We’ve been keeping a close eye on the Democratic HEROES and Republican HEALS Acts debate among Congress because of the widespread impact to you and the economy. Our report last week (Link to article) gave you a run down of the differences between them and mentioned the impending August 7th deadline.
What we didn’t mention was what would happen if no agreement could be reached. And it wasn’t.
It turns out that over the past weekend Trump made good on his promise to step in if this couldn’t be solved in time by signing an Executive Action into existence. It adopted neither of the plans perfectly and became a hybrid of its own.
It addressed 4 things considered crucial:
The previously debated weekly bump of $600 versus $200 was met in the middle at $400. In the new version $300 is to come from the Federal Government’s pocketbook and $100 from the State’s Coronavirus benefits they received earlier this year. An individual first needs to qualify for $100 in aid from their state prior to receiving the $300 federal benefit.
With many states experiencing cash flow shortages, it is unsure if the States will agree to participate. However, the current Federally earmarked unemployment pot of money is predicted to last another 5 weeks before it runs out, likely making this a temporary solution.
Payroll Tax Change
The executive order provides for a payroll tax deferral of the employee’s 6.2% of Social Security tax beginning September 1, 2020 through December 31, 2020. The payroll tax deferral is for any employee whose wages are generally less than $4,000 payable during any bi-weekly pay period. ($4,333.34 for a semi-monthly pay period, $2,000 for a weekly pay period, and $8,666.67 for a monthly pay period) The wage limit is determined on a pre-tax basis. Keep in mind this is currently not a payroll tax cut. It is a payroll tax deferral meaning an employee would have to have any deferred Social Security from September 1 – December 31, 2020 withheld in 2021 unless there is legislation to eliminate the obligation to pay the taxes that were deferred.
Take note that these changes will require additional changes to the Form 941 for the Q3 quarterly reporting. Many questions remain unanswered related to the deferral. More information will be shared as additional guidance is released.
The Secretary of the Treasury and the Secretary of Housing and Urban Development have been asked to identify any and all available Federal funds to provide temporary financial assistance to renters and homeowners who are struggling to meet their monthly rent or mortgage obligations. The executive order does not promise more aid nor does it ban evictions.
Past due rent is becoming a major issue across America and will have far reaching impact. A new study by the Aspen Institute shows that 30-40 million people will be close to risking eviction in the next several months. “While methodologies differ, these analyses converge on a dire prediction: If conditions do not change, 29-43% of renter households could be at risk of eviction by the end of the year.” When millions of renters are behind on their rent it has epic domino effect for landlords and banks as foreclosures will also loom.
Student Loan Suspension
The executive order extends the suspension of payment and the waiver of all interest on student loans held by the Department of Education until December 31, 2020. The suspension was set to expire on September 30, 2020 as part of the CARES Act.
What has yet to be solved:
- PPP Ends. The program expired Saturday closing the door on new applications. The future of forgiveness modifications, or a second round of lending remains uncertain. Those awaiting forgiveness or needing new funds will want to keep their eye on this development.
- $1200 Stimulus Checks Not Cut. No folks, these are not coming to your bank accounts just yet.
- Agriculture Assistance. Once again, there is no final ruling on this either. We are watching.
- State Funding. Expect various degrees of state funding to still be debated.
Don’t get too comfortable. There’s still a fight to see if this new Executive Action will even hold. A President isn’t allowed to spend money himself, however a loophole may be that the money was coming from previous dollars allocated for Coronavirus relief.
We will release more information as it becomes clear. In the meantime, if you have questions relating to your business during these unprecedented times, please contact our experts today. We’re here to help!