Summary of Emergency legislation enacted in 2020

The below email was sent to our clients as the fourth email to keep our clients up to date on the new emergency legislation enacted due to Covid-19.  It was posted to our blog just before 10 PM on Thursday April 2nd.

April 2, 2020

This is the 4th email blast to our clients discussing the emergency legislation that was passed.  This should be the last email of this type unless Congress passes new emergency legislation that affects a large number of our clients, and this is possible.

This is the email discussing the new emergency loan provisions for small businesses enacted by Congress and the new rules for sick pay and the family medical leave act for small businesses.  This email is mostly for those businesses that have chosen the 2nd path: to keep their employees on payroll.

We fully expect and want our clients to contact us regarding this email, and we hope to spend a lot of time working with our clients on the items discussed in this email.  That being said, we need everyone to understand several things:

Please contact your CPA via email and let us know when and how to reach you.

There is only so much time in the day, and we are already working as much as we can.  The best way to contact us is via email, and you should expect our response times to be significantly longer than usual.

The Government is changing the rules on these programs every day.  Today, a new application form was distributed along with new regulations.  By the time you read this email, the rules have likely changed at least once.  Due to this, we have minimized the details in the email since we know many things are going to change in the next few days.

We will not be able to work on tax returns very much in the next 3 or 4 weeks due to all of this new legislation, and we will be doing many income tax returns in May and June since the deadlines for those returns has been extended to July 15, 2020.  We have no choice but to do this due to all of the new work we have to d0 to comply with this new legislation.

We will start by discussing some tax changes that will affect all of our clients:

You can take up to $100,000 from a retirement plan in 2020 without being subject to the 10% early withdrawal penalty.  Note the withdrawal is still subject to all income taxes.  That being said, those income taxes can be spread over three years.

If you have a loan against your retirement plan of up to $100,000, you can defer payments for one year.

Required minimum distributions are suspended for 2020.

The amount of charitable donations you can deduct on your 2020 income tax returns has been increased dramatically to 100% on income on individual returns and 25% of income for C Corporations.

Losses incurred in 2018, 2019, or 2020 can be carried back for up to five years.

15- year qualified improvement property can now be expensed immediately.

There is a provision that allows the employer portion of social security taxes for the rest of 2020 to be deferred, so half is payable on 12/31/21, and the other half is payable on 12/31/2022.  This is a terrible idea, and we do not want to do this for any of our clients unless the circumstances genuinely warrant it.

Self-Employed people will have the same option on their 1040, and this is just as bad of an idea; however, this one would at least be easier to track.

Not all of our clients need to read the rest of this email.  You should read the rest of this long email if you are a small business, a not-for-profit, or an individual who is self-employed or are an independent contractor and paid via a 1099.

This email is split into several sections with the most critical parts in the beginning.  If the rest of this email applies to you, we put in a procedure we want you to follow when considering these options, and your CPA can go through this with you; just send your CPA an email and give us plenty of time to respond.

Paycheck Protection Program (PPP)

This is going to affect a lot of our business clients, and it is an essential part of this email by far.  $349 Billion of loans have been authorized for small businesses under this program.  This program is capped and is first-come, first-serve.  Note they think there are six million people who can apply, so this is an average $58,333 per application.  Most experts believe the program will fill up, and that is why it is essential to apply relatively quickly.

In general, these loans will be forgiven as long as the loans are used to cover payroll costs, including benefits, mortgage interest on loans incurred before 2/15/2020, rent under lease agreements in force before 2/15/20, and utility costs in force before 2/15/20.  To be forgiven, these costs must occur over the eight weeks starting the day the loan is approved AND full-time employee numbers and compensation levels must be maintained at prior-year levels.

This program is designed to cover payroll costs, and not more than 25% of the forgiven cost may be for non-payroll expenses.  Payroll costs are capped at $100,000 on an annualized basis for each employee or contractor.

The loans are handled by the Small Business Administration (SBA) approved lenders.  You can apply with the SBA approved lender as follows:

Friday, April 3, 2020, small businesses and sole proprietorships may apply.

Friday, April 10, 2020, independent contractors and self-employed individuals can


This is yet another program that Congress has mandated, and they want the money in the hands of businesses in days.  That being said, the Small Business Administration (SBA) and the banks responsible for the loans are working hard to try and interpret the rules, and the rules are changing every day.  No kidding, the worksheets we looked at two days ago are different today.  No kidding, the main application form changed significantly on Thursday, the day before it is to be submitted, and the day this email was written.

You will need to submit applications through SBA approved lenders.  There are a lot of local lenders who you can use, including 1st Source Bank, Lake City Bank, Horizon Bank, PNC, and Chase.

