Covid-19 Economic Relief Talks Have StalledPosted on August 12th, 2020
Congress Has Failed to Pass Any New Economic Relief,
A Few Executive Orders to Update You On Instead
I’ve been holding off on sending you an update this week, in hopes that some kind of miracle agreement would get done, but those hopes are fading, so I figure I’ll give you a status update on where things stand right now, as of Wednesday at Noon, August 12, 2020.
Last week, Congress did not get a deal done, on what most people were calling “CARES Act 2.0”, a proposed next phase of economic stimulus. IN short, the Democrats have the HEROES Act, and Republicans have the HEALS Act, and there are/were lots of good things in both of those, but the bills were so far apart that it isn’t even worth reconciling the 2 plans to come up with one agreeable piece of legislation. So they have gone on vacation for a month, with nothing passed. Both sides have invited the other back to the table, but neither wants to make the first move. So our government plays the ultimate game of chicken, while small business owners go broke, and American families struggle to pay the mortgage, rent, and put food on the table. This is the disaster within the disaster.
It is still possible they all come to their senses and get a deal done, but for now here is what the “no deal” means for us:
- No 2nd round of stimulus checks
- No extension of the $600/week Federal unemployment benefits
- No 2nd round of PPP Forgivable Loans
- No ability to apply for “missed” PPP round one dollars, for those who borrowed less than they ended up qualifying for
- No extension of PPP Round 1 applications from Aug 8 to Dec 31, so $130B of approved funds went un-lent
- No automatic forgiveness of PPP Loans under $150K
- No expanded Employee Retention Credit (ERTC)
- No tax credit for purchases of protective equipment and cleaning costs
That list is painful to type, so I hope a deal eventually does get done. In the meantime, we can’t just sit around waiting for the government to help. Business owners have some serious decisions to make. The name of the game right now is to find a way to make money. If that means you have to scrap your existing business, or make serious changes to your business plan, so be it. There’s no glamour in being the captain of a ship if it is sinking.
Meanwhile, a few executive orders were signed by the president, here is a quick summary of those:
Federal Additional Unemployment Benefits Assistance
- Federal weekly benefit reduced from $600/week to $300/week.
- If your calculated state benefit is less than $100/week, your Federal weekly benefit is reduced from $600/week to $0/week.
- This requires a new program to be setup in each state in order to administer, so it can be weeks or months before payments re-start.
- Extension of weekly payments runs through Dec 6, 2020, or when the $45B of re-allocated FEMA money for this program runs out, whichever occurs first.
- Please remember that unemployment compensation is taxable income, and remember to withhold Federal and State income taxes accordingly.
Employee Payroll Tax Deferral
- Applies to W-2 employees earning less than $4,000 bi-weekly. This would equate to anyone earning a salary of $104,000 per year.
- Deferral period starts Sept 1, and runs through Dec 31, 2020.
- Employee portion of Social Security tax will be deferred (6.2% of their paycheck).
- Deferred amount must be repaid in January 2021, or possibly on the employee’s tax year 2020 Form 1040 tax return. No idea yet on how this will be administered.
- The Treasury Dept has been tasked with issuing guidance on how to implement the program. Based on the magnitude of questions from tax experts, payroll companies, and employers, this guidance will need to be quite lengthy.
- Many employers, and/or employees, prefer not to participate (ok, almost all), so we are trying to determine if participation will be optional or mandatory, and at the employee level, or at the company level. Stay tuned. Not many people want a big tax bill later, for the temporary use of the deferred money.
- There is a possibility the deferred amount will be forgiven! That would require an act of Congress. The forgiveness was presented as being contingent on re-election, in which case a promise was made to forgive the repayment of the deferred amount, as well as make this temporary payroll tax deferral, a permanent payroll tax cut, which I believe would essentially cancel the Social Security program. Obviously, there is a lot of speculation and concern about this particular point right now.