HELP FOR BUSINESS OWNERS & SELF-EMPLOYED INDIVIDUALS
Businesses and self-employed individuals, independent contractors, “gig economy” workers, and individuals who were unable to start a new job or contract due to the pandemic are eligible for assistance with unemployment, deferred payments, loans, deferrals, tax credits, and much more.
- Expanded Unemployment Eligibility and Assistance
The CARES Act permits states to expand eligibility to provide Unemployment Compensation to workers who are not normally eligible for benefits, so long as their unemployment was connected to the COVID-19 pandemic. Expanded eligibility would provide benefits to self-employed individuals, independent contractors, “gig economy” workers, and individuals who were unable to start a new job or contract due to the pandemic. States are also permitted to provide an additional 13 weeks of unemployment benefits to workers who need beyond what is provided for in state and federal law.
- Deferred Payments
Employers and self-employed individuals can defer payment on the employer’s share of Social Security payroll taxes from March 27 – Dec. 31, 2020. The deferred tax can be paid over the following two years, with 50% required by Dec. 31, 2021, and the remaining 50% due by Dec. 31, 2022. Employers who utilize the SBA’s paycheck protection loan are not eligible.
- Business Loan Programs
Expansion of Small Business Administration (SBA) loan programs, specifically the Economic Injury Disaster and Paycheck Protection Program loan programs. Both programs are available to businesses with 500 or fewer employees.
- Economic Injury Disaster Loans – Relief up to $2 million that may be used for paid sick leave, payroll, rent/mortgage, and certain debt obligations and increased costs related to COVID-19. The coverage period runs Jan. 31 – Dec. 31, 2020.
- Paycheck Protection Program Loans – Relief calculated at 250% of the average salary expenditures/month for 2019, up to $10 million, and may be used for payroll, rent/mortgage interest, and utilities. All or a portion of these loans will be forgivable for businesses that maintain the same average payroll levels as in the previous year. The coverage period runs Feb. 15 – June 30, 2020.
- Emergency Economic Injury Grants – The CARES Act provides an advance of $10,000 to small businesses and nonprofits that apply for an SBA economic injury disaster loan. This funding will be received within three days of applying for the loan and does not need to be repaid. Your business can use this grant to provide paid sick leave to employees, maintain payroll, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments. These grants are available until the end of the year and are backdated to January 31, 2020 to allow those who have already applied for EIDLs to be eligible to also receive a grant.
- Debt Relief to new SBA Borrowers The stimulus includes $17 billion in funding to provide immediate relief to small businesses with standard SBA 7(a), 504, or microloans. Under this provision, SBA will cover all loan payments for existing SBA borrowers, including principal, interest, and fees, for six months. This relief will also be available to new borrowers who take out an SBA loan before September 2020.
- Assistance to Mid-sized Businesses
The CARES Act also creates a direct loan program for businesses and eligible nonprofit outfits with 500 to 10,000 employees. These loans have interest rates up to 2% and no interest or principal due for the first six months. Companies seeking aid must agree to a few requirements, including using the loan “to retain at least 90 percent of the recipient’s workforce, at full compensation and benefits, until September 30, 2020.” The recipient must also agree to not outsource jobs, to get rid of collective bargaining agreements, and to pay dividends or stock buybacks.
- Federal Emergency Paid Sick Leave Requirements
The federal Families First Coronavirus Response Act requires employers to provide up to two weeks of fully-paid emergency sick leave to employees to self-quarantine, seek a diagnosis, or receive treatment for COVID-19. In order to offset the impact to small- and medium-sized businesses, employers are provided a refundable payroll tax credit to cover 100 percent of the cost of emergency paid sick leave wages. There is also a refundable income tax credit for self-employed individuals. These requirements apply to employers with fewer than 500 employees, state and local governments, and employers with employees who work under a multi-employer collective agreement. The Department of Labor has provided guidance for employers and a comprehensive list of questions and answers.
- Federal Paid Family Leave Requirements
The federal Families First Coronavirus Response Act also requires employers to offer 12 weeks of paid family leave for an employee with a minor child in the event of the closure of the child’s school or place of childcare. The first two weeks are unpaid, but the employee can overlap this with the two weeks of emergency paid sick leave. This benefit must replace at least two-thirds of the employee’s wages up to a maximum of $200 per day. In order to offset the impact to small- and medium-sized businesses, employers are provided a refundable paid family leave payroll tax credit that offsets 100 percent of employer costs for providing mandated paid family leave. The credit also offsets the employer contribution for health insurance premiums for the employee for the period of leave. These requirements apply to employers with fewer than 500 employees, state and local governments, and employers with employees who work under a multiemployer collective agreement. The Department of Labor has provided guidance for employers and a comprehensive list of questions and answers.
- Deferral in payroll taxes
The CARES Act allows businesses to delay the payroll taxes typically paid by employers on wages. The 6.2 percent tax on wages businesses normally pay would instead have to be paid over the following two years, with the first half due Dec. 31, 2021, and the second half due at the end of 2022. Deferral of payroll taxes is not provided to employers receiving assistance through the Small Business Administration Paycheck Protection Program.
- Employee Retention Tax Credit
The federal Coronavirus Aid, Relief, and Economic Security (CARES) Act created a new Employee Retention Tax Credit through December 31, 2020. The Employee Retention Credit is a refundable payroll tax credit for 50 percent of wages paid by employers to employees during the COVID-19 pandemic, up to $10,000 in wages and compensation per employee. The credit is available to employers, including non-profits, whose operations have been fully or partially suspended as a result of a government order limiting commerce, travel or group meetings. The credit is also provided to employers who have experienced a greater than 50 percent reduction in quarterly receipts, measured on a year-over-year basis. The Employee Retention Credit is not available to employers receiving assistance through the Paycheck Protection Program.
- Retail tax fix
The CARES Act will allow retailers, restaurateurs and hotels to either immediately deduct from their taxes the full cost of improvements to restaurant, retail, and most other property (classified as 15-year property), or allow these costs to be depreciated over 20 years in the case of a real property trade or business.
Return to our blog article: What You Need to Know About The Cares Act