Two key recovery acts
Highlights of two major federal relief acts. Businesses should doublecheck with their lawyers or accountants for further details about these and other programs
Coronavirus Aid, Relief and Economic Security Act
The $2 trillion CARES Act offers help to businesses, individuals, federal agencies, state governments and local governments. Here are some of its provisions:
• Paycheck Protection Program: The $350 billion program encourages businesses to keep workers employed by providing government-backed loans from banks to businesses. Businesses that meet certain criteria won’t need to pay the loans back. How to get it: Contact your lender to see if they will participate or use this SBA search tool to find a lender: sba.gov/paycheckprotection/find
• SBA Economic Injury Disaster Loans: The act further opens the SBA’s EIDL program. How to get it: These loans come directly from the SBA: covid19relief.sba.gov/#/
• Business tax changes: The act includes the following highlights, but this is not a comprehensive list:
• Employee retention tax credit: Businesses are eligible for an employee retention tax credit if their operations were fully or partially suspended due to a COVID-19 shutdown order or gross receipts declined by more than 50 percent compared to the same quarter in the prior year. Eligible businesses can get a refundable 50 percent tax credit on wages up to $10,000 per employee. The credit can be obtained on wages paid or incurred from March 13 through Dec. 31. How to get it: Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxeswithheld from employees’ wages by the amount of the credit. To learn more: https://bit.ly/3b2l4zq.
• Social Security payment deferral: Starting in April, all employers could defer paying the 6.2 percent employer Social Security tax through Dec. 31. The deferred amounts are then paid in equal amounts over two years with deadlines of Dec. 31, 2021 and Dec. 31, 2022. (Business that have a Paycheck Protection loan forgiven are not eligible.) How to get it: Defer the payments until the end of the year and then pay by the end of year deadlines in 2021 and 2022.
• Net operating losses: If your business had a net operating loss in tax years beginning in 2018, 2019 or 2020, the loss can be now be carried back, five years instead. This may improve cash flow and liquidity. How to get it: Talk to your accountant.
• Interest expense deductions: For 2019 and 2020, the amount of interest expense businesses are allowed to deduct on their tax returns is increased to 50 percent from 30 percent of taxable income. How to get it: Talk to your accountant.
Families First Coronavirus Response Act
The act requires some employers to provide paid sick leave, paid family and medical leave, but offers tax credits for that and expanded unemployment insurance. (Small businesses with fewer than 50 employees are eligible for an exemption from the leave requirements relating to school closings or child care unavailability where the requirements would jeopardize the ability of the business to continue.) After tweaks under the CARES act, here are some key provisions:
• Paid family and medical leave: Capped at $200 per day and $10,000 total per employee.
• Paid sick leave: Capped at $511 per day and $5,110 total per employee. The amount drops to $200 per day and $2,000 total for sick leave taken by an employee to care for a family member in quarantine or care for a child whose school has closed.
• How to get it: Businesses can keep money that they would have deposited for payroll taxes, including taxes withheld from all employees. ♦