Diversity Development Announcement
Corona Virus Resources
Does your small business need financial assistance as a result of the coronavirus pandemic? If so, one of the biggest federal initiatives for small businesses is the Paycheck Protection Program.
Paycheck Protection Program (PPP)
This program provides forgivable loans to small businesses to help cover up to eight weeks of payroll costs, interest on mortgages, rent, and utilities. PPP is a small business relief measure established under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). It incentivizes businesses to retain employees on payroll.
The recent PPP program has been refunded. To apply go to: https://disasterloan.sba.gov/ela/
This announcement provides preliminary information regarding the resources available to small businesses.
What can employers use PPP funds for?
- Payroll costs for full-time and part-time employees
- Salaries, wages, commissions, or tips ($100,000 max per employee—gross earnings)
- Employee benefits (e.g., vacation, sick leave, health care benefits, retirement benefits)
- State and local taxes
- Interest on mortgages (incurred before February 15, 2020)
- Rent (under lease agreements pre-February 15, 2020)
- Utilities (if service began before February 15, 2020)
Note: Independent contractors do not count as employees. Do not include their payments when calculating your payroll costs.
Keep in mind that funds are limited. PPP loans are first come, first served. You can only take out one loan.
This payroll protection program previously distributed up to $349 billion in loans. The U.S. Department of the Treasury encourages businesses to apply quickly for the next round—before the funds are exhausted. Note, it will take bank lenders time to process applications, meaning you won’t receive funds instantaneously.
- Resources from the MMCA
Are You an Independent Contractor (IC)?
Learn about resources available to (ICs) impacted by the coronavirus (COVID-19) pandemic
You are an independent contractor if you do work without the direction and control of an employer and you have your own independent business or trade.
Each new day in this shutdown brings dozens of new stop-work orders on contracts. When contracts are stopped, the companies that hold those contracts—and therefore the personnel they employ or subcontract to execute them—are not paid. Regardless of the cause, the majority of contractors will receive no back compensation, According to the finance journal Bloomberg, the shutdown could be costing contractors $200 million per day, or almost $1.5 billion per week, and as funded revenue dries up, those numbers will compound.
"Each day, we’re getting more and more stop-work orders,” said David Berteau, president and chief executive officer of the Professional Services Council. PSC represents some 400 government technology and professional services companies.
Here is a guide to help you. This is available to the nation’s independent contractors.
- You Can Collect Unemployment Benefits
Ordinarily, independent contractors can’t collect unemployment from their state unemployment insurance agency when they are out of work. This is because they are not employees and ordinarily do not pay unemployment taxes.
However, the Coronavirus Aid, Response, and Economic Security Act (CARES Act) passed by Congress makes independent contractors and gig workers eligible for unemployment for the first time. The CARES Act Pandemic Unemployment Assistance (PUA) program also increases the maximum unemployment benefit by $600 per week through July 31 and extends coverage by an additional 13 weeks, to a maximum of 39 weeks. You need to apply through your state unemployment office. Each state has its own eligibility requirements, benefit amounts, and application procedures. You can find a link to the MA. unemployment office at the Unemployment Benefits Finder.
- Sick and Family Leave Tax Credits for the Self-Employed
Congress has enacted the "Families First Coronavirus Response Act" which includes special sick leave and family leave tax credits for the self-employed. You can qualify for the sick leave credit if you have to self-isolate, are experiencing symptoms and need to obtain a diagnosis, or to comply with a self-isolation recommendation for coronavirus. You qualify for the family leave credit if you have to care for a son or daughter under 18 years of age whose school or place of care has been closed due to coronavirus.
The sick leave credit is equal to 100% of the average net self-employment income you earn per day for a maximum of 10 days. The credit is capped at $510 per day.
The family leave credit is equal to 67% of the average self-employment income you earn per day for a maximum of 50 days. But the credit is capped at $200 per day. Thus, the maximum credit is $10,000.
To calculate the credit, you must determine your average daily net self-employment income. To do so, divide your total 2020 net self-employment income by 260. For example, if your 2020 net self-employment income is $70,000, your daily self-employment income is $269. Your sick pay credit is a maximum of 10 days x $269 = $2,690. Your family leave credit is $200 per day for up to a maximum of 50 days.
These credits are refundable, meaning you get the full amount even if you end up with a negative tax liability. For example, if you owe $1,000 in total taxes and qualify for a $2,500 credit, you won't have to pay any taxes and the IRS will send you a check for $1,500. The credits apply to both income and self-employment taxes (Social Security and Medicare tax).
You won't actually collect these credits until you file your 2020 taxes in 2021. But, if you qualify for either or both credits, you should reduce (or eliminate) your estimated tax payments to the IRS during 2020 to take the amount of your credit into account.
These highly innovative tax credits are a temporary measure that are only available for 2020.
The above data was collected and the information was prepared by:
Stephen Fishman, J.D.