The Banks are nervous about these loans right now, and they are working with the SBA to clarify the rules in writing.  The banks are making less on these loans than they make on average loans, and as such, they are trying to ensure they do not get burned on the loans when many businesses default on the loans.

The banks are not earning much on these loans, and the banks are not as interested in making these loans for this reason.  The banks are going to apply additional rules to keep them from getting burned by businesses that go under.  There is a long list of agents business owners can hire who will, in turn, prepare the loan applications for the company, and this list includes CPAs.  At SBS CPA Group, we are not bankers, and we will assist our clients who are filling out their forms; however, we will not fill in and submit anyone’s forms.  Note if an agent does this form for you, they get some of the loan fees, and the bankers get less in loan fees.  There is already tension between some of the agents and the banks, and we are pretty sure that many banks will not accept forms from agents because they do not want to split the fees.

We will help you fill out the forms by answering your questions and providing you data, and we will just charge you for our time, and we consider this a high-end consulting engagement.

We talked to three different local bankers with three different banks in the last 36 hours, and all three told us:

They hope to accept applications Friday, April 3; however, they are not sure that they will be able to, and they have no idea how long they will take to go through the information and submit them to the SBA.

At least, in the beginning, they are only going to do these types of loans for existing clients they know and have a banking relationship with since at least February 15, 2020.

What all of this means is you need to talk to your current banker quickly, and your current banker will need to take the lead on these loans with you.  Please do not be surprised if your banker is overwhelmed with this and everyone is going to need to be patient.  I honestly expect the banks to have a lot of people working this weekend; otherwise, the bank does not want these loans.

There are a lot of summaries of these laws you can read, and since they are changing so often, we are just going to hit the high-level details here:

The application form is likely to be four pages long and straightforward for you to fill out.  You may well need us to help you calculate payroll costs that have specific rules and determine the maximum size of the loan.  We have already developed a spreadsheet to handle this.  Note this changed in the last few hours because now the application form both has a place where the applicant fills in the data; however, says explicitly, the lending bank will calculate the maximum loan amount.  We think this may mean the data is put on the form by the applicant and then verified by the lender.

Most banks are going to have an additional 2-4-page form you fill out as well.  These will vary by bank.  We looked at one already, and this form precludes anyone from filling out the form and submitting it other than the owners or managers of the company.  This bank is not accepting any applications from agents because they want the fees for themselves,

Each bank is going to require certain documents to be attached.  We have looked at the list of documents from three different local banks, and all three lists are significantly different.  If you need copies of forms from us, please email your CPA the exact list of documents the bank needs from you, and we will not send you documents until you send us the specific form you received from your bank; otherwise, a lot of time will be wasted, and we do not have that time right now to waste.   It looks like they will only be wanting various payroll tax forms and payroll reports and will not be asking for income tax returns, and that is good news.

It is more complicated than this; however, roughly speaking, you can borrow 20.833 percent of your annual payroll and employer-paid health insurance.  It is more complicated than this; however, this gets you in the ballpark.

As long as you follow the rules of the loan program and turn in documentation to support your expenses, some or all of the loan will be forgiven.

Remember, this loan is primarily for companies who are keeping employees on payroll rather than laying them off and putting them into the unemployment system.

Expenses that can be forgiven if the money is spent in the first eight weeks (beginning on the date the loan is accepted) and the proper documentation is turned into the SBA and approved by the SBA are:

Actual payroll costs for your employees, and this does not include the employer portion of Social Security and Medicare taxes.  Based on our interpretation of the current rules, the maximum you can pay any employee or contractor in the eight weeks is $15,384.

Group Health Insurance portion paid by Employer only

Rent if a lease agreement is dated 2/15/20 or before.

Mortgage INTEREST (not principal) if the mortgage is dated 2/15/20 or before.

Utilities for which service began before 2/15/2020. For facilities in place since 2/15/20.

75% or more of the forgiven expenses must specifically be for payroll.  Remember the point of this program is you must keep the same number of full-time employees on staff and pay them similar to before (there are specific rules).

On current application form (It may change again in the next 24 hours):

You must certify in writing that: “Current economic uncertainty makes this loan request necessary to support the ongoing operations of the Applicant.”   It will be interesting to see how this is interpreted.

The funds will be used to retain workers and maintain payroll or make mortgage payments, lease payments, and utility payments, and you must provide specific proof regarding these payments, if funds are used for any other purpose the government can pursue fraud charges.

You can only get one loan under this unique program.

This part is a significant change in the last few hours.  You have to acknowledge that the lender will calculate the available loan amount using payroll tax documents you have submitted, and you must verify these are the same documents you submitted to the IRS.  It could take the bank a long time to verify these items before they submit your application.

