On Monday, April 27, the U.S. government resumed paying out billions of dollars in low-interest lending for businesses with a maximum of 500 employees. This is the second stimulus bill that has begun to provide relief for businesses under the Payment Protection Program (PPP). This stimulus package is expected to run out fast, so you have to be able to understand what you need to do and how it works if you hope to use it.
Understanding this second round of government assistance can be challenging, that is why we had Mark Kohler on our Secrets of Top Selling Agents webinar. Kohler, a notable CPA and attorney provided viewers with an understanding of how the stimulus package works and how it will provide assistance to real estate agents.
What is the Second Stimulus Package?
The second stimulus package comes as businesses struggle to ensure their employees are paid during this time. This bill, authorized on April 24, will provide an additional $310 billion in funds for the program and also provides 1 percent interest loans to businesses with less than 500 employees.
Strategies That Affect Everyone
1. Stimulus checks or wire transfers. You may have already received a stimulus deposit to your bank account. However, there are many Americans who have not yet received their stimulus check as a result of checks not being sent out until recently.
2. SBA Loan Forbearance. You or the clients that you serve may have a Small Business Administration 504 (SBA) Loan in place. According to Kohler, if you have one of these loans, the bank that issued you the SBA loan will begin to make the payments for you for six months. This is not a part of the Payment Protection Program, but is an option for those who have one of these loans. What you need to know is that the bank is making payments on the principal and interest of the loan during this time and that there are no tax repercussions after the six-month timeframe has completed. You or your clients do not need to apply for this, but Kohler suggested reaching out to your bank to ensure that the bank is making these payments, as they started on April 1.
3. Retirement Plan Provisions. This provision may enable you or your clients to take money out of a retirement account and defer the taxes for 3 years or return the money back to the account and pay no taxes or penalty. While this is not the best option, it can provide emergency financial assistance. You can take out up to $100,000. Kohler suggested taking money out of your IRA and rolling it into your 401K if needed. Then, you can borrow from that and put the money back into your 401K or IRA over the course of five years. This can be done if you are still employed. You can only borrow out of your 401K during this time whether it is a personal 401K or your company-originated 401K.
Should You File for Unemployment?
Under the Payment Protection Program (PPP), you have the option of filing for unemployment and collecting the benefits. Kohler states if you are not currently working and don’t have any business or closings, that this might be the best bet for you. You have the option to collect up to $1,000 a week or up to $4,000 a month for up to three months.
This sounds good, but remember that to qualify for unemployment, you have to be fully unemployed. If your real estate business is suffering, but your 9-5 job is still paying you, you are not unemployed, and you will not qualify for unemployment benefits.
Kohler suggested that the best thing that you can do to qualify for unemployment benefits is to take a step back from your business, keep networking, but stop all business for three months until things go back to normal so that you can collect the benefits that you might need. This does not mean that you are a failure, but it means that you are taking a step back to get your bearings, do some training and regroup when things are back to normal.
Options for Unemployment Under the PPP
You should take advantage of every opportunity you have when it comes to qualifying for unemployment under the PPP. There are two things you need to know when it comes to the options for unemployment under the PPP. What Kohler describes as “The Fork in the Road.”
1. Unemployment Under the PPP. Most REALTORS® will receive anywhere between $8,000 and $20,000 with a cap of $20,800. You can apply for a 1 percent loan repayable over 24 months at a bank, or can collect unemployment benefits, FMLA and emergency paid sick leave. If you file under the PPP, you subtract what you have received from the Economic Injury Disaster Loan (EIDL).
2. Employee Retention Tax Credit (ERTC). If you are a broker, you can receive $5,000 per employee that you are supporting. If you opt to receive the ERTC, you cannot do the PPP and the employee has to be an official W-2 receiving employee, and not a 1099. You can also receive a payroll tax deposit deferral for up to two years.