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28
Mar

CARES Act LAW breakdown: Stimulus Bill Benefits for Small Businesses due to Coronavirus Covid-19 Pandemic

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Warning

We are no longer updating this blog post due to ongoing legislative changes. This is outdated information. Please refer to https://www.sba.gov/funding-programs/loans/covid-19-relief-options and to your state and local offices for more information. We are filing PPP Round 1 and Round 2 Applications, and Forgiveness Applications for existing clients only. Please contact us if you need assistance. 

Decide What You Qualify For and What is Right for You

CARES Act: Insights on the Stimulus Bill Benefits to Small Businesses

Highlight of Benefits to Businesses: 

  1. “Payroll Protection Program” SBA 7(a) loan expansion (go to SBA to learn more):  is to provide forgiveness of the loan for 8 weeks of Payroll (including Group Health Care), Rent (or business location Mortgage interest), and Utilities.
    • If you just laid someone off, you can rehire them without penalty and the government wants you to do this. (This differs from what was being said in many places on Tuesday, that it was in your employee’s best interest to let them go, so they can get Unemployment Benefits immediately). The forgiveness portion will be decreased or dinged per employee that was laid off. 
    • All SBA Lenders are working for fulfill these loans. It is guaranteed by the Federal Government, not by you or the loan provider, and you don’t have to have collateral to back the loan. See links above of where to apply.
    • This loan has a maturity of 2 years and an interest rate of 1%.
    • The amount you qualify for is up to 10million and limited by the qualifying core expenses of Payroll, Rent, Utilities, and Mortgage Insurance paid in Jan – Dec 2019.
    • Business must be operational as of Feb 21, 2020.
    • While Forgiveness of the Loan use is limited to Rent (or Mortgage Interest), Payroll, and Utilities, the Loan can also be used for Insurance Premiums and other Current Payables. (but cannot be used for Debt Consolidation aka paying existing debt).
    • the PPP opened Friday March 3 for Corporate entities and Friday March 10 for Sole Proprietors, but remains open for all entities. However, the funds are limited and it is based on a first come first serve basis.
    • It is best to apply where you have a business checking or debt account. Most banks have a link to their application process on their home page.
    • It takes about 20 mins.
    • Depending on your entity type, you’ll need from Jan – Dec 2019: 
      1. Corporate entities: Payroll Paid (Gross Wage + Federal Taxes paid by Company) Note: Distributions do not count.
      2. Self Employed Sole Proprietor or Single Member LLC: Net Income (aka Self Employment Pay) + Payroll paid to employees. Note: Owners Draws do not count. 
      3. there is a Less excess of $100k question and this is where you deduct any individual wage amount paid over $100k. (Example: Wage is $118,000, deduct excess of $18,000)
      4. Group Health or Retirement Plans are entered separately. 
      5. State Payroll Tax is entered separately. 
      6. Average Monthly applicable pay is the Employer’s Annual Payroll Cost / 12 months
      7. Rent 
      8. Utilities
  2. SBA EIDL’s or Disaster Loans (click to apply): the areas for these have expanded, but they are still only eligible to qualified areas of Disaster. See links at top of this page for more information on the SBA site. You can only receive benefits from one SBA Loan, not both. So if you receive a Disaster Loan under the Coronavirus Pandemic, you are not also eligible for the SBA 7(a) CARES Act expansion for the Paycheck Protection Program. 
    • Disaster Loans borrowers can receive a $10,000 emergency grant cash advance that can be forgiven if spent on paid leave, maintaining payroll, increased costs due to supply chain disruption, mortgage or lease payments or repaying obligations that cannot be met due to revenue losses. This is important – do your math to know if the 10k advance is more beneficial than the 8-week Forgiveness of the Payroll Protection Program. For most small businesses, the PPP will be the better option. 
    • The rate is 3.75% up to 2million and can be up to a 30 year fixed loan. 
    • These do require a Personal guarantee if the Loan amount is above $200,000. 