The loan itself is a two to ten-year loan with payments deferred for the first six- to twelve months.  These rules keep changing as well, so clarify with your banker.   In some places, it says the interest rate is .5%, and in other places it says the interest rate is 4%.  Please discuss this with your banker.

This program is an excellent program for many of our clients; however, it has been rushed through, and the rules are changing significantly every day.

Note that if you already took out an Economic Injury Disaster Loan, you can refinance this loan into a Paycheck Protection Program (PPP) loan, discuss it with your banker.

If you took a payroll tax credit for paying qualified sick and family leave pay, those wages are excluded from the PPP.   You cannot double dip with these programs.

Unusual things about these loans:

Almost no documentation is required to be provided to the lender.  You do NOT need income tax returns, financial statements, etc.  All you need are payroll forms and payroll summary and benefit summary information.

No collateral is required.

There is no personal guarantee.

You need to certify as part of the application:

Current economic conditions make the loan necessary to support your ongoing operations.  This will be interesting to see how they interpret this one sentence.

Funds will be used only to retain workers, maintain payroll, or to make mortgage, lease, and utility payments.

You will only apply for this type of loan once.

You agree to provide proof of payroll, mortgage, rent, and utility costs to the lender for the eight weeks after getting the loan.

You verify all is correct.

Please understand you need to contact your bank to get the process started.  Please understand your CPA can help you with this.

Economic Injury Disaster Loan (EIDL) Program.

We are not SBA loan experts, and you need to rely on the information your banker and the SBA  provides. You can and should use the Small Business Development Center (SBDC) in Indiana for more details.  You can reach the Indiana SBDC at

The SBA grants these loans at

This is a more substantial application process.  Business must have been in operation on 2/15/2020.  The maximum loan is two million dollars.  They provide you an advance of $10,000 within three days of the SBA accepting your loan application, and you may not have to repay this advance.  The loan will be for thirty years or less.  The first payment is due one year from note signing. The maximum interest rate is 3.75%.  Loan is for up to six months of working capital, and there are specific rules for what you can spend it on.  You cannot obtain a PPP and an EIDL loan for the same purpose. They are primarily based on credit score.  Loans for $25,000 or less are unsecured. Standard collateral rules apply to loans above $25,000.

If you apply for this type of loan, your 2019 business income tax returns will need to be filed.  If you are using for this type of loan, please let us know, and we will prioritize finishing your 2019 business income tax returns. 

Families First Coronavirus Response Act (FFCRA)

This is the second stimulus bill.  Each Employer is required to post a poster in their workplace, informing their employees about these rules.  You can obtain these posters online.

The Families First Coronavirus Response Act (FFCRA) requires certain employers to provide their employees with paid sick leave and expanded family and medical leave for specified reasons related to COVID-19. These provisions will apply from April 1, 2020, through December 31, 2020.

PAID LEAVE ENTITLEMENTS Generally, employers covered under the Act must provide employees: Up to two weeks (80 hours, or a part-time employee’s two-week equivalent) of paid sick leave based on the higher of their regular rate of pay, or the applicable state or federal minimum wage, paid at • 100% for qualifying reasons #1-3 below, up to $511 daily and $5,110 total; • 2/3 for qualifying purposes #4 and 6 below, up to $200 daily and $2,000 total; and • Up to 12 weeks of paid sick leave and expanded family and medical leave paid at 2/3 for qualifying reason #5 below for up to $200 daily and $12,000 total.  A part-time employee is eligible for leave for the number of hours that the employee is typically scheduled to work over that period.

ELIGIBLE EMPLOYEES In general, employees of private-sector employers with fewer than 500 employees, and specific public sector employers, are eligible for up to two weeks of fully or partially paid sick leave for COVID-19 related reasons (see below). Employees who have been employed for at least 30 days before their leave request may be eligible for up to an additional ten weeks of partially paid expanded family and medical leave for reason #5 below.

QUALIFYING REASONS FOR LEAVE RELATED TO COVID-19 An employee is entitled to take leave related to COVID-19 if the employee is unable to work, including unable to telework, because the employee:

  1. is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. has been advised by a health care provider to self-quarantine related to COVID-19;
  3. is experiencing COVID-19 symptoms and is seeking a medical diagnosis;
  4. is caring for an individual subject to an order described in (1) or self-quarantine as described in (2);
  5. is caring for his or her child whose school or place of care is closed (or child care provider is unavailable) due to COVID-19 related reasons; or
  6. is experiencing any other substantially-similar condition specified by the U.S. Department of Health and Human Services.

Employers will receive a 100% payroll tax credit, including for Employer-paid health insurance benefits. This tax credit is taken as a credit against 941 taxes paid.  You can also file a form 7200 with the IRS and ask for the money upfront; we have no idea how long this would take the IRS to process.  In the end, this tax credit will make the employer whole for roughly 92% of the employers’ total payroll cost.

