The CARES Act Overview: Small Business Owners
This past Friday Congress passed the CARES Act which includes a number of individual, family and small business provisions. We are evaluating the legislation, so we can provide timely advice to our clients. The CARES Act includes over $350B of benefits to small business and self-employed individuals, as well as one-time recovery rebate payments to taxpayers, expanded unemployment, and more. The magnitude of the relief package requires careful study and quick action – there is no guarantee of how long the money will last.
There are several options available to small businesses who need relief:
Coronavirus Relief options
-Employee Retention Credit
-Deferral of Payment of Payroll Taxes
Please note that both small businesses and self-employed individuals can qualify for up to a $10,000 grant as a part of the Economic Disaster Loan program through the Small Business Administration (“SBA”). Even if your loan is denied you will be able to keep the grant. Cash is expected to be disbursed within a week of application. The application process is simple, completely online, and should only take 15 minutes to complete.
Small Business Relief Options
-Paid sick leave required to be provided by employers and they get a credit against their taxes for providing it.
-Refundable payroll tax credit for 50 percent of wages paid by employers to employees, if 1) operations were fully or partially suspended, due to a COVID-19-related shut-down order, or 2) gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
-For eligible employers with 100 or fewer full-time employees whether the employer is open for business or subject to a shut-down order is irrelevant.
-The credit is provided for the first $10,000 of compensation, including health benefits, paid to an eligible employee. The credit is provided for wages paid or incurred from March 13, 2020, through December 31, 2020.
-Employers and self-employed individuals can defer payment of the employer share of the Social Security tax (6.2%). Half to be repaid by 12/31/21 and the other half by 12/31/22.
-Small businesses who do not take the previous payroll tax credit (not the deferral) may qualify for loans which are either 1) forgiven (if used for payroll, mortgage/rent, utilities and no employees are laid off) or, 2) if not used for those items in the specified time-frame, carry a maximum 4% interest rate and a term as long as 10 years.
-NOLs (Net Operating Losses) from a tax year beginning in 2018, 2019, or 2020 can be carried back five years, and the taxable income limitation is temporarily removed as well. (You may remember the Tax Cuts and Jobs Act of 2017 removed NOL carrybacks.)
-Error (from the Tax Cuts and Jobs Act of 2017) that disallowed expensing of some qualified improvement property corrected. This has been in the works for a while so it got added here where no one is paying attention to “pay-fors.”
Important Dates to Remember
April 3, 2020 for Small Business Owners
*pending SBA lenders opening the doors for applications
April 10, 2020 for Sole proprietors and Self-Employed
Links to forms:
Have questions about small business relief during the coronavirus pandemic? Reach out! We’d love to talk to you.