SPECIAL FEATURE - Understanding the Coronavirus Aid, Relief, And Economic Security Act
Dan Pilla • April 28, 2020
Critical Help for Individuals and Businesses
On March 27, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This is a massive stimulus package designed to mitigate the horrific economic damage inflicted by the COVID-19 pandemic. The bill provides for about $2.2 trillion in spending, cash rebates and loans to businesses intended to help keep them afloat during this time of unprecedented upheaval to our social and economic culture.
In addition to providing loans (some forgivable, as discussed below), the package provides money for the IRS to carry out new administrative duties under the law. The IRS’s funding looks approximately like this:
• $293.5 million for IRS taxpayer services,
• $170 million for IRS operations support,
• $78.7 million for the Treasury Department’s Bureau of the Fiscal Service,
• $38 million for the Social Security Administration, and
• $37.2 million for IRS enforcement.
Let’s examine some of the key elements of CARES as it relates to individuals and businesses.
Economic Impact Payments
The Centerpiece of CARES
The centerpiece of CARES is the so-called “economic impact payment” that will be handed out to most Americans. This combination stimulus/relief payment is intended to provide families with immediate cash to hold them over while businesses are closed because of the “stay-at-home” orders in effect throughout the nation.
The IRS stated on March 30 that the distribution of checks will begin by mid-April, and as of this writing, money is being deposited into bank accounts. It is estimated that 165 million people, or 93% of all tax return filers, will get some cash. About 140 million will get the full amount of $1,200. The payment is actually considered a credit against your 2020 income tax liability. As such, it is not subject to being taxed. Even if you don’t owe taxes, you could get cash because the pay-ment is considered a “refundable” credit. As such, it’s treated just like the Earned Income Tax Credit.
You must have a Social Security number to get paid. That includes the SSN of the taxpayer and his spouse, and the SSNs of any dependents. Without a valid SSN, you will not receive a payment. See: new code §6428(g).Here’s what you can expect in the way of payment. If your adjusted gross income (AGI) is less than $75,000 for a single person, or $150,000 for a married couple filing jointly, you’ll get $1,200 per individual. Plus, you get an additional $500 for each child under 17. A family of four will get a check for $3,400. There is no limit to the number of children to which the $500 applies. See new code §6428(d).If your AGI exceeds the above amounts, the credit is phased out. Under the phase-out rules, the credit is gradually reduced to zero by the point at which AGI exceeds $99,000 for individuals, $146,500 for heads of household, or $198,000 for joint filers.
The rebate is based on your 2019 tax return or your 2019 Social Security statement, if Social Security is your only income. If you haven’t yet filed the 2019 return, the rebate is based on your 2018 return. As you know from last month’s Pilla Talks Taxes, the filing deadline for 2019 returns is moved to July 15, 2020 (see my update on this article below). The best bet is to get the return filed as soon as possible, especially if your 2019 income is lower than 2018 such as to impact the amount of the rebate you’re entitled to. The IRS will process the rebate checks through the end of 2020.
The IRS intends to deliver the checks via direct deposit. They will put the money in the account indicated on the tax return to which the tax refund payment was made. If no bank account information was provided, you should provide that information to the IRS to get your money as fast as possible. The has a portal on its web site al-lowing individuals to provide their current bank account information. If there simply is no bank account available, the IRS will mail you a check.
If you filed neither your 2018 tax return, nor your 2019 return, you need to get busy. It appears that you will not get a rebate check if both of these returns remain unfiled through 2020.
Earlier in the week of March 30, the IRS said that if a person didn’t file a return because their income was too low to require filing, that person would have to file an “abbreviated” return to get the payment. I don’t know what an “abbreviated” return is. I assume the IRS meant you must file a return to prove you don’t have to file a return, for the purposes only of providing proof of your income and bank account information. Those receiving only Social Security payments might fall into this category.
