As Covid-19 continues to spread and economic uncertainty increases, the adverse impact on charitable gifting in San Diego County continues to worsen. Charitable contributions had already been on a significant decline since 2018 due to The Tax Cuts and Jobs Act of 2018 (TCJA), which reduced the ability of many taxpayers to claim itemized deductions due to the increase of the standard deduction: from 46 million in 2016 to only 18 million in 2018. With so many nonprofits relying largely on donations, the Covid-19 pandemic has exacerbated the problem making it extremely difficult for these organizations to continue serving our San Diego Community. 

To make matters worse, many of the people that need assistance from nonprofits are the ones that are being hardest hit by the pandemic with the San Diego unemployment rate currently at 15%. However, if you have the ability to make charitable donations, there are a number of ways for you to do so while saving money on your taxes, including some new opportunities that have become available due to recent federal stimulus. In this article, we review some of the best strategies to save taxes, give to nonprofits and highlight some great nonprofits that are doing amazing work in our local San Diego community.

What’s New In 2020

Changes to Standard and Itemized Deduction Limits

The CARES Act passed earlier this year allows donors to use a universal tax deduction of up to $300 on their 2020 tax return if they take the standard deduction. This provision means that all taxpayers who don’t itemize deductions can give $300 and get a deduction, otherwise referred to as an above-the-line deduction.

For taxpayers who itemize deductions, an additional tax incentive that increases the cap on charitable contributions from 60% of your Adjusted Gross Income (AGI) to 100% is now available in 2020. This recent legislation ensures that all taxpayers that donate to nonprofits will receive increased tax incentives this year.

As an example, let’s say a taxpayer who has $500,000 of AGI for 2020 would like to make a $1 million charitable contribution this year. In prior years the income tax deduction would be limited to $300,000 or 60% or $500,000. 

For this year only, the CARES Act allows for a charitable contribution deduction of $500,000, 100% of AGI in this example. This would still leave an additional $500,000 million charitable contribution carry-forward (subject to the 60% of AGI limit) that can be used in the subsequent five tax years.

Increased Deduction Limits for Corporations

For corporations looking to extend their charitable giving efforts, the CARES Act raises the annual cash gift limit from 10% to 25% of corporate taxable income. To ensure the deduction comes through, each partner or shareholder must individually elect to receive the benefit of the increased charitable deduction on their taxes. 

Higher Incentive for Food Donations

In addition to cash donations, the CARES Act now incentivizes food donations in a big way. The tax deduction available for food inventory has been raised from 15% to 25% for the 2020 taxable year, in the face of heightened visibility and exacerbation of food insecurity during the crisis. Taxpayers who donate food to their local food pantry can claim the value of that food on their taxes. 

On a larger scale, if you’re a restaurant with an income of $100,000, and you donate $25,000 worth of food inventory, you can reduce your business’s taxable income to $75,000. If you’re able to donate more than 25% of your AGI — let’s say $50,000 — you’ll still only be able to write off $25,000 this year, and the additional $25,000 will carry over to the next year.

Traditional Gifting Strategies

Donating Appreciated Securities

For donors who own appreciated securities such as stocks in their brokerage accounts, donating these securities allows you to avoid paying capital gain taxes upon the potential sale. If you itemize deductions, you also get the benefit of a current-year tax deduction. 

As an example, let’s say you purchased Apple stock for $20,000, it’s current value is $50,000 and you are in a combined federal and state marginal tax bracket of 25%. Selling your position means that you will owe $7,500 in taxes on the gain. 

Since capital gain tax rates can be as high as 37%, this is a great way to boost the amount you are giving to charities and reduce your tax bill. Non-profits do not pay taxes on the sale of securities so both parties receive a substantial benefit. Fidelity Investments has a simple calculator to help you determine your potential savings.

