interest as long as the mortgage was signed before Febraruy15, 2020;
• Rent as long as the lease agreement was in effect before February 15, 2020
• Utilities as long as the service began before February 15, 2020.
The lender has 60 days o make a decision on your forgiveness application from the time you make the submission. The conditions of loan forgiveness is your commitment of maintaining the average monthly number of full-time equivalent employees equal or above the average monthly number of full-time equivalent employees during the previous one year. The amount that can be forgiven will be reduced in proportion to any reduction in the number of employees retained and if any wages were reduced by then a 25%. If employees are rehired that were previously laid off at the beginning of the period or any decreased salaries were restored you will not be penalized for having a reduction in employees or wages as long as this is done by June 30, 2020.
SBA Disaster Loan Program
The SBA Disaster Loan Program is usually reserved for people affected by a natural disaster but the ACT is including COVID-19 relief as part of the program. You can borrow up to $2 million at 3.5% (2.75% for nonprofits) and up to 30-year payback (note the terms are subject to change). This loan can be used to keep your business operating during the pandemic. This program is applied through the SBA’s Disaster Loan Assistance Portal.
Lastly, in trying to keep in compliance with social distancing guidelines, I am now offering to pick up your tax documents and discuss your tax situation either over the phone or via Zoom or Skype. You can also scan your documents into a PDF and email to me. Also, they can be mailed to my P O Box.
As more information becomes known I will keep everyone informed. Feel free to reach out to me to discuss your situation. Be safe everyone.
Harry E. Hunter
Hunter Consulting, Inc.
April 2, 2020