Get updates on the government assistance programs and available aid for small business owners.
Latest update: A second round of relief is coming. Read below.
Finally, some good news for small business owners. You’ve been hit especially hard during the pandemic, but more aid is available to help keep you afloat. The new COVID-19 relief bill includes $325 billion in new small business support. This much-needed lifeline includes:
Need help understanding how the new relief bill might benefit you? Our Block Advisors small business certified tax pros can help you make sense of it all.
A Second Wave of PPP is Available
It’s being called the “PPP Second Draw,” meaning if you previously received a PPP loan, you have a second chance at funding with the renewed program. New loans are available if:
Didn’t Take a PPP Loan in the Spring? You Can Apply Now
If you have not previously received PPP funding, you are also eligible to apply. Loans of up to $2 million are available for businesses with less than 500 employees, sole proprietors, independent contractors and eligible self-employed individuals.
New Relief Priorities for Underserved Communities
Minority-owned small businesses have been disproportionately affected by the pandemic. Recognizing this, the new PPP relief package prioritizes underserved communities, earmarking funds for minority and women-owned businesses as well as non-profits.
To guarantee funding is available for truly small and underserved businesses, $40 billion is set aside (for loans up to $250,000) for small businesses with up to 10 employees and businesses located in low to moderate-income areas.
New Economic Injury Disaster Loan Program Measures for Those Hardest Hit
The Economic Injury Disaster Loan Program (EIDL) was intended to get money quickly to small business owners to alleviate cash flow issues caused by the pandemic. The new bill will ensure money is quickly distributed to the hardest-hit by:
New SBA Lending Policies with Lower Fees and Increased Loan Amounts
In addition to traditional Small Business Administration (SBA) funding programs, the CARES Act established several temporary programs to address the COVID-19 pandemic. New policies will ensure lower fees and increased loan limits and government guarantees. The current bill is also designed to help small businesses in low-income communities. For more details or to see if you qualify for SBA assistance, visit sba.gov.
How You Can Secure New Funding
Loan applications can be submitted with banks and approved financial lenders.
Even if you applied before and were denied, this new bill includes new funding so try again. Loan applications can be submitted with banks and approved financial lenders. This new round of funding also has set-asides for community lenders to assist hard-to-reach communities and unbanked or underbanked small businesses.
So, how does this all impact your 2020 taxes?
We know this information is complicated, but you don’t have to go it alone. We’re here to help.
Our small business tax professional certification is awarded by Block Advisors, a part of H&R Block, based upon successful completion of proprietary training. Our Block Advisors small business services are available at participating Block Advisors and H&R Block offices nationwide.
Congress has approved an additional $310 Billion in funding for this high-demand loan program. Take note: the new Paycheck Protection Program funds are expected to be allocated quickly. Contact your lender to apply right away.
This program helps businesses cover payroll and other costs. Businesses with fewer than 500 employees are eligible to borrow up to $10 million. Applications currently suspended until additional funding is available. Read below for additional assistance still available to small businesses.
The loan can be used for:
These loans are 100% guaranteed without collateral or a personal guarantee. And, if you use the loan for permitted purposes, the balance is forgiven. So, if you follow the rules, this is more of a grant than a loan!
This credit provides a payroll tax credit of 50% per employee for wages paid March 13 – December 31, 2020.
Your business qualifies if you:
If you employ others or you’re self-employed, you can defer paying your company’s share of social security contributions.
Traditionally reserved for businesses in regions declared disaster areas, this loan is now available to businesses in all 50 states.
Already have an SBA loan?
The SBA will cover your principle and interest payments for 6 months.
The new relief bill, called the Coronavirus Response and Relief Supplemental Appropriations Act of 2021, includes $325 billion in small business support, including an extended Payroll Protection Program (PPP), new Economic Disaster Loans (EIDL), and SBA debt-relief payments along with enhancements to SBA lending. You may also benefit from the extended and expanded payroll tax credits and the ability to deduct expenses paid with forgiven COVID-related loans and grants.
This information is complicated, but our Block Advisors Small Business Certified tax pros are here to help you make sense of it all.
To guarantee funding is available for truly small and underserved businesses, the bill sets aside $40 billion for small businesses with up to 10 employees and businesses located in low to moderate-income areas to receive loans of up to $250,000.
PPP loan applications can be submitted with banks and approved financial lenders. Other SBA loan applications can be submitted directly to the SBA. Check out SBA.gov for more information. Even if you applied before and were denied, this new bill includes new funding so try again. This new round of funding also has set-asides for community lenders to assist hard-to-reach communities and unbanked or underbanked small businesses.
Yes, even with part-time employees, the payroll tax postponement allows business owners to defer payment of the employer’s share of Social Security (but not Medicare) contributions for employees during 2020. Self-employed individuals can also defer one half of Social Security taxes for 2020 as well.