Establish A Donor-Advised Fund for Charitable Giving

A donor-advised fund is a simple, tax-effective way to dedicate money to charitable giving. You can establish a donor-advised fund at most custodians and brokerages. You then make a donation of cash or other assets to the brokerage account, which makes you eligible to take a tax deduction for your charitable gift since the donor-advised fund is a program of a public charity. Once the donation is made, you can recommend which qualified charities you would like to give to. 

The timing is flexible, as are the number of charitable causes you select to receive a donation. Let’s say that you anticipate a higher level of income in the current tax year and you typically gift $10,000 per year to charities. You can contribute $50,000 to a donor-advised fund in the current tax year and receive the full deduction for that year, but continue to distribute your $10,000 gift annually over the next 5 years to any charity of your choosing. Any growth that occurs in the account will be tax-free since the funds are earmarked as a charitable contribution.

Using A Charitable Deduction To Facilitate A Roth Conversion

A popular tax planning strategy with retirement accounts is to make a charitable donation to offset the tax costs of converting a Traditional IRA to a Roth IRA. Converting a traditional IRA to a Roth IRA typically means paying significant taxes, but making a charitable contribution can help offset that income. This strategy may make sense if you already donate regularly to a charity and have sufficient non-retirement assets to pay the tax cost of the conversion.

Qualified Charitable Distributions (QCDs) 

In prior years, clients over age 70.5 who were taking Required Minimum Distributions (RMD’s) from their IRA accounts may have completed a Qualified Charitable Deduction (QCD). Tax law allows donors to give up to $100,000 of their RMD directly to a qualifying charity of their choosing. 

The amount sent to charity counted towards the donor’s RMD for the year but was excluded from their taxable income. The CARES Act has waived RMD’s in 2020, but this is another popular tax planning strategy that to consider with retirement accounts in future tax years. 

Charitable Trusts

For donors that want to give substantially more than the aforementioned strategies, charitable trusts are a great option to donate during your life or to leave a legacy when you are gone. These trusts are irrevocable and the primary types are Charitable Lead Trusts (CLT’s) and Charitable Remainder Trusts (CRT’s).

Charitable lead trusts give a set amount of the trust’s income to a charitable organization, and then the remaining income either reverts back to the grantor’s beneficiaries or stays in the trust at the grantor’s death. CLTs are a great giving strategy when you don’t need a set amount of additional income, and your primary goal is to donate cash to an organization. 

On the other hand, charitable remainder trusts, also referred to as split-interest trusts, make payments the opposite way of CLTs. First, the donor gives an asset to an irrevocable trust. Then, the income from a charitable remainder trust goes first to one or more beneficiaries in set amounts during their lifetimes, and then the remaining income goes to a charitable organization at death.

There are a number of ways we can help nonprofits during these difficult times when they need it the most. Whether you can donate your time through volunteering, donate items you may no longer need or give financial resources. Our tax system has always encouraged charitable giving through tax incentives, and changes in tax law this year have made 2020 one of the best years to do so. 

To determine whether these gifting strategies are suitable for you, please consult your tax advisor. Lastly, if you are new to charitable giving or are looking for some causes you are passionate about, the following is a list of some great organizations in San Diego County that are constantly making a positive impact in our community.

Veterans

Workshops for Warriors
Contact Information
Rachel Luis y Prado
P:  619-550-1620
E:  r@wfw.org
W: www.wfw.org


Zero8hundred
Contact Information
Stephanie Kiesel
P:  858-309-4412
E:  skiesel@zero8hundred.org 
W: www.zero8hundred.org

Workshops for Warriors is a 501 (c)(3) nonprofit school that provides veterans and transitioning service members with industry-leading advanced manufacturing education and job placement. The organization trains, certifies, and places a veteran into a high paying entry level job in four to eight months. Students become welders, CNC machinists, CNC mill and CNC lathe operators, parts designers and programmers.

Zero8hundred empowers our military service members, recent veterans and their families with the essential connections they need to effectively access the local opportunities they’re looking for so they can thrive in their transition from the military to civilian life in Southern California.