As of April 1, the Treasury reversed itself on that point. The most recent guidance states that, at least for SS recipients, some veterans and others not otherwise required to file, no return is necessary. The IRS will simply deposit their checks directly into their bank accounts where the SS or other federal benefits are paid. There now is no need for these people to file an “abbreviated” return, whatever that is.
The Paycheck Protection Program
Guaranteed and Forgivable Federal Loans
If the $1,200 refundable credit for individuals is the centerpiece of the CARES Act, the Paycheck Protec-tion Program (PPP) is a close second. And for small businesses, it will very likely prove to be much more valuable than the $1,200 credit. This is especially true since small business owners with AGI above certain limits aren’t getting the $1,200 credit anyway.
The PPP authorizes up to $349 billion in forgivable loans to small businesses to pay their employees during the COVID-19 crisis. That’s right. I said “forgivable” loans. In fact, not only are the loans forgivable assuming you use the proceeds as provided by law, but further, there is no personal guarantee or collateral required by a business owner to obtain the loan. And what’s more, the Small Business Administration (SBA) “shall have no recourse against any individual share-holder, member, or partner of an eligible recipient of a covered loan for nonpayment of any covered loan” except to the extent that the proceeds were used for a purpose other than those authorized under the law. See: CARES Act §1102(a)(1).
Let me say all this another way. The loan doesn’t have to be paid back if you use the proceeds as authorized. You don’t need to personally guarantee the loan. You don’t have to put up any collateral. You can’t be sued for not paying the loan. Furthermore, it is not necessary to first seek a loan from some other source before applying for a PPP loan. The SBA waived the usual requirement that you seek funding from other sources before coming to the SBA. To top it all off, if the loan is forgiven, the forgiveness does not constitute “income” for tax purposes. And, there’s already talk about adding another $250 billion to the pool of resources available for these loans.
The Paycheck Protection Program is effective for loans made from February 15, 2020, through June 30, 2020. The loan terms are the same for everyone.
WHO QUALIFIES FOR A PPP LOAN?
Any type of business qualifies, including nonprofits, veterans organizations and Tribal businesses. Quali-fied businesses also include sole proprietorships, self-employed individuals and independent contractors. As long as your business has 500 or fewer employees, you can apply. Even certain businesses with more than 500 employees might qualify if they meet applicable SBA employee-based size standards for specified industries. Check the SBA’s website for more details on this.
AUTHORIZED USES OF LOAN PROCEEDS
The loans issued under the PPP will be forgiven as long as you use the proceeds for specifically authorized purposes. The law describes the following as authorized uses of loan proceeds:
• Payroll costs;
• Costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;
• Employee salaries, commissions, or similar compensation;
• Payment of interest on any mortgage obligation (but not prepayment of, or payment of principal on a mortgage);
• Rent (including rent under a lease agreement);
• Utilities; and
• Interest on any other debt obligations that were incurred before “the covered period.” See CARES Act §§1102(a)(1), amending §7(a) of the Small Business Act, 15 U.S.C. 636(a).
The “covered period” is defined as the period beginning on February 15, 2020 and ending on June 30, 2020.
WHAT CONSTITUTES PAYROLL COSTS?
Payroll costs include any of the following items:
• Salary, wages, commissions, or tips (capped at $100,000 on an annualized basis for each employee);
• Employee benefits including costs for vacation, parental, family, medical, or sick leave;
• Allowances for separation or dismissal benefits;
• Payments required for the provisions of group health care benefits including insurance premiums;
• Payment of any retirement benefits; and
• State and local (but not federal) employment taxes assessed on compensation.
Sole proprietor self-employed persons and independent contractors are included in this program, even if they pay no wages to other employees. For this purpose, commissions earned by, or net earnings from self-employment (as reported on Schedule C), are considered “payroll costs.” Such earnings are capped at $100,000 on an annualized basis for each self-employed person.
Payroll does not include employment taxes imposed under the Internal Revenue Code, compensation paid to an employee who lives outside of the United States, qualified sick leave wages for which a credit is allowed under the Families First Coronavirus Response Act, or qualified family leave wages for which a credit is allowed under the Families First Coronavirus Response Act.