    • the EIDL form takes about 10mins: 
      1. For this you’ll need your totals for Feb 2019-Jan 2020 
        1. Gross Income
        2. Cost of Goods Sold
        3. check the box that you do want the $10k advance – this has now been confirmed that it is limited to $1k per employee 
  3. Unemployment Insurance has been expanded to cover wages for reduced workers.
    • For workers that have reduced hours, and cannot work from home, they can get unemployment benefits. The Federal Stimulus package adds up to $600 per week per person, based on their pay and is in addition to qualified State Unemployment Insurance coverage.
    • This is open to for furloughed employees, part time, business owners, freelance contractors and anyone unable to work because of the pandemic shut down.
    • If you qualify for one of the SBA loans, the Unemployment Insurance benefit can still be used, because the Loan is for wages paid, while the UI covers reduction in wages that are not paid. 
    • File claims directly with your states UI website. Click here to find your State’s website. 
  4. Employee Retention Payroll Tax Credit:
    • As of the March 18 Families First Coronavirus Response Act, this was only for those who are Sick or required to be Quarantined while caring for a Sick person and unable to work. This was limited to $200 per day and for 10 days.
    • As of the March 27 writing of this post, the CARE Act has become Law and has amended this and it is now available for anyone that is unable to work due to the the Covid-19 Stay at Home efforts.Websites, such as the IRS newsroom have not issued updated guidance on this. I will update as more guidance becomes available.
    • This reduction in employer-paid payroll tax as a credit towards wages paid is limited to 50% of employee wage up to $10,000 per Quarter. If paid, it will count as an overpayment and be promptly refunded. I have reached out to Gusto, our preferred payroll provider, to discover how they will be handling this, and how it is reported and what we need to do to comply and receive this tax credit. 
    • To take immediate advantage of the paid leave credits, businesses can retain and access funds that they would otherwise pay to the IRS in payroll taxes. If those amounts are not sufficient to cover the cost of paid leave, employers can seek an expedited advance from the IRS by submitting a streamlined claim form that will be released next week.
    • If you are Self-Employed, your benefit is a credit in Self Employment Tax (Social Security and Medicare) you pay on your Net Taxable Income.
  5. Deferred Payroll Taxes: this is not recommended, but is available if you can still pay your employees, but do not have enough cash to remit the Payroll Tax (Employer paid Social Security and Medicare; Income Tax and Employe paid Payroll Tax withholding is not included). This is not forgiveness, so you don’t want this to snowball and have to pay old and current payroll at one time in the future. Best to space it out if you can. Deferral is through Jan 2021.  
  6. Estimated Income Tax Payments and Installment Payments for Individuals are deferred until July 15, 2020. 
  7. Estimated Income Tax Payments and Installment Payments for Corporations are deferred until October 15, 2020.
  8. Income Tax Return Filings and Payments for 2019 have a deferred due date July 15, 2020. 

 

IMPORTANT LINKS

SBA LOANS

SBA Disaster Loan – apply online: https://covid19relief.sba.gov/#/

SBA 7(a) expansion under CARES Act apply online:

SBA Coronavirus Benefits Overview

 

MORE LINKS TO HELP YOU

From Gusto:

  1. Live Google Sheet with Financial Relief and Resources for Small Businesses. Check Back to it for updated information.
  2. Employer Sites by State
  3. Covid-19 Resource Center for Employers

Facebook Grants for Small Businesses

Know if you need to be tested and what to do! Apple & the CDC partnered to create this web and mobile App.

Covid-19 App

Screen at Home

Online from any device:  https://www.apple.com/covid19/

Or download the mobile App: https://apps.apple.com/us/app/id1504132184

Apple and CDC

We are not affiliated with any company or entity mentioned in this post.

This information has been compiled and interpreted for your convenience, but we do not claim to be experts on this subject. 

Anything you decide to do is your own decision.

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