Stimulus Checks and SBA Funds for Small Business CARES Act

[Updated 4/13/20]

The CARES Act is a massive new law – long, complex, and full of relief programs to help small business and self employed individuals.

I’m going to highlight the primary grant and loan programs for small business.  This is my personal summary of the programs based on my current understanding.  I am attempting to get you the critical information while keeping it as simple(ish). Please note that this information is accurate as of the morning of April 2nd, when I’m writing it.

Some of the details are subject to change.  Since the Act was signed into law on March 27th, we have received updates, changes, clarifications, and corrections daily. I expect to see more and will keep you informed of the major items that I expect to impact many of our clients.

Also note that the SBA is overwhelmed with applications and completely bogged down trying to handle the current need (and I think we’re just getting started).  Although they promise quick processing and fast funding, so far I am not seeing it happen.  I do encourage you to use the program(s) that make sense for you, but also to be patient with the process and funding.

I hope this helps navigate these huge and confusing relief options.  We will be providing multiple ways to get more detailed or personalize questions answered in the near future.  Please watch our email newsletter for follow-up Q&A info, group Q&A sessions, and individual consultation options.

Thank you,



CARES Act – Stimulus Check

This relief funding has gotten the most media attention.  Here are the basics:

If you file single or head of household, and your (adjusted gross) income is less than $75,000, you will receive $1,200 plus $500 more per dependent.  If your income is $75,000 – $99,000, you will receive a smaller stimulus check.  If your income is over $99,000 you will not receive a check.

If you file married/joint, and your (adjusted gross) income is less than $150,000, you will receive $2,400 plus $500 more per dependent.  If your income is $150,000 – $198,000, you will receive a smaller stimulus check.  If your income is over $198,000 you will not receive a check.

The payment you will received is based on the income you reported on your most recently filed tax return (2019 or 2018 if you have not yet filed 2019.  However, this is considered an advanced payment of a tax credit on your 2020 tax return.

That means that if you receive the payment and then your 2020 income is higher than the limits above, you will pay back the stimulus payment with your 2020 tax filing.  The reverse is also true – if you do not qualify now, but in 2020 your income is reduced below the limits above, the stimulus payment will be added as a tax credit to your 2020 tax return.

There is some political pressure to change this and make it so no one would have to repay the stimulus payment.  However, as the law is currently written, the possibility of repayment exists.

If you owe back taxes or are on a payment plan with the IRS, you are still eligible for this stimulus payment.

If you are not required to file a tax return because you have only Social Security Income, you do not need to file to receive the stimulus payment.

The IRS will directly deposit your stimulus payment if they have your bank info.  The way they get your bank info is if your 2018 or 2019 tax return reports it for the purpose of receiving a direct deposit refund or paying tax via direct debit.  They also have your bank info if you are receiving direct deposit federal government benefits (such as Social Security).

There is no special form to give your bank info to the IRS.  If we are filing your return for you, we can only include your bank info if you are receiving a direct deposit refund or making a direct debit payment. We have no way to provide the bank info to the IRS without attaching it to your tax refund or payment.


CARES Act – SBA Grant & EIDL Loan

This is my favorite program available for relief right now and can help so many people.

This applies to you if two conditions apply:

  1. you own a small business, are self-employed (including sole proprietors and contract workers), own a rental property, are a cooperative, or are a nonprofit and
  2. if you are under a stay home order (or similar), have a financial loss due to Covid-19, or expect you might have a financial loss due to Covid-19.

The SBA Grant provides $10,000 of immediate relief.  This $10,000 acts like a grant, not a loan, and does not need to be repaid.  It is taxable income, so you will pay tax on it on your 2020 tax return.

The SBA EIDL (Emergency Injury Disaster Loan) Loan program provides a 3.75% loan of up to $2 million to meet your financial obligations. The SBA will make the first 6 months of loan payments for you, the remainder is your responsibility to repay. The term is to be determined (up to 30 years) for each loan approved.