What we are talking about here are the payments due and made to employees for their services to your company.
HOW MUCH CAN YOU BORROW?
PPP loans are based on your average monthly pay-roll costs for the preceding twelve months from the date of application. The amount of the loan is equal to the monthly payroll average, multiplied by 2.5. For example, if your 12-month average payroll costs from February 2019 through January 2020 equal $10,000, your loan amount is $25,000 (10,000 x 2.5). The total amount available to any one business under the PPP is $10 million. The lender determines the precise loan amount you will receive based on the documents you provide.
Payroll costs are limited to $100,000 annualized for each employee. So, for example, if you have an employee who earns $120,000 a year, the amount of “payroll” for this calculation is capped at $100,000, or $8,333 per month. This applies to self-employed and independent contractors as well.
HOW MUCH OF THE LOAN CAN BE FORGIVEN?
Forgiveness of the loan is tied directly to how you use the money. The loan will not be forgiven if you use loan proceeds for anything other than payroll costs, mortgage interest (not principle), rent, and utilities payments over the eight-week period after getting the loan. The loan will likewise not be forgiven if you don’t maintain your staff and payroll.
The loan forgiveness amount is reduced if you decrease your full-time employee headcount. Likewise, you will not be forgiven if you reduce salaries and wages by more than 25% for any employee that made less than $100,000 annualized over the past twelve months. If you lay off workers, you have until June 30, 2020 to restore your full-time employment and salary levels for any changes made between February 15, 2020 and April 26, 2020.
WHAT IF THE LOAN IS NOT FORGIVEN?
If the loan is not forgiven, the remaining balance is nevertheless guaranteed by the SBA. It then converts to an amortized loan payable within two years at an interest rate of 1%. Loan payments are deferred for six months.
WHEN TO APPLY
Small businesses (corporations, partnerships, etc.) could submit applications starting April 3, 2020. As of April 10, 2020, independent contractors and self-employed individuals can apply for PPP loans.
WHERE TO APPLY
Apply for a PPP loan through any existing SBA lender or through any federally insured depository institution, federally insured credit union, and Farm Credit System institution that is participating. Other regulated lenders will be available to make PPP loans once they are approved and enrolled in the program. Check with your business bank right away to see whether it offers PPP loans. If it participates with the SBA in any way, it is likely already participating in this program. Go to sba.gov for a list of SBA lenders.
HOW TO APPLY
You must complete the Paycheck Protection Program loan application. It gets submitted to your PPP lender. Include the documentation sought in the form. The application must be submitted so that it can be processed by June 30, 2020. Included here is a copy of the application. You can take out just one loan under this program.
Note that the application, page 2, requires several “certifications.” You must certify “in good faith,” that:
• Current economic uncertainty makes the loan necessary to support your ongoing operations;
• The funds will be used to retain workers and maintain payroll or to make mortgage, lease, and utility payments;
• You have not and will not receive another loan under this program;
• You will provide the lender with documentation to verify the number of full-time equivalent employees on payroll and the dollar amount of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight weeks after getting a PPP loan;
• All the information you provide in your application, and all supporting documents and forms, are true and accurate;
• Knowingly making a false statement to get a PPP loan is punishable by law;
• You acknowledge that the lender will calculate the eligible loan amount using the tax documents you submit;
• You affirm that the tax documents are identical to those you filed with the IRS; and
• You also understand, acknowledge, and agree that the lender can share the tax information with the SBA’s authorized representatives, including authorized representatives of the SBA Office of Inspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews.
SUPPORTING DOCUMENTS REQUIRED
You will need documents to prove,
1) the number of full time employees on your payroll,
2) the dollar amount of your payroll costs,
3) covered mortgage interest payments, or covered rent payments, and
4) covered utility costs for the eight-week period following the granting of the loan.
As to the number of employees, the Forms W-2 that you submitted to the Social Security Administration for 2019, and the Forms W-4 submitted to you by your employees, will help prove that issue. Also, your internal payroll records, including checks issued to employees for January and February 2020 will prove this point.
