Now that the Federal Government has set a $2.2 trillion coronavirus bailout in motion, people across the country want to know more about it.

Questions include:

  • Who’s eligible for a piece of that pie?
  • How do you go about taking advantage of the stimulus funds?
  • What tax implications come with the money?

Payments made directly to individuals are known as “2020 recovery rebates.” According to the Congressional Research Service, individuals will receive $1,200. If you were married in 2019 and filed taxes jointly, you get $2,400. You can also count on an additional $500 per child you claimed. These rebates will be deposited directly into the bank account you listed on your 2019 or 2018 tax return.

Logistics of the Payments

The exact date of the payments is still up in the air. They may take as long as two months, which is about how long it took for previous stimulus payments to be disbursed. Those with direct deposit information on file with the IRS will get the payments sooner than those who must wait for a check in the mail.

The payments will be paid automatically; no sign-up is required. And as with tax refunds, the payments are not taxable. To repeat: you do not have to claim these payments as income on your taxes.

Who Won’t Get Full Amount?

You must have filed taxes within the last two years to receive the stimulus money. If you didn’t, you can receive a tax credit when you file your 2020 taxes. Exclusions for payments include:

  • Non-resident aliens
  • Those claimed by another as a dependent
  • Trusts and estates
The stimulus payments are reduced for individuals who made more than $75,000 in 2019 — or $112,500 if you filed as a head of household. A tiered reduction for higher earners equals five percent of your adjusted gross income. For every $100 you made over the limit, your payment is reduced by $5. Therefore, your rebate will be:
  • $950 if you made $80,000
  • $700 if you made $85,000
  • $150 if you made $96,000
  • $0 if you made $99,000 or more

What Can Small Businesses Expect from the Stimulus Package?

The U.S. Senate Committee on Small Business and Entrepreneurship secured funding for small business support that includes:

  • Emergency Economic Injury Grants of up to $10,000 if you apply for a Small Business Administration (SBA) economic injury disaster loan (EIDL). The grant may be given even if you’re denied for the 3.75% interest loan. The grant will be deducted from the loan amount if you’re approved. Grants should be sent within three days of your loan application.
  • Debt Relief for Existing and New SBA Borrowers is a provision of the stimulus bill that directs the SBA to forgive loans, including fees, interest and principle for up to six months to those with existing SBA loans.
  • Paycheck Protection Program (PPP) provides zero-fee loans up to $10 million for small businesses to pay employees. Up to eight weeks of payroll may be forgiven if you keep your employees at their current salary levels. Repayment of principle and interest is deferred for up to one year.
  • Paid Leave for Government Contractors allows government agencies to modify contracts to reimburse companies for contractor pay when employees can’t go to the office or telecommute.
According to the National Law Review, grants to LLCs and general partnerships are taxed as income. However, other corporate entities may receive tax-free grants if the funds are:
  • Not compensation for services or goods
  • Used to generate income
  • Invested in depreciable property such as machinery and not used for payroll

Seek Trusted Small Business Guidance

While government counselling agencies are ramping up to deal with inquiries from small business owners, their phone lines are expected to be overwhelmed in the coming weeks. They may be able to help you navigate the required paperwork to apply for grants and/or loans during the COVID-19 crisis, but a business accountant who tracks the pulse of the stimulus package can steer you in the right direction.

The funds are allocated and available. You still need to ensure you take the appropriate steps to protect your business going forward. The mass shut-downs are only temporary, but your business needs to exist far beyond this current crisis.

So move wisely by relying on trusted tax advisors. Don’t end up with loans you may not be able to pay back or higher-than-necessary tax burdens in the future.