Arts

Ilan-Lael Foundation
Contact Information
Marianne Gerdes
P:  760-765-3427
E:  ilanlael@mac.com 
W:https://www.ilanlaelfoundation.org

Connecting people, art, and nature to help people discover their own creativity. The Ilan-Lael Foundation was founded by James and Anne Hubbell in 1982 and has sponsored public art projects, lectures, seminars and exhibitions in San Diego and Tijuana.

Social Causes

Second Chance
Contact Information
Sylvia DuBeau
P: 619-839-0955
 E:sdubeau@secondchanceprogram.org W: www.secondchanceprogram.org

MANA de San Diego
Contact Information
Rosa Maria Hernandez
P:  619-297-0115
E:  rmhernandez@manasd.orgW: www.manasd.org

Kim Center for Social Balance
Contact Information
Dr. Kim Hei-ock
P:  858-344-0315
E:  heiock@kimcenter.org
W: www.kimcenter.org

Second Chance offers specialized workforce readiness training, sober-living housing, educational programs and support services essential to achieving self-sufficiency. The mission is to disrupt the cycles of incarceration and poverty by helping people find their way to self-sufficiency.

To empower Latinas through education, community service, advocacy and leadership development. MANA de San Diego is the largest and most active MANA chapter, with more than 4,000 supporters.


To accelerate the achievement of equal status for all genders in the workplace. In our work with employers and communities, we use data-driven tools to collaboratively design and implement actionable plans. Our strategy generates impact on both the macro and micro levels:

Education

University of San Diego
Contact Information
Mary Rose McDermott
P:  619-260-4744
E:  mmcdermott@sandiego.edu  
W: www.sandiego.edu

East Region Adult Education
Contact Information
Ute Maschke
P:  619-588-3509
E:  ute.maschke@gcccd.edu
W: www.adultedworks.org

Friends of Downtown
Contact Information
Jessica Schatz
P:  619- 709-9066
E:  jessica.schatz@compass.com 
W: www.fodsd.org/about

The University of San Diego is a Roman Catholic institution committed to advancing academic excellence, expanding liberal and professional knowledge, creating a diverse and inclusive community and preparing leaders who are dedicated to ethical conduct and compassionate service.

 

Moving learning opportunities forward for all San Diegans to achieve economic mobility through education that works. Educating and training adults and connecting workforce talent to regional businesses.


Friends of Downtown (FOD) is a 100% volunteer registered 501(c)3 non-profit organization committed to the enhancement of San Diego’s downtown community through scholarships, community service, education and networking. The organization is made up of professionals and residents who work and/or live in the downtown community.

Health

San Ysidro Health
Contact Information
Adrianna O’Donnell
P:  808-291-4412 
E:adrianna.odonnell@syhealth.org
W: www.syhealth.org

San Ysidro Health is a federally qualified community health center providing high quality, compassionate, accessible and affordable health care services to 107,000 patients at 42 program sites from South Bay to rural East County. 

The number of Americans that have sought help from a financial advisor has increased tremendously over recent years. The primary reason most people seek professional assistance is their finances have become too complex to handle on their own. Some want to avoid repeating a financial mistake again or realize that they don’t pay attention to their finances enough. Or it may be that our lives have become busier and the financial landscape has become too complex and time-consuming to manage on our own. We want to help simplify the process for you by providing a guide to find the best financial advisor for you.

The primary steps in evaluating the right advisor for you are to:

1. Determine Your Needs 
2. Understand How Advisors are Compensated
3. Evaluate Credentials and Experience
4. Conduct a Firm Evaluation

This 5-minute article should help you save hours in your search for the best financial advisor and help you avoid making any costly mistakes.

Determine Your Needs

As with a good financial plan, your search for a financial advisor should be centered around your specific needs. While most traditional financial advisors from the 1980’s and 1990’s focused on investments and stock-picking, many financial advisors today provide comprehensive financial planning services to their clients to help them make better financial decisions. 

We are inundated with information these days, which is what makes self-managing one’s finances so difficult. Having a professional that truly understands your goals in life is crucial in helping you plot the shortest and most efficient path from point A to B. 