As to the dollar amount of the payroll, Forms 941 for all quarters of 2019 and the first quarter of 2020 will prove this, as well as current payroll data for the second quarter 2020.
Interest on loans, rent and utility bills can be document-ed from information on hand for each of these items.
Note that interest on any loans, rent or utilities that you cover with PPP loan proceeds must be paid pursuant to mortgage obligations, rent agreements or utilities for services which began before February 15, 2020. You can’t pay for a new loan or make rent payments per a lease agreement entered into on or after February 15, 2020.
HOW LONG DOES THE PROGRAM LAST?
The application process is open through June 30, 2020. However, there is a cap on the amount of money appropriated by Congress for these loans. Once the money is gone, it’s gone, unless Congress appropriates more, which is distinctly possible. In the meantime, you should apply as quickly as possible.
HOW TO REQUEST LOAN FORGIVENESS
A request for loan forgiveness is submitted to the lender servicing the loan. The request must include documents to verify that the money was used only for authorized purposes. You must prove the number of full-time employees and their pay rates, and, of course, that you paid those wages. You must also prove the payments you made on eligible mortgage interest, lease, and utility bills. You must declare under penalties of perjury that you used the loan proceeds to keep employees on staff and to make eligible mortgage inter-est, rent, and utility payments. To the extent that you used the money for other purposes, the loan will not be forgiven and there may be other legal consequences for misusing the money.
The lender must make a decision on the forgiveness within sixty days. In the meantime, the interest rate is 1% and is fixed. You must begin paying interest on the loan after six months, which is the deferral period. However, interest accrues during the deferral period. The loan must be paid within two years. It can be paid in full earlier as there are no prepayment penalties or fees.
CONCLUSION
Assuming you use the money as specifically dictated by the terms of the PPP program under the CARES Act, this loan is in fact a gift. There’s $349 billion (and likely more) available in bailouts to small businesses under this program.
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Learn more about Dan and your rights as a taxpayer at www.taxhelponline.com
Reading Time 2 mins 56 secs – Take a moment and think about this: faith isn’t just for the mountaintop moments. It’s for Mondays. It’s for traffic jams, unexpected bills, and the times when you’re just trying to get through the week. God never designed faith to be complicated or out of reach. He designed it to be your everyday operating system. Faith Is for Today Sometimes, we picture faith as something we have to “muster up” for significant challenges, like praying for healing, believing for a miracle, or asking for a breakthrough in a crisis. And while faith absolutely applies to those moments, it’s also for the little ones. Faith is choosing to trust God with your attitude in a tough conversation. Faith is deciding to believe He’ll provide, even when your budget looks thin. Faith is remembering you’re never alone, even when you feel overlooked. Second Corinthians 5:7 (NIV) says, “ For we live by faith, not by sight. ” Notice it doesn’t say “visit by faith” or “use faith once in a while.” It says live. Faith was always meant to be your way of life. Small Steps, Strong Roots Faith doesn’t usually grow in leaps; it grows in steps. Little, steady decisions that put your trust in God day after day. Opening your Bible instead of scrolling on your phone first thing in the morning Speaking truth over yourself when your feelings want to run the show Praying before making a decision instead of relying only on logic These may not seem dramatic, but they lay a strong foundation. And just like a tree with deep roots, your faith will keep you standing strong when storms come. God Is Faithful, Even When Life Isn’t Here’s the best part: your faith doesn’t rest on your ability to figure everything out. It rests on God’s ability to be faithful. And He is. Always. When you feel shaky, remember this: God is steady. When you feel uncertain, remember this: His promises are sure. When you feel small, remember this: faith the size of a mustard seed can move mountains. You don’t need giant faith for God to move. You just need real faith in a giant God. Faith That Shows Up in Action Faith isn’t just belief in your heart; it’s trust that shows up in your choices. James 2:17 says, faith without works is dead, which means faith comes alive when you act on it. That could look like forgiving when it’s hard, giving when it feels impossible, or stepping into an opportunity that scares you, but you know God is calling you to. Every time you take action in faith, you’re making a declaration: “God, I trust You more than my feelings, more than my circumstances, and more than what I see.” That kind of faith not only changes your life, but it also inspires others to believe. A Simple Prayer to Start With “Lord, thank You that faith isn’t complicated. Teach me to live by faith in the small things and the big things. I trust You with my today, my tomorrow, and every detail of my life. Strengthen my heart and remind me that You are faithful. In Jesus’s name, amen.” Take This with You Faith isn’t a moment. It’s a mindset. It’s not about pretending life is easy. It’s about trusting God, no matter what life looks like. Friend, you don’t need to wait for a crisis to practice faith. You can start today, right where you are, with whatever you’re carrying. Take a step. Speak His Word. Trust His heart. Because faith isn’t just for the extraordinary, it’s for the everyday. And your everyday is exactly where God loves to show up.