Note: Previously, employers that receive a Paycheck Protection Program (PPP) loan could not defer any payroll taxes due after the employer received a decision for the lender that the PPP loan is forgiven. The PPP Flexibility Act of June 5, 2020, removes that restriction, so that PPP recipients can now delay payroll taxes.
Yes, receiving aid may impact your 2020 tax filing. For example, money received from your forgivable PPP loan will not be included in your gross income at the federal level, but you’ll want to check with your state to determine if the forgiven loan is taxable on your state return. In addition, the latest legislation provides for the ability to deduct business expenses paid with forgiven PPP loans and other COVID-related loans and grants.
To fully understand your eligibility for tax credits and deductions, we recommend speaking with one of our Block Advisor Small Business Certified Tax Pros to help you make sense of it all.
The Paycheck Protection Program (PPP) was created in the CARES Act, which was enacted in March, 2020. In December, 2020, the program was enhanced with more lenient expense eligibility requirements, a streamlined loan forgiveness application for smaller loan amounts, and an opportunity for a second draw for businesses that already received a PPP loan in 2020.
Yes. The new legislation is being called the “PPP Second Draw,” meaning if you previously received a PPP loan, you have a second chance at funding with the renewed program. You may receive a new PPP loan if:
Even if you applied before and were denied, this new bill includes new funding so try again. Loan applications can be submitted with banks and approved financial lenders.
This will depend on if you’re applying for your first loan or a “second draw” as indicated below.
In general, a company can have no more than 500 employees. Additionally,
According to the new law, the loan can be used for several things including: payroll costs, mortgage interest payments, rent payments, utility payments, covered operating expenses, covered property damages, covered supplier costs, worker protection expenses and interest on any other debt incurred before February 15, 2020. Mortgage interest, rent, and utility should be for obligations and services in force or beginning before February 15, 2020.
Additionally, costs for employee vacation, parental, family, medical and sick leave are included. There are some exclusions when a credit is allowed under the Families First Coronavirus Response Act.
The calculation depends on your type of business – dining and lodging businesses may qualify for more than other types of businesses – but loans under the new program authorized in December 2020 can’t exceed $2 million. Generally, new applicants can qualify for a loan of up to 2.5 x (3.5 x for restaurants/hotels) a small business owner’s average monthly payroll cost or $2 million whichever is less.
Note that loans under the original program authorized in March 2020 could be up to $10 million.
All loans have the following identical terms: 1) interest rate of 1.0%, 2) matures in five years (for loans made on or after June 5, 2020), 3) first payment deferred for six months after the loan forgiveness determination, 4) 100% guaranteed by Small Business Administration, 5) no collateral, 6) no personal guarantee, and 7) no borrower or lender fees payable to SBA.
Note: The PPP Flexibility Act of June 5, 2020, extended the loan maturity from two to five years and further deferred the first payment to six months after the loan forgiveness determination. Lenders and borrowers may mutually agree to modify terms to extend the maturity date from two years to five years.
You can apply for the Paycheck Protection Program (PPP) through a participating lender. Once you find a lender that is accepting applications, you will likely need to gather your monthly payroll expenses for 2019 and 2020. The PPP requires the lender to use your payroll expenses to determine the maximum loan amount as well as the amount that may be forgiven.
Second draw loan applicants will also need to provide quarterly profit / loss statements to demonstrate a decline in revenue.
The PPP allows small business owners, including sole proprietors, to borrow up to 2.5 times their average monthly payroll costs (3.5 times if they are in the hotel/restaurant industry). A portion of the loan may be forgiven if the proceeds are used for payroll costs, mortgage interest, rent and utilities. The interest rate on the amount that must be repaid is only 1% and the term is five years from the date of disbursement. The first payment is due six months after the loan forgiveness determination date, though interest will accrue during that deferral period.
Note: The PPP Flexibility Act extended the loan maturity from two to five years (for loans made on or after June 5, 2020).
Independent contractors and self-employed individuals who don’t have any employees and don’t issue paychecks to themselves during the year will use their net income from self-employment as a substitute for wages for purposes of the PPP. These owner-employees can still qualify for loan forgiveness as long as the loan proceeds are used for qualifying expenses.
Self-employed individuals substantiate net income from self-employment by providing a copy of their business tax return – typically a Schedule C (Form 1040) – for tax year 2019 with their loan application as well as any Form 1099-MISC detailing nonemployee compensation, invoice, bank statement, and book of record that establishes they are self-employed. They must also provide documentation from 2020 that show they were in operation on or around February 15, 2020.
Assuming your payroll expenses consist solely of the reasonable compensation you pay yourself and report on a W-2, you can find that expense on line 7 of your corporate tax return (1120-S). Alternatively, you may be able to find your payroll expenses in your accounting or bookkeeping software.
The CARES Act allows the USDA to provide direct assistance to agriculture producers as well as makes appropriations for the Commodity Credit Corporation. As the USDA works to implement the CARES Act, visit https://www.farmers.gov/coronavirus for more information about programs for farmers.
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