Coronavirus Financial Relief
Many businesses and individuals are affected by the coronavirus. Below is some helpful information regarding this pandemic that may be helpful to you or your business.
SBA Forgivable Loan Through Your Bank
This is probably the best option for most businesses. The CARES Act contains several provisions to provide emergency assistance for Small Businesses affected by the pandemic. One of those provisions is the Paycheck Protection Loan Program. Paycheck Protection Loan Program expands loan eligibility under the SBA 7a program with the intention to assist businesses up to 500 employees with covering costs related to payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt.
Borrowers will need to certify that they’ve been impacted. There will be no personal guarantees or collateral associated with the loan. Detailed application requirements are still to be determined.
The maximum loan amount is 2.5 times average monthly payroll or up to $10 million.
The application process will be much easier since your bank will process it. Also, this loan comes with the potential to defer your payments to a later date, or have the debt forgiven completely!
Employee Retention Credit
The Treasury Department and the Internal Revenue Service launched the Employee Retention Credit, designed to encourage businesses to keep employees on their payroll. The refundable tax credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19.
The credit is available to all employers regardless of size, including tax-exempt organizations. There are only two exceptions: State and local governments and their instrumentalities and small businesses who take small business loans.
Qualifying employers must fall into one of two categories:
- The employer’s business is fully or partially suspended by government order due to COVID-19 during the calendar quarter.
- The employer’s gross receipts are below 50% of the comparable quarter in 2019. Once the employer’s gross receipts go above 80% of a comparable quarter in 2019, they no longer qualify after the end of that quarter.
These measures are calculated each calendar quarter.
Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.
Example 1: Eligible Employer pays $10,000 in qualified wages to Employee A in Q2 2020. The Employee Retention Credit available to the Eligible Employer for the qualified wages paid to Employee A is $5,000.
Example 2: Eligible Employer pays Employee B $8,000 in qualified wages in Q2 2020 and $8,000 in qualified wages in Q3 2020. The credit available to the Eligible Employer for the qualified wages paid to Employee B is equal to $4,000 in Q2 and $1,000 in Q3 due to the overall limit of $10,000 on qualified wages per employee for all calendar quarters.
Economic Injury Disaster Loan (EIDL)
For any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organization or 501(c)(19) veterans organizations affected by COVID-19 are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000.
This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. The Economic Injury Disaster Loan advance funds will be made available within days of a successful application, and this loan advance will not have to be repaid.
To apply click here: https://covid19relief.sba.gov/#/
Currently there is one loan in place through the SBA, It has three steps to the process. However, employers must be aware that step two of the process states that the SBA will send a verifier out to estimate your actual loss. You have to be able to prove you have a loss because of the disaster that you need a loan to recover from.
Here is a link to the three step process and application:
Sick Pay and Family Leave
Another option that is available to employers with under 500 employees is to give paid sick leave to your employees. They must have worked at least 30 days before the impact of the virus. Businesses will have to provide up to 10 business days of paid sick leave to employees that are quarantined or looking to get a diagnosis for coronavirus. Employers can pay up to $511 per day to each employee. They can also pay up to $200 per day to care for a quarantined family member or for childcare. If an employer pays this, they can then take a 100 percent credit for the cost of this pay against their employer portion of the Social Security taxes normally paid. The employer should maintain detailed records to prove the employee was required to be quarantined though.
Deferring Federal Payroll Tax Payments
Payroll taxes must be paid on time or you will incur a late payment penalty. There are not many exceptions to this penalty except the following:
Employers can delay paying the company portion of payroll taxes related to Social Security tax (6.2%). This deferment is until 12/31/2021 of which 50% of the applicable taxes must be paid. The final payment must be made by 12/31/2022.
The other option is an employer will not be subject to a penalty for failing to deposit Employment Taxes relating to Qualified Leave Wages in a calendar quarter if
- The employer paid Qualified Leave Wages to its employees in the calendar quarter prior to the time of the required deposit,
- The amount of Employment Taxes that the employer does not timely deposit is less than or equal to the amount of the employer’s anticipated credits under the Families First Act for the calendar quarter as of the time of the required deposit, and
- The employer did not seek payment of an advance credit by filing Form 7200, Advance Payment of Employer Credits Due to COVID-19, with respect to the anticipated credits it relied upon to reduce its deposits.
Thus, an employer may reduce, without a penalty, the amount of a deposit of Employment Taxes by the amount of Qualified Leave Wages and Qualified Health Plan Expenses paid by the employer in the calendar quarter prior to the required deposit, plus the amount of the employer’s share of Medicare tax on such Qualified Leave Wages, as long as the employer does not also seek an advance credit with regard to the same amount.
Currently there is a proposal that taxpayers that make under $75,000 per year will receive a payment of $1,200 sometime in April. If you are filing joint, the income limit is $150,000 and the refund will be $2,400. For each qualifying child you could see an increase of $500. Taxpayers making up to $100,000 and married taxpayers making up to $200,000 could still see a refund but it would be reduced. Again, this is not finalized yet and could change.
Keep checking back here for updates as the situation is very fluid and changes almost daily.