CARES Act Info
As always, we try our very best to keep our clients and friends of the firm up-to-date when it comes to important tax information. On Friday, March 27, 2020 an unprecedented $2.2 trillion stimulus package to alleviate the economic devastation of the coronavirus pandemic was signed by President Donald Trump into law. Here are major elements of the plan that pertain to most of our clients regarding The Coronavirus Aid, Relief and Economic Security (CARES) Act.
DIRECT PAYMENTS TO AMERICANS
Direct payments of up to $1,200 with additional payments of $500 per child. Payments would be phased out for those earning more than $75,000 a year. Those earning more than $99,000 would not be eligible.
ENHANCED UNEMPLOYMENT AID
Payments for jobless workers would increase by $600 per week. Laid-off workers would get those payments for up to four months. Regular benefits, which typically run out after six months in most states, would be extended for an additional 13 weeks.
Self-employed workers, independent contractors and those who typically don’t qualify for unemployment benefits would be eligible. The government would also partially make up wages for workers whose hours are scaled back, in an effort to encourage employers to avoid layoffs.
SMALL BUSINESS LOANS AND GRANTS
Loans for businesses that have fewer than 500 employees could be partially forgiven if they are used for employee salaries, rent, mortgage interest and utility costs. The bill also includes emergency grants for small business. It’s important to note that it appears that you cannot obtain a loan under this legislation AND also claim tax credits provided for the same types of expenses.
CARES includes the Paycheck Protection Program that expands Small Business Administration (“SBA”) support for small businesses (including nonprofit organizations), generally those with less than 500 employees. Every small business should consider applying for a loan through this program that is designed to provide low-interest loans equal to essentially 2 ½ months of average payroll costs. Also note that part or even all of that loan may be forgiven depending on the extent to which the business retains its employees for the period February 15, 2020 through June 20, 2020.
CARES includes additional access to loans for small and midsize businesses. This article by RSM US LLP that describes three options, one of which is the Paycheck Protection Program. https://realeconomy.rsmus.com/cares-act-expands-access-to-loans-for-small-and-midsize-businesses/
CARES also includes several other provisions designed to help businesses and individuals navigate the economy the COVID-19 pandemic created. This article https://rsmus.com/what-we-do/services/tax/federal-tax/u-s-senate-finalizes-covid-19-legislation-sends-to-house-for-vo.html includes a discussion of most of the provisions in the 880-page Bill. This is based on the Senate bill which then did pass the House and was signed into law.
TAX CUTS
– A refundable 50 percent payroll tax credit for businesses affected by the coronavirus, to encourage employee retention. Employers would also be able to defer payment of those taxes if necessary.
– Loosened tax deductions for interest and operating losses.
– Suspension of penalties for people who tap their retirement funds early.
– Tax write-offs to encourage charitable deductions and encourage employers to help pay off student loans.
As with any new legislation, rules and regulations for how this law will be implemented are not yet available. Many of those will become available in the coming days and weeks. Please reach out to us for specific questions of how this might affect your business. Below are more links with other related information.
For information about coronavirus for small businesses from the U.S. Chamber of Commerce
https://www.uschamber.com/co/small-business-coronavirus
https://www.uschamber.com/coronavirus?iesrc=ctr.
For information about the CARES Act loans
https://www.uschamber.com/report/coronavirus-emergency-loans-guide-and-checklist-small-businesses
https://www.uschamber.com/co/start/strategy/cares-act-small-business-guide
For information about the Families First Coronavirus Response Act
https://www.dol.gov/agencies/whd/pandemic
IRS link to CARES Act
Treasury Department