April 1, 2020

As noted previously, we are continuing “business as usual” in a remote-work capacity. If you need to reach us for any reason, simply call or email as you would have before.

Here’s What the CARES Act Means for You and Your Business

Dear Clients and Friends,

I hope this email finds you safe and well. You are likely to have heard that the CARES Act has been passed and in it are many stimulus packages designed to stabilize the economy. Some parts pertain to individuals and some to business; we will detail the most relevant to you below. In order to keep you well-informed, we plan to follow this newsletter with additional ones explaining other implications of the stimulus package and related developments.

All of us at the Dowling Group are here to help however we can. Please reach out to us via phone or email if you have questions or would like to talk.

Individuals

Stimulus checks will be mailed out or directly deposited into individual bank accounts within the next 3 weeks. The bill provides for a payment to eligible taxpayers of $1,200 for an individual filing single or $2,400 for married taxpayers filing jointly plus $500 for each child.

  • The amount of your stimulus check is dependent on your 2018 or 2019 income as reported on your tax return. You can use this calculator to estimate your possible check: https://www.forbes.com/advisor/personal-finance/stimulus-check-calculator/
  • Those with adjusted gross incomes up to or less than the following will receive the full payment:
    • $75,000 for single
    • $150,000 for married filing joint
    • $112,500 for head of household
  • Those with adjusted gross incomes between the above and the following will receive partial payments:
    • $99,000 for single
    • $198,000 for married filing joint
    • $136,500 for head of household

For taxpayers under 59.5 years of age, the 10% early withdrawal penalty of up to $100,000 from retirement plans will be waived. Note that while the penalty is waived, tax must still be paid on the distribution. However, the tax is spread out over three years (or you can elect to have it taxed all in 2020).

It also provides a temporary waiver of required minimum distributions (RMD) for 2020. If you already took your RMD there is no provision to put it back.

In addition to state unemployment insurance, federal unemployment insurance increases benefits by up to $600 per week. It also adds an additional 13 weeks of coverage. There are provisions for the self-employed to receive unemployment as well.

Businesses

The $350 billion SBA Payroll Protection Loan (PPL) is the big news for organizations with fewer than 500 employees. Those involved with small businesses, 501(c)(3) nonprofits granted SBA access for the first time, sole proprietors, and independent contractors will be affected. Here are the key points:

  1. Loans are 100% guaranteed by the SBA. Lenders will not require FICO scores, financial statement information, personal loan guarantees or collateral.
  2. Maximum loan amounts are calculated by multiplying average monthly payroll costs (PC) by 2½. This calculation must exclude annual PC amounts for a single individual above $100,000 and workers outside the United States. A company with average $100,000/month PC after the exclusions can get a loan of $250,000.
  3. Based on a formula, if the company has essentially the same number of employees and close to the same payroll at the end of this emergency as it had beforehand, and the loan is expended within an 8-week period for payroll costs and certain operational expenses, the loan is forgiven, with forgiveness nontaxable.
  4. Any part of the loan not forgiven because these conditions were not met becomes a maximum ten-year government guaranteed SBA loan at 4% interest.
  5. The SBA is shortly expected to issue rules for both bankers and borrowers to clarify procedures and answer open questions, after which they will permit the banks to take loan applications. Interested parties should inform their bank’s SBA lending officer now and be put on the waiting list. If you need a local option for an SBA loan, we can recommend Jenniffer Yan at Greenwich Bank & Trust. She can be reached at 203-698-4033.

As we review more of the bill we will relay important sections. We are putting together financial planning strategies to share in our next email, so stay tuned. In the meantime, please reach out to us with questions and stay well.

Wishing you and your families well,
Sean M. Dowling, CFP, EA
President, The Dowling Group Wealth Management

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  • Government bonds and Treasury Bills are guaranteed by the U.S. government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. However, the value of fund shares is not guaranteed and will fluctuate.
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  • Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful.
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  • You cannot invest directly in an index.
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