- You Can Delay Your 2020 Tax Filing and Payments
The deadline to file and pay 2019 income taxes has been extended by 90 days. This means that you do not have to file your 2019 tax return or pay any 2019 taxes you owe until July 15, 2020. If you file an extension, you can delay filing your return until October 15, 2020; but you'll still be required to pay any 2019 tax you owe by July 15.
If you're owed a refund by the IRS, you should file your tax return as soon as possible. You won't get your refund until you file your 2019 tax return. The IRS is still processing refunds and says it takes about 21 days to get them (if there are no problems with your return).
Many self-employed people pay estimated taxes to the IRS four times per year. The first 2020 estimated tax payment for 2020 is ordinarily due on April 15. This deadline has also been extended to July 15. It’s expected that all or most states will follow the IRS and extend their tax filing and payment deadlines as well.
For more details, see Nolo’s article “IRS Extends 2019 Income Tax Payment Deadline In Response to Coronavirus.”
- You Can Delay 2020 Social Security Tax Payments
When you are a self-employed independent contractor, you must pay a 12.4% Social Security tax on up to $137,700 in net self-employment income for 2020. You ordinarily pay this tax as part of your quarterly estimated tax payments to the IRS. However, you may defer 50% of your 2020 Social Security taxes until the end of 2021 and 2022. If you choose to do this, you must pay 25% of the deferred amount by December 31, 2021 and 25% by December 31, 2022.
- You Can Obtain Affordable Care Act (ACA) Coverage in Many States
Health insurance is mandated for individuals in the state of MA. If you don’t have it, please check with your state health insurance exchange. You may be allowed to obtain Affordable Care Act (ACA) coverage through your state exchange right now. Several states are classifying the pandemic as a special enrollment event to allow uninsured state residents to obtain coverage. The states that have already done so include Massachusetts. Others may do so as well.
Depending on your income, you may qualify for tax credits to cover much of the cost of the health insurance premiums for yourself and your family, however, you can qualify for these credits only if you obtain your health insurance through your state exchange.
If you already have health insurance coverage through your state exchange and are paying premiums, you may qualify for premium tax credits or increased credits if you expect your 2020 income to decline. You must notify your exchange of your lower income. You can find a link to your state health insurance exchange at www.healthcare.gov.
- You Can Deduct Your Business Losses Against Other Income
If your business loses money, you can get a tax deduction. Congress has amended the tax law to make it much easier for all business owners, including independent contractors, to deduct net operating losses (NOLs). Under the new rules, you can deduct an NOL incurred in 2018 through 2020 against 100% of your other income for these years. NOLs incurred during 2018-2020 can be carried back five years to reduce taxes paid in those years. This can result in a quick tax refund from the IRS, a huge help in this time of economic stress. Unfortunately, you must wait until you file your 2020 tax return to carry back a NOL for 2020 to prior years. To obtain such a refund, you must file IRS Form 1045 or Form 1040X.
For more on deducting NOLs, see Nolo’s article “How to Deduct Business Losses and Net Operating Losses.”
- You Can Make Penalty-Free Retirement Account Withdrawals
If you’re under age 59.5 and have a tax qualified retirement plan, you can withdraw up to $100,00 in 2020 without having to pay the 10% early withdrawal penalty. But you will have to pay regular income tax on the withdrawal over three years unless you pay it back over that time period. Such withdrawals are allowed if you or a spouse or dependent get the coronavirus, or you experience adverse financial consequences as a result of being quarantined, furloughed, laid off, having work hours reduced, or being unable to work due to lack of child care. All retirement plans come under this rule, including IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, 401(k)s, pension plans, 457 plans and 403(b) plans.
If you have a 401(k) or 403(b) plan that permits you to take loans from your account, the amount you may borrow during 2020 has been increased from $50,000 to $100,000. No taxes are due on such a loan, but you must pay it back over five years and pay interest, which is currently 5.25%.
- You May Qualify for Low or No-Interest Loans
Even before the pandemic, there were many types of low-interest loans available to small businesses. These loan programs have been vastly expanded. For more information, see New SBA Loan Programs Offer COVID-19 Relief: Economic Injury Disaster Loan Program (EIDL) and the Paycheck Protection Program (PPP) for more information.
- SBA Economic Injury Disaster Loans
Congress has added millions in additional funds to the Small Business Administration’s Economic Injury Disaster Loans (EIDL) program. These loans are available up to $2 million and have a 3.75% interest rate. Payments can be deferred for up to four years. You can qualify for such loans if you need the money to pay for certain business expenses that you can’t pay due to the pandemic. You can also get an emergency grant of up to $10,000 while you apply for such a loan. You apply online with the Small Business Administration.
- Paycheck Protection Program
Congress has authorized a brand new loan program called the Paycheck Protection Program (PPP). You can borrow up to 2.5 times what you earned each month in 2019 as an independent contractor. These are two- year loans with a 0.5% interest rate. However, up to 80% of the loan can be forgiven if you use it for payroll, mortgage interest, and certain other expenses. You apply directly with participating banks and other lenders. The SBA has an online tool called Lender Match that helps you find lenders. Note that you may obtain both a disaster injury loan and a PPP loan.
