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****UPDATE****
We are taking every advantage of our professional groups to monitor the meaning and application of the various relief packages that are being offered. Here are thoughts from the latest download. If you have specific questions that relate to your business, whether nonprofit or for-profit, you can email them to info@thenonprofitbookkeeper.com and we’ll try to find answers for you.
REMINDER: the CARE Act is continuing to be unpacked and explained, and this information we are sharing is what is being explained to us from bankers, CPA’s and tax professionals. Due your due diligence. We will continue to update as we gain new information.
CASH FLOW MATTERS
As your friendly neighborhood bookkeeper, a reminder that cash flow is king! Now is the time to conserve cash. Here are steps you could take:
· If you do not have the reserves to hold onto employees, you can lay them off and they can apply for unemployment. Once you receive relief funds for payroll, you should be able to rehire them and use the loan funds to pay them
· Personal residence mortgages are mandated by the Act to qualify for 180 days of forbearance, meaning your payments will be tacked onto the END of your loan with no penalty. Your mortgage would be extended by the amount of forbearance you received up to 180 days. Call your mortgage company.
· Commercial mortgage forbearance is mandated for 90 cays. Call your mortgage company.
· Seek forbearance for all loans on fixed assets to see about reducing or delaying payments. Call your lender.
UNEMPLOYMENT BENEFITS
There is emergency unemployment available to people formerly not eligible for it, such as independent contractors and sole proprietors. Here is a link for Washington State Unemployment information. The system is not yet set up for this segment, so keep checking back. Here is a link for from the Feds regarding unemployment and the CARES Act.
· On top of regular state unemployment funds, the Federal Govt will be doling out $600 monthly
· If you CANNOT stay open, unemployment is the best option for employees until you get funds to rehire during the covered period for the PPP
· If you’re an owner/employee, the PPP is a better option than unemployment for you
THE ECONOMIC INJURY DISASTER LOAN (EIDL)
Apply for the EIDL to get an influx of cash as quickly as possible. While we don’t know how quickly the funds will become available, it’s likely it will be faster than the PPP which will process through the banks.
· You can apply for BOTH the EIDL and the PPP.
· The PPP is a better option because it has a generous loan forgiveness component. Your EIDL loan would be rolled into the PPP, less the amount of any grant received.
· The EIDL grant portion of up to $10,000 does not need to be paid back if used for eligible expenses (this we clearly know). It should be used for payroll and direct costs and SHOULD BE CAREFULLY ACCOUNTED FOR.
· Because it is unclear what will be done regarding remaining portions of the loan which were NOT used on eligible expenses, it is suggested to keep those funds separated until we have clarity. Unused portions can be repaid without penalty. We will update as we learn more.
· The EIDL non-grant portion is not forgivable, it is a loan, but it can be rolled into the PPP which has a forgivable portion.
· It’s estimated 1 million businesses will get this loan. It is expected that further roll outs of relief will be forthcoming to stimulate the economy.
· Again, it’s recommended to set up a separate bank account and files to track everything related to these loans. Great bookkeepers make this simpler for you to navigate.
THE PAYCHECK PROTECTION PROGRAM (PPP)
The deadline to apply for the PPP is 6/30/20.
· It will likely take 45 days or more before funds become available. Thus the EIDL is a good option to get some cash flow quickly.
· The EIDL will need to be rolled into the PPP, less the amount of any grant received. This is how you can take advantage of the loan forgiveness and non-taxable funds.
· Contact your bank if you are not sure you qualify for the PPP – most businesses are.
· There will be a process of requesting loan forgiveness when the time comes. Thus the need to keep records to facilitate this.
· The covered period for the loan is 2/15/20 – 6/30/20. 8 weeks of eligible payroll costs will be forgivable within that period.
· Payroll costs will be averaged for the year prior to the loan application to figure your eligible monthly payroll costs (which will be verified). There are details in the above link to the Bill for payroll costs for seasonal employment, etc.
· If you regularly pay independent contractors rather than employees, they are likely covered under “similar compensation”. Include those amounts in your payroll costs. This is not covering the “one-off” payment to your lawyer or CPA etc.
· The loan portion not forgiven will be repayable at 4% interest over 10 years. There is no penalty for early payoff.
If you pay wages and payroll taxes, you qualify.
1099 MISC contractors qualify. Otherwise it is unclear at this time.
#EIDL #PPP #unemployment #covid19 #SBA @CARESact