What percentage of your income do you need to save to retire at a certain age? If you saved X amount more, how many years earlier could you retire? Does keeping your target retirement age the same, but spent 15% less change things? 

These questions are an example of the types of questions you should be asking yourself and your financial advisor candidates. You want to gain a thorough understanding of their knowledge, education and scope of services offered. Will they review your tax return? Ask them about their typical client – does that sound like you?

Part of a sound financial plan is to have an investment philosophy that reflects your goals and it’s important that you and your advisor share a similar philosophy.  If you are seeking an active investment philosophy (trying to outperform market indexes), then a financial advisor might help you construct an allocation and find suitable active managers to attempt to outperform the market. You should keep in mind that this approach is expensive and can be tax-inefficient. Also, many studies show that this investment strategy can underperform a portfolio comprised of index funds. 

If you are only seeking investment management and don’t want to pay the higher fees associated with active management, then a passive strategy can be pursued through index funds exchange-traded funds (ETF’s) or through a number of different robo-advisors. A passive investment strategy is predicated on the belief that markets are efficient and that buying indexes that track the market is more effective than the higher costs and low odds associated with beating the market. A passive investment strategy will typically be lower in cost and more tax-efficient than an active strategy and has more support from the academic community.

Understand How Advisors are Compensated

The most crucial element that must be understood about the person giving you financial advice is how they are compensated. A Fee-Only financial advisory firm receives all of its revenue from its clients as opposed to any third parties. Simply, the firm or advisor charges their client’s a fee for the advice that is being provided. 

There aren’t any other commissions or alternative sources of revenue from sales of products that could influence the advisor’s objectivity. Because after all, you are hiring someone to provide advice that’s in YOUR best interest, not theirs. Fee-Only advisors are also held to a fiduciary standard in working with clients, so by law, they must always act in a prudent manner for their clients. Working with a Fee-Only advisor is the best way to ensure you are getting objective advice free from conflicts of interest. 

In addition to Fee-Only financial advisors, there are a number of other financial professionals that are commission-based and earn the majority if not all of their income by selling a certain number of products or opening a certain number of accounts. Products come in the form of insurance products such as annuities, mutual funds, or even private investments. 

This is not to say that all commission-based financial professionals are acting in bad faith. However, under current law, the only protection the consumer has is that these professionals recommend products that pass a “suitability test,” but not a fiduciary test. Under the suitability test, they can sell any products that are suitable, but they do not have any legal duty to their clients.

Evaluate Credentials and Background

No assessment of hiring any professional is complete without a thorough analysis of that individual’s resume. Finding an advisor with the CFP® designation should be at the top of your list when evaluating credentials. The CFP® certification is the most recognized and rigorous credential for financial advisors and requires proficiency in all areas of financial planning.

The list of designations is nearly endless and while some may imply additional knowledge and expertise, none require the same experience, testing, educational, and ethics requirements presented by the CFP Board. While the CPA and CFA credential programs are well recognized and accepted, they are focused on taxes and investments, not the broader financial picture. 

Let’s face it, experience matters. You are going to want to know how many years the advisor has been working with clients. If you are working with a younger advisor, it doesn’t hurt to ask if there will be another senior advisor involved in the relationship. Working with a more experienced advisor who has advised clients in similar situations goes a long way in getting reliable financial recommendations.

If working with a broker, you can perform a background check by searching for their form U-4. This form will provide you with all sorts of information about the advisor like have they ever committed a felony or misdemeanor, filed bankruptcy or been involved in any lawsuits or violations of securities laws.

Firm Evaluation

Specialization

One of the most overlooked criteria in searching for a financial advisor is determining what type of client they work with.  As more financial advisors have made an effort to provide financial planning services, many advisors have become subject matter experts in one niche. 

There are financial planners that specialize in employee stock options, business owners, millennials and retirees. From college planning to retirement planning and everything in between – there’s an expert for that. Aside from ensuring that you are working with a  Fee-Only CFP®, working with an advisor that is a specialist in your area of need may be the most critical factor to evaluate. 