The SBA Grant & EIDL Loan are two programs, but they are joined at the hip – there is just one application to submit for both combined. For example, if you apply and indicate that you will have $30,000 in financial impact to cover, the SBA will issue a $10,000 grant followed by a $20,000 loan.

A few important notes:

  • When applying, you must check the box indicating that you want the grant to apply to the beginning of the loan. If you do not check this box, you will be applying for the loan only and will not receive the grant.
  • The SBA refers to the $10,000 grant as a “loan advance,” however it does not need to be repaid, so I am referring to is as a (taxable) grant.
  • There is no pre-payment penalty.
  • There is no personal guarantee or other qualifications; approval is based on credit score. Additional documentation may be requested in the loan review process.
  • If you use this program, you can still qualify for the PPP Program (described in part 2) or refinance this loan into the PPP Program.
  • The application is very short and easy – the SBA info says it takes an hour and 10 minutes to complete, but it took me 20 minutes.
  • The application is online, directly with the SBA (not through a bank) here:


I love this program – it’s quick and easy to apply, includes $10,000 of grant funds that do not need to be repaid, and applies widely. I can see it benefiting at least 80% of our clients.

I do not see any reason not to apply for this grant if you meet the two criteria.


CARES Act – PPP “Paycheck” Loan

The PPP (Paycheck Protection Program) Loan program is the source of a lot of questions. The purpose of this loan is to help maintain our workforce, so it is incentivized to promote use to cover wages. Here are the basics:

  • This program is available to small businesses with employees and to self-employed individuals. (Below talks about wages – for self-employed folks, it’s all based on a calculation of average income.)
  • The loan amount is based on wages paid – the maximum loan amount is 2.5 times your average monthly wage cost (including medical insurance, retirement benefits, and state payroll taxes).
  • You can use the funds for wage costs (including employee medical insurance and retirement benefits), rent, mortgage interest, and utilities
  • You will get the most benefit out of this program by using the funds primarily for wages (at least 75%) and secondarily for rent and utilities – because these uses are tied to the loan being forgiven (details below).
  • This is a loan, you will need to repay any parts that are not forgiven. Interest is 1% and the term is 2 years. (The law allows for up to 10 years, but the SBA has decided to only allow 2 years.) The first 6 months there is no payment, but interest does accrue.  (The SBA is not paying the first 6 months for you like the EIDL loan, the payments just begin 6 months after the loan is approved).
  • There is no pre-payment penalty, no personal guarantee, no collateral, but a good dose of paperwork. Paperwork requirements include providing W-2s, 941s, documentation of certain expense payments, etc.
  • You can apply for both the SBA Grant/EIDL loan and this PPP Loan. You also may refinance the EIDL Loan into the PPP Loan program.
  • The loan application is made through an SBA participating bank. Be sure to understand the details of the loan with your bank as they likely have changed (at least a little) since we sent this newsletter.
  • To get the maximum value out of the loan and the maximum possible loan forgiveness, apply for this loan as soon as possible. The funding may run out due to massive demand, and loans are on a “first come, first serviced basis.”

The loan forgiveness portion of this program is very important. Here’s how it works.  After your loan is approved, the following 8 weeks is critical – this is when your spending is monitored – in particular, how much you spend on wages.

If you spend the same or more for wages than you did last year (i.e. you are maintaining your workforce), then your loan is eligible for full forgiveness. If your wage cost has decreased, then only a portion of your loan is eligible for forgiveness.

Government funds are limited for the forgiveness portion of this program, so even if you are eligible for full forgiveness because you are maintaining your workforce, there are other limitations that may apply.  The SBA is expecting to forgive the loan funds that were used for wages in full, but limit the loan forgiveness for rent & utilities to 25% of the loan funds. In other words, if you spend at least 75% of the loan funds for wages and the other 25% or less on rent and utilities, then you are may have full loan forgiveness. If some of your loan is not forgiven, , you will be required to pay it back like any other loan.

