David N. McCullough CPA PC

Financial, Tax, and Family Office Services

Overview of Cares Act sent to clients April 2, 2020

The CARES Act which was passed last week by Congress and signed by the President has a number of provisions that effect you and your business. I’ll try the summarize the most relevant and timely issues here. This is a broad overview – some may not be relevant to you/your business but I hope to focus the conversation into understandable pieces. I will be reaching out to you by phone, but there’s many of you and only one of me – please be patient if I’m not reachable immediately.


First, the Payoll Protection Plan  (PPP for short). Your bank will administer this item. Generally, when you apply with the correct documentation, you’ll receive a forgivable loan equal to two and a half months’ of your eligible payroll. If I handle your payroll, I’ll provide the documentation to submit. I will discuss with you what “eligible” payroll means. This loan is forgivable – if the proceeds of the loan are spent within 2 months on payroll, rent, or health insurance, the amounts spent will be fully forgiven. Banks will have very quick turnaround – it is expected that you see the funds within a few days. Additionally, this amount will be tax free. This is the high level view- we will discuss exceptions and questions by telephone.


Next, Economic Injury Disaster Loans (EIDL). These will be administered by the Small Business Administration. The link to the application is found, as of today, at https://covid19relief.sba.gov/#/.  You have to certify that you have suffered economic injury. I will discuss the parameters with you and discuss documentation procedures. The amount of economic injury sustained is obviously unknown right now; when you apply, you have insured your place in line to determine and document your damages, and only then the SBA will review the loan package. Loans will be limited to the lesser of damage sustained or $2 million. We don’t know how long it will take for the SBA to review the loan packages BUT if you have a good-faith belief that you have economic injury, the SBA will send you $10,000 within three days to help keep your business alive until the loan can be processed. This $10,000 will be tax free to you, even if a disaster loan is not subsequently granted. Please – only apply if you really have incurred economic injury – there are severe penalties for fraud.


There are other provisions of the CARES act that may affect you – I will outline these later. The two provisions outlined above are the most time-sensitive – apply with your bank as soon as the bank provides the necessary forms, and apply with the SBA if you are eligible immediately.


This is brand new legislation with a lot of unknowns, and every business in the country is also applying and every CPA is fielding dozens of calls – please be patient with me  and others during the next few weeks.

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