The Stimulus Bill: Decoded for Carriers & Owner Operators

Updated: Apr 20



The United States government has passed multiple stimulus packages after imposing stay-at-home orders related COVID-19 in order to boost the economy and to curb unemployment. These packages are new to everyone and it has been difficult to understand where they apply and when they go into effect.


Before going deeper into explaining the details of the stimulus package we want to clarify that this is all based on personal experience and information from different resources. If you have additional questions or if this doesn't apply to your situation please reach out to a tax professional.


A stimulus package is defined as a government approved economic measure to stimulate a negatively impacted economy. It is a part of the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act. This law was passed in response to the devastating impact to the US economy as a result of the 2020 pandemic. The three stimulus packages available as part of the Act are:

  • PPP (Payroll Protection Program)

  • EIDL (Economic Injury Disaster Loan Emergency Advance)

  • EIP (Economic Impact Payment) program

Payroll Protection Program (PPP)


This is a loan designed to assist in covering the cost of payroll, most mortgage interest, rent and utilities over a 2-and-a-half-month period. All payroll costs are capped at $100,000, which means that any employee making more than $100,000 (including designated taxes and health benefits) cannot have those additional funds reported for loan eligibility. Loan payments are deferred for 6 months once funds have been distributed. The repayment of the loan must be made over a 2-year period with a fixed interest rate of 1%. It is important to note that the interest clock starts immediately, following the disbursement of funds.The PPP loan may be forgivable depending on whether the applying company meets the forgiveness criteria. This criterion includes maintaining or rehiring all employees prior to June 30, 2020 and only using 25% of the loan to pay mortgage interest, rent and/or utilities.


You need to make sure your financial institution is processing these loans and work closely with them to collect all the data required to file otherwise the whole process can seem a bit daunting. As of April 23rd, the House is expected to approve an additional $310 billion to be placed in the PPP. Businesses looking to apply should prepare all the necessary documents in advance so they are prepared to submit as soon as the funding becomes available.


Economic Injury Disaster Loan


Contrary to the PPP, this loan does not have stipulations for what it can and cannot be used for and the maximum loan amount is $2 million. With this loan, the applying company may request a $10,000 advance if their revenues are suffering from the current pandemic. This seems to be a highly discussed topic, as companies are only allowed to request up to $1,000 per employee with a maximum advance request of $10,000. Noteworthy, the $10,000 maximum advance is said to be forgiven without stipulations. Repayment of this loan must be made within 30 years and the interest is 3.75% for businesses and 2.75% for non-profit companies. The repayment terms will also be determined based on your ability to pay the loan back. The companies that qualify for this loan are those with 500 or less employees, and this includes sole proprietors, independent contractors, and self-employed individuals.


This option is less appealing as it does not have the potential to be forgiven. However, it can be a necessary step to take when thinking about recovery and longevity for a carrier or broker that might be suffering heavy losses due to COVID-19. It is important to weigh all risks and options when considering applying and to understand your business’ repayment obligation and how that can affect cash flow. This loan, however, is much easier to apply for and requires less hoops to jump through. The requester must submit their application via the SBA website as opposed to going directly through their SBA approved financial institution.


Economic Impact Payment Program


The final stimulus program may not impact carriers or brokers directly but, instead their company employees and contractors. This program is called the Economic Impact Payment program, which puts up to $1200 in American citizen’s pockets, depending on how much they reported to have earned in 2018 or 2019. Those who are citizens of the US, have a valid SSN and have an adjusted gross income below the established amounts based on filing status and number of qualifying children are eligible for this program. For individual tax filers, the adjusted gross income must be $75,000 or lower and joint tax filers must have an adjusted gross income of $150,000 or lower. Filers who have an adjusted gross income above these amounts will have $5 deducted for every $100. Individual filers who have an adjusted gross income of $99,000 or more and joint filers who have an adjusted gross income of $198,000 or more (with no children) will not be eligible. Not only will each qualifying individual receive $1200, but if you have children under the age of 17 you will receive $500 for each child.


The EIP is not taxable income. It is, however, an advance of a refundable tax credit for this year’s tax return. If you do not qualify right now but you are eligible based on this year’s adjusted gross income, you will be able to claim your tax credit during next year’s filing. How does this affect taxes filed in 2021? Lets say that you file your 2020 taxes and you qualify for a tax return of $1200 but you received the $1200 EIP. In this case unfortunately you will not receive your calculated refund. If you file your 2020 taxes and end up owing money, the $1200 EIP does NOT have to be paid back.


How Do PPP and EID Compare?


Both programs can assist in providing the necessary funds needed to survive till the pandemic is over and business can return to normal levels. Since no one can predict when that will be one option may seem to make more sense then the other based on your particular business and model. Companies may apply for both programs, but they are not able to use the funds received for the same purpose. If your company applies for the PPP with the purpose of using it solely on payroll costs, you cannot use the EIDL on payroll costs.


In the end make sure to weigh all your options, ask questions, and think about how these programs will impact your company in the long run too and not just right now.


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