CARES Act: Small Business Overview

This information is constantly changing. We will update it as we can. Please make sure to review the PPP loan under the SBA loan section below. It is something that most of our clients could and should take advantage of.

Employee Retention Credit

Qualifying employers can take a tax credit equal to 50% of employee’s wages if your business was entirely or partially shut down or closed due to COVID-19 related orders or if gross receipts declined by more than 50% when compared to the same quarter of the year before. More details are available on the IRS website here.

Delay in Payment of Employer Payroll Taxes

Although this provision is allowed we do not recommend it. Staying in the habit of paying payroll taxes is very important. Penalties for not paying payroll taxes at the deferred time can be very high.

This provision allows employers to defer payment their portion of Social Security (FICA) tax for wages from March 27, 2020 to December 31, 2020. Half of the taxes owed will be due by December 31, 2021 and the other half will be due on December 31, 2022.

In the example below the only portion that you would be able to defer would be the $6,200 of the employer’s portion of FICA or Social Security.

  • $100,000 gross wages from March 27 – December 31, 2020
  • $6,200 FICA, employee’s share
  • $1,450 Medicare, employee’s share
  • $6,200 FICA, employer’s share
  • $1,450 Medicare, employer’s share

Mandatory Paid Sick Leave and E-FMLA

See our post here describing the leave policy. Employers would receive a tax credit equal to the amount of paid sick leave and expanded family medical leave paid and the related taxes.

SBA Loans

Paycheck Protection Plan Loan (PPP Loan)

This loan is applied for through banks that are qualified to do SBA lending. Applications may begin to be sent beginning April 3, 2020. Please reach out to your banker or if you need a referral please let us know.

This loan allows you to receive up to 2.5x your average monthly payroll. If within the 8 week following the close of the loan you use the funds to pay payroll, rent, utilities or interest on loans, the amount you pay for those expenses may be forgiven and you won’t have to pay back that portion of the loan.

Most businesses will qualify including self-employed individuals (Sole Proprietors, Partnerships, etc.). There are many rules as to what is included in your average payroll and reductions in forgiveness if you have less employees than in the past. WCG Inc, another CPA firm, has a great post with many of those details.

Economic Injury Disaster Loan (EILD) and $10k Grant

This loan is applied for directly on the SBA website here. It is a basic application that is available right now.

In applying for this loan you can request that the SBA send you a one-time $10,000 grant that you do not need to pay back unless you also are participating in the PPP loan above. The $10k should arrive within a week of submitting your application.

This loan is essentially just a loan that is much easier to qualify for and the terms are favorable (3.75% interest rate, up to 30 year amortization). The entire country is in a disaster are due to COVID-19 so everyone should be eligible

Additional Resources