If you are approaching retirement you need to know how much you can spend, how to replace your income, when to take Social Security, etc. Ideally, you want to work with a firm that helps retirees since they will have the expertise, resources and experience to provide you with the best solutions to your problems. 

Firm Type and Size

One thing that has changed over the last 20 years are the number of independent and smaller Registered Investment Advisors (RIA). Advancements in financial technology platforms and dedicated platforms from the largest custodians (Fidelity, Charles Schwab & TD Ameritrade) have allowed smaller firms to offer a more boutique-style personalized approach than larger firms. In some instances, you may even be directly working with the founders of the firm, who are typically more seasoned advisors and also business owners. RIA’s have been the fastest-growing segment in the financial advisory realm in recent years.

Outside of RIA’s, the most populous platform to work with a financial advisor is through a brokerage such as Merrill Lynch, UBS, Raymond James or Edward Jones just to name a few. Even your local bank has a licensed securities branch representative who can sell you financial products.

Again, broker-dealers are not held to a fiduciary standard, and the products they sell all pay them different types of commissions, so make sure to understand the costs associated with the investment and how the broker is being compensated. Some representatives are under salary & bonus structures, but bonuses are typically tied to selling a certain type or number of products. At the end of the day, it’s your right to understand any conflicts of interest the advisor has, so you shouldn’t feel that these questions are inappropriate.

Process

As a potential new client to a firm, you should be paying close attention to the initial onboarding process. Most firms have an initial meeting with some type of free evaluation of your situation. You want to ensure that the advisor is being transparent in all facets of the relationship, especially how they are compensated and the types of clients they serve. 

Most importantly, how much time are they spending upfront to gain a thorough understanding of your life goals. This will be paramount to a successful relationship because a good financial plan is a result of how much the advisor understands your core values and goals. They should be helping you make financial decisions that are in alignment with what’s most important to you. 

If you are working with a comprehensive financial planner, they will most likely request a number of documents, but tax returns, insurance policies and investment statements are some of the most common documents for the planner to begin their analysis. Depending on how thorough the initial process is, they may also need to spend more time with you to clarify goals more clearly prior to making recommendations. 

If you aren’t working with a financial planner, then your onboarding process with a broker or agent will most likely be to review a final proposal or illustration and sign the paperwork depending on the type of financial product you are purchasing.

Once you have made your decision and completed your client onboarding process and have implemented all recommendations, you should feel good about unifying your goals with all of your financial decisions. At this point, you should know how many times a year you will be meeting with your advisor, how to access online portals and what type of reporting you will receive.

While it may take some time effort before you find the right fit, you don’t want to cut any corners in finding the best financial advisor for you. However, if you know that you are looking for a Fee-Only financial planner, then you can really start your search by looking for a firm that specializes in your needs. From there you can continue your evaluation of the firm and the advisor you will be working with. There are also a few websites such as NAPFA and the Fee-Only Network that offer databases of Fee-Only planners to help make your search easier. Aside from your doctor, you will probably interact with your financial advisor more than any other service provider in your life, so make sure to hire the best one for YOU.

The massive $2 trillion stimulus package that was recently passed to help Americans through the Coronavirus pandemic affects every business and individual in our country one way or another. It is roughly 3 times as great as what we received from the great recession that began in 2008. One of the primary differences of the recent stimulus is that it is going mostly to the low and middle-income consumers and small business owners as you can see from the diagram below. This is very different than 2008 when the fiscal stimulus didn’t really trickle down to these cohorts that are more inclined to spend it.

We have summarized some of the key portions of the CARES Act that we feel will be most pertinent to you.

Federal Tax Filing Deadline Extended

The federal tax filing deadline has been extended to July 15th. You don’t have to file your return or make payments until then. The extended deadline applies to 2019 IRA, Roth IRA, and employer profit-sharing contribution deadlines as well.

