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What the CARES Act Means for Independent Workers and Small Businesses

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What does the CARES Act mean for independent workers and small businesses? MBO Partners explains the nuances of this important act for COVID-19 relief.

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What the CARES Act Means for Independent Workers and Small Businesses

  1. 1. MARCH 2020
  2. 2. Using the Webinar Features • All attendees are muted and video is turned off • We will facilitate as many questions as we are able during the meeting using the Q&A feature at the end • Please visit caresforindependents.com after this webinar to sign up for more information as it becomes available, and to view the live video that will be posted after the webinar. You can also find a recording on Facebook Live. PARTICIPATING IN TODAY’S WEBINAR
  3. 3. Disclaimer The information provided here does not constitute legal, tax or financial advice. It does not take into account your particular circumstances, objectives, legal and financial situation or needs. Before acting on any information, you should consider the appropriateness of the information for your situation in consultation with a professional advisor of your choosing. This is a rapidly changing area of the law and will be subject to change and interpretation.
  4. 4. At MBO Partners, our mission is to make it easier for enterprise organizations and top independent professionals to work together. For more than 20 years, we’ve been leading the charge to keep the independent economy moving forward, building a unique, dual-sided ecosystem comprising many of the world’s most prominent companies and in-demand professionals. MBO has always been committed to advancing the next way of working, and we are far from done. We’ll continue to drive change on the ground, delivering innovative solutions that enable both organizations and talent to thrive in a constantly evolving workplace.
  5. 5. 5 CaresForIndependents.com
  6. 6. Miles Everson, CEO
  7. 7. In the face of uncertainty, Fear often sets in. MBO exists to help independent workers face everything and rise up.
  8. 8. OUR PURPOSE
  9. 9. 9
  10. 10. Gene Zaino, Founder & Executive Chairman
  11. 11. 12
  12. 12. Economic Contribution 13 Over the past year, independent workers generated roughly $1.28 trillion of revenue for the U.S. economy, equal to about 6.2 percent of U.S. GDP (2018), or the entire economic output of Spain.
  13. 13. Coronavirus Aid, Relief, and Economic Security Act (CARES) 14 A $2 trillion relief package for US citizens and businesses affected by the COVID-19 pandemic and resulting economic impact of mandatory closures, social distancing orders, supply chain disruptions, unemployment and reduced consumer demand.
  14. 14. Key CARES Act Benefits 15 For Your Independent Business • Deferring employer side of SS tax • Refunds for NOLs carried back • Cash grants for immediate assistance • Payroll loans with potential forgiveness For You as an Individual • Expanded Unemployment assistance • Direct cash to your bank account • Retirement account withdrawals • Tax day extended to July 15
  15. 15. Self-employment taxes or employer side Social Security payment deferred 16 • Employers and self-employed individuals may defer payment of the employer share of the Social Security tax. • Employers are generally responsible for paying a 6.2 percent Social Security tax on employee wages, matching what the employees pay. • Self-employed workers pay both sides as they are their own employer and can defer 50% attributable to SS tax. • Repayment is required over two years, half by December 31, 2021 and the other half by December 31, 2022. SECTION 2302. DELAY OF PAYMENT OF EMPLOYER PAYROLL TAXES Corporations may defer the employer side of Social Security. Sole Proprietors and pass-through entities may defer half of self- employment tax.
  16. 16. Net Operations Loss (carrybacks) for income tax refunds and tax reductions 17 • The provision relaxes the limitations on a company’s use of losses. • Net operating losses (NOL) are no longer subject to a taxable income limitation and can now be carried back to reduce income in a prior tax year. • The provision provides that an NOL arising in a tax year beginning in 2018, 2019, or 2020 can be carried back five years. • Please check with your tax professional to see if this can help you. SECTION 2303 AND 2304. MODIFICATIONS FOR NET OPERATING LOSSES Allows businesses, including pass-through entities and sole proprietors, to utilize losses and amend prior year returns for additional cash flow.
