I am continuing to get a large number of inquiries from clients regarding the government programs designed to help us through the current crisis and figured it might be helpful to share some information with you, as well as some new information regarding a SALT fix for small businesses in NJ. Here is the latest:
Paycheck Protection Program (PPP): This is the federal program administered by the Small Business Administration (SBA) designed to help eligible businesses cover costs such as payroll, rent, utilities and certain other costs for a period of 2.5 months. The loan can be converted to a grant (that does not have to be repaid!) as long as you use the funds for the intended purposes . On April 23, Congress passed a new $484 billion corona-virus relief bill that includes more than $320 billion in additional funds for the PPP, which had come close to running out of funds. So if you were in the process of applying and became discouraged or were discouraged by your bank because the program was “out of money”, I implore you to pursue your lender and complete the application process to secure your spot in line ASAP. This program is on a first come- first serve basis. If you have not yet begun the application process – start right now! Contact me on my cell phone (732-822-6890) if you need help competing the forms, obtaining the required documentation, or making the necessary calculations. I am here for you!
Stimulus Payments: This refers to the $1200 per person, and additional $500 per child, payments that are being delivered by the IRS or (for Social Security recipients) the Social Security Administration. The payments will not be considered taxable income on your 2020 personal tax returns. You do not have to do anything to secure your payment unless you do not file a tax return in which case you should go to www.irs.gov/coronavirus/non-filers-enter-payment-info-here. To check the status of your payment, or enter information regarding your banking information to get the payment faster go to www.irs.gov/coronavirus/get-my-payment.
Electronic payments to taxpayers for whom the IRS has banking information on file are going out now. Social Security recipients can expect to see payments go out in early May, Taxpayers for whom the IRS does not have banking information and have adjusted gross income (AGI) under $10,000 can expect to get checks in the mail beginning April 24, with the maximum AGI increasing by $10,000 each week until September 4, when married taxpayers with AGI up to $198,000 can expect to receive their checks. This schedule is subject to change at any time.
Unfortunately this program has been plagued by kinks and inefficiencies that have caused delays. Hybrid situations (for example where one person gets social security and the other does not) are anybody’s guess.
Pass-Through Business Alternative Income Tax Act: This is not a corona-virus relief measure but is instead a State of NJ act that allows the owners of certain pass-through businesses such as S-Corporations, Partnerships and Multi-member LLC’s some relief from the federal SALT tax deduction limitation that is hitting NJ taxpayers, who already contribute proportionately more to the federal tax coffers than any other state, so hard. Basically, it will allow certain pass-through entities to pay the NJ Gross Income Tax normally paid personally by the owners. Since state income taxes paid are still a 100% allowable deduction on business tax returns, this will reduce the profit of the company that is passed on to the owners and subject to federal income tax on the owners personal return. The effect is to give the company owners a full deduction for the portion of state income taxes paid on the profits of the company and partially bypass the SALT limitation on Schedule A of the personal tax return. Of course there are a variety of rules and restrictions, so contact me if you think this may apply to you and your business.
I help clients reduce taxes, increase profitability, meet reporting requirements and save valuable time. Contact me to find out how!