While California has extended their deadline, not all states have followed suit. You can find your state’s filing deadline here.

Stimulus Checks

Single adults who have an adjusted gross income of $75,000 or less will get the full $1,200, while married couples with no children and earning $150,000 or less will receive a total of $2,400. For every qualifying child age 16 or under, you get another $500.

People who earn more will see their payments decrease until they phase out completely. That happens for single people earning $99,000 or married people who have no children and earn $198,000. Your 2018 or 2019 Adjusted Gross Income amount will be the determining factor.

However, if you make under those thresholds in 2020 – you actually will be eligible when you file your 2020 tax return, so you will have to be a bit patient.

There are other situations that make certain people ineligible — college-age children who were claimed as dependents on their parents’ returns won’t receive a check, for example. And you generally need a valid Social Security number to collect as well.

Most people don’t have to do anything to receive the payment. If the Internal Revenue Service already has your bank account information (i.e. you get your tax refunds direct deposited), it will transfer the money to you via direct deposit based on the recent income-tax figures it already has. Payments are expected to start landing within the next few weeks.

Retirement Plans

IRA and qualified plan distributions – A qualified individual can take up to $100,000 in “coronavirus-related” distributions in 2020 and:

  • Not have to pay the 10% early distribution penalty even if you are under age 59½; and
  • Not have to withhold 20% in federal income taxes; and
  • Not have to pay tax on it if repaid within three years; or
  • Elect to spread the inclusion of income over three years.

Qualified plan loans – Another option is to borrow from your retirement plan. The CARES Act increased the loan maximum from $50,000 or 50% of your vested balance to $100,000 or 100% of your vested balance. This is for any money borrowed between March 27, 2020 and December 31, 2020. For individuals with existing loans, the due date for the loan repayment is suspended one year.

Taking a loan means liquidating securities in your portfolio and with most asset classes down year-to-date, you risk the chance of selling at a loss and missing the rebound. Make sure to consider other types of loans you may be eligible for before taking a qualified plan loan.

RMD’s suspended this year – The Act suspended the minimum distribution requirements for 2020. This includes distributions from most qualified retirement plans (but not nongovernmental 457(b) plans) and IRAs, including inherited IRAs.

As a reminder, the recently enacted SECURE Act (January 1st, 2020) changed the required beginning date from 70½ to 72, but this change only applied if you had not yet turned 70½ before 2020.

The key takeaway here is that if you had already started taking your mandatory distributions or you had an inherited IRA, you don’t have to take a distribution in 2020. This gives you the chance to let your plan balance recover from the downturn in the stock market before you take any money out. It also allows you to save money on taxes or you consider a Roth conversion as an alternative.

If you already took your required distribution from your IRA in 2020, you have 60 days from the date of the distribution to put it back and not be taxed on it. Roth conversions in lieu of distributions this year is another option that can make sense, depending on your tax situation.

Unemployment Insurance

The new stimulus made significant, albeit temporary, changes to the way the unemployment insurance system works and increases benefit amounts until July 31st. It temporarily increases the amount of benefits by $600 weekly.

It also extends by up to 13 weeks the time period for which state-level benefits are available for many workers. States set many of their own rules, including benefit amounts. You should visit your state’s employment development office website for more specific information.

Federal Student Loans

Borrowers of federal student loans will be placed in administrative forbearance, which allows you to temporarily stop making payments from March 13th until September 30th. No interest will accrue during this period and interest that you accrued before the period began will also not be rolled into your loan principal. Borrowers can continue making loan payments to pay down balances faster if the full amount of your payment can be applied towards your loan’s principal.

Loans issued through state agencies and others, including big private lenders like Sallie Mae, are not covered. Other loans not covered include the majority of Federal Family Education Loans, which are mostly held by commercial lenders, and school-held Perkins loans.

Some private lenders are offering relief programs, such as Sallie Mae who is offering suspension of payment for up to three months, with no damage to a borrower’s credit. Navient made an identical offer for “qualified” borrowers. It’s advisable to contact your lender to determine what relief programs are available to you.