Some self-employed individuals will qualify, and these details have not been provided.

An employer can receive tax credits for qualified leave under both the FFCRA and the ERC; however, you cannot get more than one credit for the same wages.  No double-dipping.

An employer cannot use the same wages for the FFCRA and the PPP.  No double-dipping.

SBA Bridge Loan Program

We are not SBA loan experts, and you need to rely on the information your banker and the SBA provides. You can and should use the Small Business Development Center (SBDC) in Indiana for more details.  You can reach the Indiana SBDC at

You apply for this through your bank.  It is a short-term bridge loan to hold you over while you are applying for other emergency loans.  This is a more substantial application process.  The maximum loan amount is $25,000.  In many cases, the first six payments will be made by the SBA.

These loans have a much higher interest rate of 6.5% plus prime.  There are bank fees on these loans.  Underwritten by banks and based on their criteria.  There will be personal guarantees on these loans.

Employee Retention Credit (ERC)

You can only apply for this payroll tax credit if you experience a decrease in gross receipts of 50% in a calendar quarter.   This credit runs from 3/12/2020 through 12/31/2020.  You compare each quarter of 2020 to the corresponding quarter of 2019.  Once you start using this payroll tax

Credit, you are no longer eligible the quarter when your gross receipts go up to 80% of the prior quarter.

This payroll tax credit will be for 50% of wages, including the employer portion of health insurance.  It is capped at a credit of $5,000 per employee on $10,000 of wages per employee.

This tax credit is taken as a credit against 941 taxes paid.  You can also file a form 7200 with the IRS and ask for the money upfront; we have no idea how long this would take the IRS to process.

This is not available to self-employed people.

An employer can receive tax credits for qualified leave under both the FFCRA and the ERC; however, you cannot get more than one credit for the same wages.  No double-dipping.

An employer cannot receive an ERC credit and a PPP loan for the same wages since they cannot double-dip.

This is a lot to digest for both you and us.  These rules change every day.  We ask our business clients to do the following:

First, read the email at least twice.  There is a lot of information in it.

Second, do some research on the internet about the options you are considering.  Some good places to look include:

The IRS          The Internal Revenue Service (IRS) has a page with links to Coronavirus related items.

The SBA         The Small Business Administration (SBA) has a page with links to

Coronavirus related items

Third, if you want our assistance in discussing your options with you, please send your CPA an email on Friday, April 3, or later, and in the subject line, please write, “Can we discuss my business options?”  In this email, please list your phone number and availability on Friday, April 3 through Monday, April 6, 2020.  Please give us information on what your current business operations are, if you have laid anyone off, and what options you want to discuss.  Please give us some information on your personal and business current financial situation.    We will be doing firmwide training on all three large emails we sent you to ensure our CPA’s are all on the same page from 9 AM until at least 10:30 AM on Friday, April 3, 2020.  We will try to get back to as many of you as we can by Monday, April 6, by the end of the day.  We will be responding to emails with phone calls this weekend for sure.  Please remember the rules change every day.

Fourth after we talk, you will have an action plan, and you can pursue various items with your banker if you are applying for a loan.

Lastly, please realize that no one knows how long this virus will last.  We will assume the lockdown orders end between May 1 and June 30 unless you want us to use another assumption because that is what we believe based on current CDC models.

We have spent a lot of time and effort (Mike alone has 35 hours into researching this legislation so far), so we can give you good advice.  Please be patient with us, and please realize many tax returns will be completed in May and June so we can prioritize helping our clients get loans and doing the payroll and payroll taxes as well as tangible business personal property taxes that must be done before the income tax deadlines of July 15, 2020.

Please be patient with us because we are honestly totally overwhelmed.

Two last of examples of how fast the rules are changing:

The stimulus rules were written and Congress specified that people on Social Security would not have to file an income tax return if they were below the filing limits.  On Monday we explained that in an email to you.  On Wednesday the IRS announced all of those people would have to file 2019 income tax returns.  Then today the IRS changed course and said that no those people actually do not have to file 2019 income tax returns to get the stimulus payments.

Mike wrote this email over a 24-hour period and finished at 18:30 on Thursday.  Brent and Karena proof read it over the next two and a half hours.  During that time there were a large number of news stories that most of America’s big banks were going to completely backout of the PPP because they were not going to make enough money off of the loans, because the SBA was not clarifying the rules, and because the rules change each and every day.  At 18:00 today The Secretary of the Treasury announced that even though Congress stipulated a .5% interest rate on the PPP loans he was immediately changing the rules so the interest rate would go up to at least 1% to make the banks happy and to try to get the banks to participate in the program tomorrow.

There is no doubt the rules are going to change again tomorrow (Friday).



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