What small business owners need to know about the CARES Act

On March 27, 2020, the House passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act (also referred to as the 3rd Stimulus Package), a $2 trillion package aimed at providing essential relief to a struggling economy as a result of the coronavirus crisis. Some of the highlights of the package can be found below.

We've created a one-pager on the CARES Act to help you determine if you are eligible.

Paycheck Protection Program Loans

On March 31st, The Treasury Department & Small Business Administration (SBA) announced further details on the Paycheck Protection Program. This loan is designed to provide an incentive for small businesses to keep their employees on the payroll.

• Eligible recipients may qualify for a loan up to $10 million determined by 12 months of monthly average payroll costs
• These loans are 100% guaranteed without collateral or a personal guarantee, and if you use the loan for permitted purposes (at least 75% has to go towards payroll costs), and maintain employment and wage levels, the balance will be forgiven
• Loan payments will be deferred for six months
• You must apply through an eligible lender (SBA 7(a) lenders) - check with your bank to see if it is an SBA lender
• On July 4th the U.S. Government announced that thePPP has been extended to August 8, 2020.

Payroll Protection Program Flexibility Act (PPPFA)

• The recently passed PPPFA includes provisions to the original PPP act to help small businesses
• This includes modified eligibility criteria forEmployer Social Security Tax Deferral.
• Read more about these new provisions here.

Disaster Loan Assistance (EIDL)

The SBA is offering loans up to $2M with a low-interest rate for eligible businesses

• These loans are offered to small businesses in order for them to pay fixed debts, payroll, rent or mortgage payments, and existing accounts payable
• This program also includes an emergency grant of up to $10,000 per business which does not need to be repaid
• SBA loan recipients are offered the ability for long-term repayments, up to a maximum of 30 years, in an effort to keep payments affordable. Terms for the loans are determined on a case-by-case basis
• You can apply for the disaster loan assistance here

Employee Retention Credit

The Employee Retention Credit was launched by The Treasury Department and the Internal Revenue Service in order to encourage businesses to keep employees on their payroll.

• A refundable tax credit is being offered for 50% of up to $10,000 of qualified wages, per employee, and will be paid between March 13, 2020 and December 31, 2020
• The calculation includes wages and employer-provided health plan costs
• Certain limitations apply for this credit, which includes proof that an employer’s operations were fully or partially suspended or that an employer’s gross revenue dropped by 50% or more year-over-year
• A business can’t take advantage of both this credit and the PPP loan program, so it’s important to determine what works best for your business

Expanded Unemployment Insurance

Unemployment insurance has been expanded by 13 weeks and will include a four-month $600 enhancement of benefits, on top of what the state unemployment programs pay.

• The program was also expanded to include freelancers, furloughed employees and gig workers, such as Uber drivers. Read more here.

Direct Stimulus Payments

More than 90% of Americans qualify for a stimulus payment. Individuals who earn $75,000 or less in adjusted gross income would get direct payments of $1,200 each, with married couples earning up to $150,000 will receive $2,400.

• An additional $500 is being given per child under age 17 in each household
• These payments phase-out as income rises, phasing out entirely at $99,000 for an individual, $146,500 for a head-of-household and $198,000 for married couples.
• Estimate your payment with H&R Block's Stimulus calculator.

Tax Deferrals

Tax Filing Deadline Postponement

• The Treasury Secretary announced the April 15 tax-filing deadline has been extended to July 15, giving people more time to prepare and pay their taxes without interest or penalties during the coronavirus outbreak
• To see how these tax deferrals affect you, H&R Block has created a fact sheet on understanding the coronavirus (COVID-19) tax payment deadline changes.

Employer Social Security Tax Deferral

• Section 2302 of the CARES Acts permits businesses and self-employed individuals to defer the 6.2% employer portion of social security tax due between the enactment date of March 27 and Dec 31, 2020. The deferred tax amount will be due over the following two years: half by Dec. 31, 2021, and the other half by Dec. 31, 2022. Read more here
• Any employer who received forgiveness of a PPP loan is ineligible for this deferral

Form 941

• The IRS released a new tax form, 941, for the second quarter of 2020 onwards that is due July 31st, 2020.
• This form has significant changes allowing for reporting of FFCRA and CARES Act COVID-19 payroll tax relief policies. Learn more here.