Housing Payments

The Federal Housing Finance Agency has instructed mortgage servicers to allow borrowers whose mortgages are owned by Fannie Mae or Freddie Mac to delay payments. This program allows for a mortgage payment to be suspended for up to 12 months due to hardship caused by the coronavirus.

Federal housing officials have also announced a nationwide eviction and foreclosure moratorium for borrowers of Fannie or Freddie mortgages or borrowers whose loans are backed by the Federal Housing Administration (F.H.A. loans).

A nationwide eviction moratorium is in place for any renters whose landlords have mortgages backed or owned by Fannie, Freddie or the F.H.A. This will last through the end of July, and landlords can’t charge any fees or penalties for nonpayment of rent either.

Business Owners

Small business owners (under 500 employees) were a key demographic targeted by the stimulus and relief is being made available through up to $10million in forgivable loans to cover employee payroll or immediate tax credits – you cannot receive both, however.

Paycheck Protection Program The CARES Act allocated $350 billion to small businesses under the Paycheck Protection Program. This program provides 100% federally guaranteed loans to small businesses with the goal of helping them keep their employees employed during the COVID-19 pandemic and any resulting economic downturn.

The program is administered by the Small Business Administration (SBA) and started accepting applications on April 3, 2020. A key feature of this program is that all or part of the loan may be completely forgiven.

To qualify for loan forgiveness, the loan proceeds must be used to cover payroll costs, mortgage interest, rent or utility costs over the 10 week period after the loan is made. Additionally, the number of employees and compensation levels must be maintained.

The loans can be for an amount up to 2.5 times the employer’s average payroll costs, not to exceed $10 million. Payroll is capped at a $100k rate per employee and the number of employees is capped at 500.

The amount of loan forgiveness may be reduced if there is a reduction in the number of employees or a reduction greater than 25% in the amount of wages paid to the employees of the business. Any reduction in the amount of loan forgiveness can be reduced or eliminated if the business restores the reduced wages or brings back any laid-off employees by June 30, 2020. All small businesses and even self-employed independent contractors are eligible for the loans.

Loan payments will also be deferred for six months. No collateral or personal guarantees are required. Neither the government nor lenders will charge small businesses any fees. This is a great deal for small business owners that qualify.

Employee Retention Credit – The bill offers a refundable payroll tax credit of up to $10,000 of wages paid to an eligible employee during the crisis. This credit is available for both for-profit and non-profit businesses and is available to all employers regardless of size.

To be eligible, businesses must fall into one of the two categories:

  1. The employer’s business must have been disrupted by government restrictions that have resulted in a full or partial suspension of their business operations.
  2. The employer’s gross receipts have gone down by over 50% year-over-year beginning from the same quarter in 2019. Once gross receipts go above 80% of the same quarter in 2019, the employer becomes ineligible for the credit at the end of that quarter.

The wages of employees who were either furloughed or whose hours have been reduced are eligible for the credit. For employers with 100 or fewer employees, all employee wages for full-time employees are eligible regardless of whether the employee was furloughed.

The amount of the credit is 50% of qualified wages capped at $10,000 paid to an employee after March 12, 2020, and before Jan. 1, 2021. Eligible wages taken into account are not limited to cash payments, but also include a portion of the cost of employer-provided health care. The employer will receive the credits, and any refund if eligible, through their quarterly payroll tax filings.

As we continue the fight against coronavirus in our country and globally, one thing has become fairly clear: social distancing and shelter in place guidance have seemed to be the most effective tools to combat the spread of the virus. The dilemma is that the longer we continue with most of the economy shut down, the greater the financial impact. At some point, the economy will have to reopen. The manner in how we assimilate back to our normal lives will have a strong influence in continuing to control the spread of the virus. As the situation continues to develop, it is very plausible that more stimulus could come our way this year. We will continue to keep you posted on how these changes impact you. Stay safe and remember to be extra kind to one another in the face of these challenging times.