Reading Time 2 mins 49 secs – Okay, let’s take a breath. Not everything has to be heavy, and healing doesn’t have to feel impossible or mysterious. Sometimes, we just need to be reminded that God actually wants us to feel better. Yes, you included. God Cares About How You Feel We can get so used to pushing through that we forget God never designed us to live burned out, worn out, or always dealing with pain. Third John (NIV) 1:2b says, “ I pray that you may enjoy good health and that all may go well with you, even as your soul is getting along well .” God’s heart is not just that we survive life. His heart is that we thrive—spirit, soul, and body. That includes your sleep. That includes your energy. That includes your mind and your moods. Healing Isn’t Just for Emergencies Most of us wait to think about healing until something significant goes wrong. A diagnosis. A surgery. A crisis. However, healing is an integral part of your daily life as a believer. You don’t have to wait for something to fall apart to lean into God’s promises. It’s kind of like drinking water; your body needs it regularly, not just when you're dehydrated. The Word is the same. It brings strength, clarity, and peace to your health before the storm hits. You’re allowed to believe in a life where you’re not constantly recovering—you’re well. Small Shifts, Big Results Maybe you’ve been dealing with something for a while—nothing catastrophic, just something that lingers. A chronic ache. Fatigue. Brain fog. A stress habit that’s hard to shake. Can I encourage you? You don’t have to settle for “just getting by.” Start speaking life over your body. Make simple changes in faith; walk a little more, drink more water, eat a bit better, get quiet with God. Healing isn’t always dramatic. Sometimes, it happens gently. Daily. Gradually. The power of God isn’t always loud, but it’s always effective. The Best Kind of Doctor He doesn’t rush your appointment. He’s never stumped by your symptoms. And He doesn’t hand you a bill at the end. He simply says, “Come to Me.” Come tired. Come unsure. Come with your questions. And He’ll give you rest (Matthew 11:28). Yes, He heals in big, miraculous ways—but He also heals in little moments of laughter, sunlight, worship, and truth. Let’s Make This Simple Healing isn’t about performance. It’s about proximity—staying close to the Healer. So, take the pressure off today. You’re not failing if you’re still waiting. You’re not disqualified if you’ve had some doubts. You’re growing. You’re learning. And most of all, you’re loved. Let healing be a conversation you have with God, not a crisis you fear. Let it be part of your everyday life with Him, not just a 911 prayer when things feel scary. A Simple Prayer to Start With “Lord, thank You that You care about every part of me. You know when I’m tired, hurting, anxious, or overwhelmed. Thank You for being my Healer, not just in emergencies but in the everyday. I receive Your peace and Your promises. I speak life over my body and my mind today, in Jesus’s name. Amen.” Take This with You Healing doesn’t have to feel far away or hard to reach. It’s not reserved for the super spiritual or the desperate. It’s available, it’s real, and it’s for right now. You don’t have to make it complicated. Just take one step. Open the Word, talk to God, speak life over yourself, and trust that He’s working behind the scenes. You don’t have to live in survival mode. You were made for wholeness. And friend? You’re allowed to feel better.