  17. 17. Low Interest loans and immediate grants 18 • Expands eligibility for Economic Injury Disaster Loans (EIDL) for any individual operating as a sole proprietor or an independent contractor during the covered period (January 31, 2020 to December 31, 2020). • Administered directly by the SBA for payroll related as well as other operating expenses. • Loans based solely on an applicant’s credit score • SBA must verify that the entity is an eligible applicant for an EIDL loan. This approval shall take the form of a certification under penalty of perjury by the applicant that they are eligible. SECTION 1110. EMERGENCY EIDL GRANTS WWW.COVID19RELIEF.SBA.GOV $10,000 available via emergency grant which the SBA must distribute within 3 days. The applicant does not have to repay.
  18. 18. Low interest payroll and overhead loans – potentially forgiven 19 • Government guaranteed loan, administered by lenders (banks) - available for independents. • Borrowers must sign a certification of necessity to obtain • Proceeds must be used for payroll and overhead-related costs • The loan amount is calculated at 2.5 times the company’s average monthly payroll costs. • Loan forgiveness is equal to the amount spent by the borrower during an 8-week period after the origination date of the loan. • Amounts forgiven will be reduced proportionally if payroll is reduced during this period • EIDL grants must be deducted from total amounts forgiven SECTION 1102; 1106. PAYCHECK PROTECTION PROGRAM LOANS AT 4 PERCENT INTEREST Can take a potentially forgivable loan for 8 weeks of qualified payroll and overhead.
  19. 19. What happens if you are among the millions of Americans not able to work and are in need of unemployment assistance?
  20. 20. Expanded unemployment benefits now include independents 21 • Pandemic Unemployment Assistance adds self-employed and gig workers who were previously unable to claim unemployment benefits. • Claim unemployment immediately without a waiting period, subject to state provisions. • Emergency increase in unemployment compensation benefits, providing an additional $600 per week payment for up to four months. Paid on top of the standard state unemployment program. • Funding for short-term compensation and partial work reduction. This is for people who have had their work reduced; they are entitled to receive a pro-rated unemployment benefit. SECTIONS 3603. 2102.2104.2105.2107.2108. ADMINISTERED BY EACH STATE $600 per week in additional unemployment benefits in addition to state compensation To apply, go to your state’s website for unemployment.
  21. 21. Finally, here are some benefits that are available to all individuals and effective immediately
  22. 22. Direct cash to your bank account 23 • All individuals with an adjusted gross income (AGI) of $75,000 or less ($112,500 for head of household filers, and $150,000 for married filing jointly) will receive recovery checks of $1,200. Increase by $500 for every child under 17 years of age. • These amounts phase out on a pro-rata based as follows: • $99,000 for individuals, $146,000 for head of household filers, and $198,000 for joint filers • There appears to be no phase out of the $500 per child • Based on AGI of 2019 tax returns if filed, and if that tax return was not filed, on the 2018 return • If you have both W-2 income and pass through income, it all ends up on the AGI line of the 1040 return SECTION 2201. 2020 RECOVERY REBATES FOR INDIVIDUALS $1,200 per individual and $500 per child, subject to phase-outs
  23. 23. Relaxed rules on early withdrawal of retirement account funds 24 • Withdraw up to $100,000 from qualified retirement accounts, like IRAs and 401(k)s without penalty if you, a spouse or a dependent are diagnosed with COVID-19, or if you experience adverse financial consequences as a result of the pandemic. • Subject to tax over three years or must be paid back to the account within three years without regard to that year’s cap on contributions. • Or, take a loan up to $100,000 (increased the standard $50,000) with repayment as far out as 6 years. Also, existing employer required loan repayments have been suspended for up to 1 year SECTION 2202. SPECIAL RULES FOR USE OF RETIREMENT FUNDS Take up to $100,000 from qualified retirement accounts as a withdrawal or loan, depending on circumstances.
  24. 24. Federal income tax filings deadline extended three months to July 15 25 • Tax deadlines for individuals and pass-through entities like Sole Proprietorships have been bumped back to July 15 from April 15. This includes payment of quarterly taxes for the first quarter. At present, second-quarter taxes are still due on June 15. • If you do elect to pay your taxes on time, refunds are being expedited.
  25. 25. © 2020, MBO Partners, Inc. Why a modern business model is needed to respond to events like COVID-19 © 2020, MBO Partners, Inc. Why a modern business model is needed to respond to events like COVID-19
  26. 26. PROGRESS IS DEFLATIONARY FRACTIONALIZATIO N OF EVERYTHING RATE OF CHANGE IS ACCELERATING THE POWER OF KNOWLEDGE FLOWS Four forces changing our world: ONLY MODERN BUSINESS MODELS WILL THRIVE 27
  27. 27. 28 CaresForIndependents.com
  28. 28. www.mbopartners.com

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