Update on Economic Stimulus
To our Clients and Friends,
It’s been nice speaking with so many of you over the past week as everyone navigated through the various stimulus programs put forth from the federal government. We wanted to pass along this update to make sure that you were aware of the latest concerning the programs affecting most of our clients.
First, we should say that “patience” is required considering all of these programs. The CARES Act was signed into law late in the day on Friday, March 27th – just a dozen days prior to the writing of this message. The CARES Act is a massive package of various programs which the government, banks and virtually all Americans are working to implement as quickly as possible.
- Relative to the $1,200 payments to individuals – it appears that direct deposits will be made to those eligible taxpayers by the end of the month (with additional amounts for married households and children) if the IRS has your banking information on file from your 2018 or 2019 tax returns. Alternative approaches are being developed to accelerate payments to others however it may be up to four to five months before all eligible citizens receive their payments. Remember, the government has to find and pay over 200 million citizens – this is going to take some time to get to everyone. Patience is required.
- Relative to the Paycheck Protection Program Loans (PPP) for Small Businesses – most small businesses will access these funds through their primary banking partner which began, to a small degree, to accept applications last Friday, April 3rd – one week after passage of this massive legislation. However, many banks are just now beginning to take applications and some banks have already reached their regulatory limit on the amount of loans to offer. Getting through your lender is only the first step – the next step requires SBA approval prior to funding.
As a point of reference, the CARES Act authorized $350 billion of PPP loans – and each individual loan requires SBA approval. Prior to the CARES Act, the SBA typically processed approximately $30 billion of loans in any given year. It’s going to take some time for programs, systems and approvals to catch up to what is now over ten times the SBA’s normal annual volume. The White House and Congress appear ready to provide additional PPP funding so that all small businesses needing these loans can get to them (see additional discussion below). Again, patience is required – and it appears that the government will take the necessary steps so that no small business misses out because they were shut out of a quickly closing program.
- Relative to Unemployment Claims – unemployment is growing each day and the systems to qualify and pay that many people are being stretched to its limits. Here in Virginia, the maximum unemployment benefit is $378 per week. The CARES Act provides an additional unemployment benefit of $600 per week (without income qualifications). Virginia announced that it will begin to pay the additional benefits “as soon as next week” (the week of April 13th). That’s good news for the many Virginian’s who have lost their job – either temporarily or permanently – as a result of the pandemic. Patience, the funds are on the way.
- Relative to Income Tax Filing Deadlines – as previously reported to you, the federal government has extended the deadline to file and pay your federal tax return to July 15, 2020. However, Virginia is still holding out and is one of just a few states which has not followed suit. As of this writing, you must estimate and pay your 2019 Virginia tax payments by May 1st – interest will accrue for any unpaid amounts. The Virginia legislature is scheduled to reconvene on April 22nd – we’re holding out hope for legislative action on this but nothing is certain.
In addition, Congress has already started to discuss the next phase of economic stimulus – the so-called “CARES Act 2.0”. Stimulus efforts under consideration include:
- Expansion of the Paycheck Protection Program for small businesses,
- Increased funding for health care systems and workers fighting the virus,
- Additional direct payments to taxpayers,
- Payroll tax cuts, and
- Extended unemployment benefits including healthcare coverage for the unemployed.
Approval of additional stimulus programs will likely not occur until late April or early May following a read of how successful efforts are to slow the spread of the virus and the then current outlook on the economic outlook for the third quarter of the year.
As always, please let us know if we can provide any additional clarification on these or other matters affecting you or your business. We’re here to help!
Look for further updates as additional information becomes available.
Thank you for your continued confidence in us during these uncertain times.
Be safe and stay well