Lawmakers have approved up to $267.5 billion in additional Covid-19 stimulus funding for the Paycheck Protection Program for businesses struggling to meet payroll. Congress has also approved an additional $13.5 billion for the Economic Injury Disaster Loans program. For small businesses, these programs could mean the difference between survival and bankruptcy.
What does this mean for small business owners?
The Paycheck Protection Program (PPP) has been extended with an additional round of funding. The program is an SBA loan intended to provide incentives for small businesses to keep their workers employed. The funds will be made available to first-time borrowers. Previous recipients who experienced business closures or significant losses tied to the pandemic will also be eligible for loans.
The bill also calls for a continuation of the SBA’s Economic Injury Disaster Loan (EIDL) program. This loan program is intended to relieve small businesses currently experiencing a loss of revenue due to Covid-19. Where the PPP is intended to cover payroll, the EIDL is intended to provide working capital and cover normal operating expenses.
Many existing borrowers will be happy to see the new forgiveness protocols for the SBA Debt Relief program. They’re expected to dramatically ease the eligibility for the smallest debtors. Small businesses with loans of $150,000 or less will be required to submit a simplified forgiveness form to their lender.
One of the major additions is the tax clarifications under this bill. Many original borrowers complained that the tax-deductibility of forgiven PPP loans wasn’t made clear. Accountants and small business owners can rest easy now. The Paycheck Protection Program money does not count as taxable income. However, the IRS had originally declared that expenses paid for using PPP funds could not be counted as tax-deductible expenses. The ruling under the new stimulus bill is that the original intent of the Cares Act was that the payroll expenses paid using PPP funds are tax-deductible. Small businesses can now take the customary deductions, regardless of whether they used forgiven funds.
The additional stimulus checks to US citizens and the additional unemployment benefits cannot be overlooked either. With money in customers’ pockets, a portion of these funds will “trickle-up” to small businesses, as well.
Contact Certified Tax Solutions to learn more about the new clarifications and how they could benefit your tax planning this year. Founder, Robin Krowlewski, says, “We not only offer tax resolutions and income tax preparation but also tax planning. At Certified Tax Solutions, we enjoy helping our clients plan for current and future events that will affect their taxable income. Planning is the key to successfully reducing tax liabilities.”
Failing Businesses Need Aid
The importance of additional stimulus injected into the economy is hard to overstate. The U.S. Chamber of Commerce surveyed small businesses on the impact of Covid-19. More than 70 percent said they need more government aid to survive. Half of the small businesses polled said that under current conditions they could continue operations less than a year before shutting down.
Though the Small Business Administration’s COVID-19 Relief page has not been updated at the time of writing, you can monitor it for the new loan information updates here: