On March 27, 2020 President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) into law.  As a result there are multiple avenues of relief available to small businesses (including nonprofit organizations that are tax-exempt under Section 501(c)(3)) through programs administered by the Small Business Administration (SBA).  One of the primary benefits is that part, or all, of the loans may qualify for forgiveness and will not be considered income to the taxpayer.

The SBA has 30 days to issue regulations implementing and providing guidance under certain provisions of the CARES Act.

HBC continues to monitor and advise on new issues as they develop.  As of today, below are highlights of the provisions (however this list is not all inclusive):

Economic Injury Disaster Loan Program (EIDL)

Note: All 50 states have been declared disaster areas for purposes of the EIDL Program effective January 31, 2020 to cover economic injury resulting from the disaster

• EIDL Loans are available in a maximum amount of $2 million, carry an interest rate of 3.75% and have a maximum term of 30 years
• Loans exceeding $200,000 must be guaranteed by any owner having a 20% or more interest in the applicant
• Applicant my request an expedited disbursement that is to be paid within 3 days of the request, not to exceed $10,000, and must be used for authorized costs but is otherwise not repayable if the EIDL Loan is not approved

Paycheck Protection Program

• Loans are available up to $10 million to qualified small businesses (including qualified nonprofit organizations).  The loans are intended to be forgiven if the borrower maintains employees and otherwise complies with the CARES Act.
• Sole proprietorships and self-employed individuals may qualify under this program.
• The maximum amount of the loan is set by formula (average monthly payroll prior to the COVID-19 pandemic times 2.5 PLUS the amount of any other debt approved for refinance, including any debt incurred as a result of COVID-19 under the EIDL program
• Applicant must have been in business on February 15, 2020 and had employees and paid salaries or had independent contractors and filed 1099-Misc for them.
• Payments deferred for 6 to 12 months
• Amounts not forgiven payable over term not to exceed 10 years
• Maximum interest rate of 4% (for amounts unforgiven)
• Loans fees may be waived, no collateral required, no prepayment penalties
• Funds must be used to keep workers and make payroll, mortgage payments or rent/lease payments and utilities

Loan Forgiveness Provisions

• Loan forgiveness will equal the amount spent in the 8 week period following the loan origination date
• Eligible costs include:
  • Payroll (not to exceed $100,000 of annualized compensation per employee)
  • Interest payments on mortgage loan incurred prior to 2/15/20
  • Payment of rent or lease in force prior to 2/15/20
  • Payment on any utility for which service began before 2/15/20

For specific guidance or more information, contact us to schedule an appointment.

The Internal Revenue Service has announced that tax payments due by April 15, 2020 may be deferred, without penalty or interest, to July 15, 2020. The following schedule highlights what this means if you owe tax with your 2019 tax return or you are submitting estimated payments for the 2020 calendar year.

July 15, 2020          Your 2nd quarter 2020 estimated payment is due

July 15, 2020           File your tax return or submit an extension to file. Your 2019 tax payment is due.

July 15, 2020           Your 1st quarter 2020 estimated payment is due

This will include personal as well as corporate tax payments. Certain limitations apply based upon the amount of the tax payments. (Up to $1 million for individuals and $10 million for corporations)

The federal tax filing deadline has moved from April 15 to July 15. Virginia tax department has issued the below announcement. We will update other relevant state filing information as it becomes available.

The Virginia Department of Tax announced that any income tax payments due during the period from April 1, 2020, to June 1, 2020, can now be submitted at any time on or before June 1, 2020, without penalty. As a result, Virginia Tax will automatically waive any late payment penalties that would otherwise apply so long as full payment is made by June 1, 2020. If full payment of the amount owed during the period is not made by June 1, 2020, this penalty waiver will not apply, and late payment penalties will accrue from the original date that the payment was due. Interest will continue to accrue from the original due date of such payment.  Taxes eligible for this payment extension and penalty waiver include individual, corporate, and fiduciary income taxes, as well as any estimated income tax payments that are required to be paid to Virginia Tax during this period.

Please note that this does not provide a filing extension. To avoid any late filing penalties that may apply, taxpayers that utilize the aforementioned payment extension are still required to file income tax returns by the relevant due dates. However, if you are unable to file by such due dates, Virginia offers automatic filing extensions to all taxpayers for up to 6 months (or 7 months in the case of certain corporations). No application is required to file on extension.