You will need to apply for the loan forgiveness through the bank that issued the loan (after the 8 weeks has passed).  It doesn’t happen automatically.  The forgiven portion of the loan will be taxable income to you.    Initially it looked like the forgiven portion of the loan would be taxable income to you.  More recent guidance indicates that it will not be taxable income (though the EIDL grant still will be).



CARES Act – Additional Payroll Help

There are two additional options for payroll help, but I’m not a fan of either one, so I am not recommending them.  Here are the basics:

Payroll Retention Credit allows you to request a refund from the IRS on 50% of wages paid up to $10,000 per employee (so a refund to you of $5,000 per employee).  You qualify if you are under a “stay home” order (or similar) or have at least a 50% reduction in revenue.

You cannot use this program if you are using the PPP loan program (which I think is a better program with more benefits). You cannot use it for owner wages or if you are self-employed (which are covered by the PPP loan program).

I would only recommend this program as a back up plan if you cannot use the PPP loan program.

Payroll Delayed Deposit allows you to delay paying the employer’s share of social security tax (not any other payroll taxes). Half of the delayed tax is due by 12/31/20 and the other half by 12/31/21.

As attractive as it might be to delay paying some payroll tax, I am recommending against this program as the risk of not being able to pay later is too high.

If for any reason you cannot make that delayed payment, you can be subject to penalties, interest, and civil penalties.  The penalties on payroll taxes are brutal and I think it’s not worth the possible risk of not being able to pay on time.


CARES Act – Retirement Plans

IRA/HSA Contributions: We now have until 7/15/2020 to make contributions to IRAs, qualified retirement plans, and HSAs.  (This came with the tax deadline extension and we shared this in a previous newsletter, but it bears repeating.)

If you already filed your 2019 tax return and you want to make a contribution to an HSA, IRA, etc. – you can make the contribution before 7/15 and then amend your 2019 tax return to claim the associated deduction.

If you are making a contribution after 4/15 and before 7/15 make sure you keep documentation showing that you indicated it to be for 2019 and double check that it has been applied to your account correctly.

Early Retirement Distributions: If you are affected by Covid-19, you can pull funds from your retirement account without penalty.  Normally, early distributions are subject to income tax plus another 10% penalty on top.  For 2020, early distributions from retirement accounts are not subject to the 10% penalty.  There is a $100,000 maximum per person – after that the penalty kicks back in.

Retirement distributions are still subject to income tax, and here too there is a change.  You can choose to pay all of the tax in 2020 or you can choose to pay 1/3 in each of the years 2020, 2021, 2022.  This is true for Covid-19 related early distributions and regular distributions for folks over 59 ½ years.

If you distribute funds from a retirement plan, you usually have up to 60 days to put it back and have it treated as a rollover and not subject to tax or penalty.  With this special rule for 2020, you have up to 3 years to put the funds back into your plan and treat it as a non-taxable rollover.  (This might involve amending a return if you return the funds to your retirement account after filing your tax return.)

Retirement Plan RMD: There is no Required Minimum Distribution (RMD) requirement for 2020.  If you have already taken your RMD, it is now considered a regular distribution and the rules above apply – you can put it back and consider it a rollover or keep it and pay tax (this year or over the next 3 years).

Retirement Plan Loans: Normally you can borrow up to $50,000 from a qualified retirement plan and repay it over 5 years.  If you are affected by Covid-19, you can now borrow up to $100,000 (if the loan is taken before September 26, 2020) with the 5 year repayment beginning in 2021.  This is still also subject to a cap of the funds in your retirement plan.  (For example, if you have $25,000 in your plan, you can borrow up to $25,000, not the full $100,000).


CARES Act – Charitable Contributions

We have a new deduction for charitable contributions if you do not itemize your deductions.  In the past, you could only deduct charitable contributions if you itemized deductions.  With the new, higher standard deductions, fewer people are itemizing.  Now, up to $300 in charitable contributions will be deductible without itemizing. This is set up as a permanent tax law change affecting 2020 and future years.


There is more!  But the remaining tax changes affect very few businesses and individuals.  These are the primary aspects of the tax part of the new law that affect the majority of our clients.


B. Siobhan Q. Murphy