- Other Loans and Grants
There will doubtless be low-interest loans available from many other sources as well. These include the states, local governments, and philanthropies. Grants—money you don’t have to pay back—are available as well.
- The CARES Act Works for All Americans
The CARES Act provides fast and direct economic assistance for American workers and families, small businesses, and preserves jobs for American industries.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act was passed by Congress with overwhelming, bipartisan support and signed into law by President Trump on March 27th, 2020. This over $2 trillion economic relief package delivers on the Trump Administration’s commitment to protecting the American people from the public health and economic impacts of COVID-19.
The CARES Act provides fast and direct economic assistance for American workers, families, and small businesses, and preserve jobs for our American industries.
Through Economic Impact Payments and other means, the Treasury Department is ensuring Americans are seeing direct and fast relief in the wake of the coronavirus pandemic.
The State's Pandemic Unemployment Assistance for self-employed (including 1099 contractors, gig workers, and those who earned too little to receive regular Unemployment Insurance benefits) is live today.
For more guidance, check out our Unemployment Insurance Guide.
- Other Help on the Way?
Mayor Walsh and the City of Boston are committed to helping small businesses during this unprecedented and uncertain time. Our team is working around the clock to answer your questions, update you on policies, and connect you with the right organizations for additional assistance.
Below you will find information on our small business conference call and office hours, as well as resources we have compiled, potential scams on small businesses and individuals around Federal resources, and guidance on Unemployment Assistance. For additional information, please visit boston.gov/econdev. For all City of Boston updates, please visit boston.gov/coronavirus.
Join: Small Business Conference Call & Office Hours
Please join tomorrow for a Small Business Conference Call at 3pm. Our team will be available to discuss policy and business operation updates, answer questions on business assistance, and inform the business community how the City of Boston is responding to COVID-19.
Audience Listen By Phone
Two 2-hour sessions will be hosted where you can call in at any time to ask questions, set up appointments to get support with applications, and get clarity on updates you’ve heard. Questions will be answered in the order they are received.
Friday April 24
9-11am OR 2-4pm
Join Hangouts Meet
PIN: 116 952 328#
Be On The Alert For Scams!
U.S. Small Business Association
The U.S. Small Business Administration is aware of potential scams on small business owners during this unprecedented time. Fraudsters have already begun targeting small business owners during these economically difficult times.
- SBA does not initiate contact on either 7a or Disaster loans or grants. If you are proactively contacted by someone claiming to be from the SBA, suspect fraud.
- If you are contacted by someone promising to get approval of an SBA loan, but requires any payment upfront or offers a high-interest bridge loan in the interim, suspect fraud.
- SBA limits the fees a broker can charge a borrower to 3% for loans $50,000 or less and 2% for loans $50,000 to $1,000,000 with an additional ¼% on amounts over $1,000,000. Any attempt to charge more than these fees is inappropriate.
- If you are in the process of applying for an SBA loan and receive email correspondence asking for PII, ensure that the referenced application number is consistent with the actual application number.
- Look out for phishing attacks/scams utilizing the SBA logo. These may be attempts to obtain your personally identifiable information (PII), to obtain personal banking access, or to install ransomware/malware on your computer.
- Any email communication from SBA will come from accounts ending with sba.gov.
- The presence of an SBA logo on a webpage does not guaranty the information is accurate or endorsed by SBA.
Please cross-reference any information you receive with information available at www.sba.gov. If you have a question about getting a SBA disaster loan, call 800-659-2955 or send an email to email@example.com. If you have questions about other SBA lending products, call SBA’s Answer Desk at 800-827-5722 or send an email to firstname.lastname@example.org. To learn more, please visit their website.
The IRS urges taxpayers to be on the lookout for scam artists trying to use the economic impact payments as cover for schemes to steal personal information and money. Remember, the IRS will not call, text you, email you or contact you on social media asking for personal or bank account information – even related to the economic impact payments. Also, watch out for emails with attachments or links claiming to have special information about economic impact payments or refunds. For more information, please visit their website.
BEWARE OF COUNTERFEIT CHECKS
Scammers may send fake stimulus checks. Signs of fraud include checks for an odd amount (a real check won’t include cents), or one that requires you to visit a website or call a number to confirm.
THINGS TO REMEMBER:
- Do not reply to texts or emails claiming that you can get your money faster by sending personal information or clicking on links that can infect your device with malware.
- Hang up immediately if you receive a call from a person claiming to be IRS agent, and/or asks you to "verify" personal information in order to receive your stimulus check or claim that you owe money and need to sign over your check.
- Hang up a call or delete an email immediately if you receive an unsolicited request from an individual claiming to represent a bank that requests account or social security information.
If the crisis grows more severe and economic conditions continue to deteriorate, both the federal and state government may provide additional help to the self-employed. Stay tuned!
-And stay safe!
Ronaldo Cheek, Principal
Post Office Box 190237
Boston, MA 02119