Reading Time 3 mins 46 secs – Picture this. You’re standing at the edge of a foggy path that winds through a forest. You’ve never walked this path before. You can’t see more than a few feet ahead. There are no signs. No map. No flashlight. Just a still, quiet voice inside telling you to start walking. Would you? Most people wouldn’t. They’d wait until the fog clears. Until the way is visible. Until they feel “sure.” But that’s not how the Kingdom works. Friend, faith walks before it sees. Hebrews 11:1 (NIV) tells us this plainly: Now faith is confidence in what we hope for and assurance about what we do not see. Not what we can see. Not what we understand. Not what’s guaranteed. Faith is walking when it feels like you’re walking blind, but you’re actually walking guided. Let’s talk about Abraham for a second. God said to him, “...Go from your country, your people and your father’s household to the land I will show you” (Genesis 12:1, NIV). God didn’t show Abraham the land first. He didn’t explain all the details. He didn’t promise a step-by-step plan. God simply said, “ Go, ” and Abraham went. He didn’t argue. He didn’t delay. He didn’t ask for the weather report or route details. He trusted the voice. He walked before he saw. And because of that one step, a generational promise was unlocked. Now, let’s fast forward to the New Testament, to the story found in Matthew 14. Jesus came walking on water in the middle of the night, and Peter saw Him. Peter said, “Lord, if it’s really You, tell me to come.” And Jesus said, “Come.” What did Peter do? He stepped out of the boat and onto the water. Pause and think about that. Peter walked on water—not because he had magic in his feet but because he trusted the One who called him forward. Peter walked before he saw. Yes, he started to sink when he looked at the waves, but before that, he did what no other human besides Jesus had done: he walked on water by faith. Friend, your boat might feel safer. It might feel familiar. But if God is calling you out of it, staying there is more dangerous than stepping forward. Let’s get real for a second. There are seasons when God will not show you the full picture, on purpose. Why? Because if He showed you everything, you’d try to control it instead of trusting Him with it. Faith is trusting His character when you can’t see His hand. It’s saying yes without having every answer. It’s building the ark before the rain comes. It’s marching around Jericho before the walls fall. It’s digging a ditch before there’s a drop of rain. That’s the Kingdom. Here’s what the Bible says: “For we live by faith, not by sight,” (2 Corinthians 5:7, NIV). That’s not a metaphor. That’s a lifestyle. You don’t wait until all your fear is gone to obey. You don’t wait until you’re certain to trust. It means you don’t wait until your finances line up perfectly to give. You walk before you see. Let’s look at one more example. In Acts 9, Saul, who later became Paul, was traveling to Damascus while persecuting Christians when, suddenly, a blinding light stopped him. Jesus spoke directly to him, and Saul was blinded. God then instructed a man named Ananias to go and pray for Saul and restore his sight. Ananias was hesitant because he knew Saul’s reputation for harming believers. Despite his doubts and without any guarantees, Ananias obeyed and went to Saul. He stepped out in faith before knowing the outcome. That single act of obedience set the stage for Paul’s powerful ministry and the writing of much of the New Testament. So, let me ask you… Where is God asking you to walk, before you see? To step into a calling that scares you? To give up something you’ve leaned on for security? To trust Him with your finances? To forgive someone you haven’t gotten an apology from? Whatever it is, I want you to hear this. You don’t have to see the outcome to take the next step. You don’t have to understand the entire path to move forward in obedience. Faith walks before it sees. That’s where the miracles are. That’s where the provision is. That’s where peace is waiting. Your comfort zone won’t get you there. But your obedience will. God doesn’t need your full understanding. He needs your full surrender. So today, let this be your reminder… You don’t have to feel brave. You just have to follow. Even in the fog. Even in the unknown. Even when it doesn’t make sense. Because God is already in the place He’s calling you to. He’s gone ahead. He’s prepared the way. He’s waiting at your next step. So, take it. Because faith? It always walks before it sees.