Small Business Resources and Updates
April 10, 2020
The Coronavirus Aid, Relief, and Economic Security Act
On March 27th, the Coronavirus Aid, Relief and Economic Security Act (“Cares Act” or “Act”) became law providing $2 trillion in assistance to individuals, businesses, health providers and others affected by the COVID-19 crisis. Here is a summary of that relief as it relates to individuals and small businesses, including medical/health-related businesses.
BENEFITS for INDIVIDUALS
Benefits: Unemployment benefits were increased to $600/week through July 31, 2020 and available to anyone in quarantine, caring for a family member diagnosed with COVID-19, or out of work for reasons related to the outbreak. Workers who are self-employed or have limited work history and independent contractors are also eligible. Workers who can work remotely or receiving paid leave from an employer are not eligible.
Benefit Period: Those who have already exhausted unemployment benefits may apply for an additional 13 weeks of coverage. These benefits are retroactive to January 27 and will remain available through December 2020.
Benefit: Every taxpayer is eligible for up to $1,200 in a refundable tax credit; $2,400 for couples filing joint tax returns. Families may receive an additional $500 for each child.
Eligibility: Credits will be lowered by 5% for any income over $75,000 for individuals, $112,500 for heads of households, and $150,000 for joint returns. Individuals earning over $99,000, heads of households earning $146,500 or more, and married couples earning $198,000 or more are not eligible.
Basis for calculation: 2019 taxes or, for those who haven’t filed 2019 taxes, 2018 taxes plus 2019 earnings will be used for calculation.
Mortgages, Foreclosures & Evictions.
Homeowners affected by the crisis may suspend payments on mortgages guaranteed by FHA, Fannie Mae, or Freddie Mac for 180 days, with the possibility of another 180-day extension.
Owners of multifamily properties with GSE-backed (Gov’t Sponsored Enterprise loan i.e. FHA, Fannie May & Freddie Mac) mortgages may take payment extensions of up to 90 days.
Effective 3/18/20, foreclosures on single-family homes with GSE mortgages are prohibited for at least 60 days starting on March 18th and suspends evictions on multifamily properties with GSE-backed mortgages for at least 120 days.
Student loan payments are suspended through 9/30/20. Negative credit reporting related to student loans will also be suspended for six months.
For those in federal loan forgiveness programs, these months will count as months in which payments were made.
Individuals may withdraw as much as $100,000 from retirement accounts without a penalty. If the funds are paid back into the retirement fund within 3 years, the funds will be treated as a tax-exempt rollover contribution; if not, the withdrawal amount will be taxed as income over a three-year period.
Individuals may also receive loans for up to $100,000 or the value of their vested benefit in their employer retirement account, whichever is less. Affected individuals with retirement plan loans due by December 31, 2020 will have an extra year to pay them back.
BENEFITS for SMALL BUSINESS
Economic Injury Disaster Loan (EIDL)
This SBA program received an additional $10 billion from to cover businesses with 500 or fewer employees, as well as sole proprietors and independent contractors. The SBA may advance as much as $10,000 to an existing and newly eligible EIDL recipient within 3 days of application. The advanced funds can be used to pay sick leave, retain employees, address interrupted supply chains, rent or mortgage payments, and for the repayment of debt. Recipients are not required to repay the advanced funds, even if their loan application is ultimately denied.
Paycheck Protection Program (PPP)
Eligibility: Businesses with 500 or fewer employees and includes 501(c)(3) nonprofit organizations, veterans’ groups, tribal business, sole proprietors, independent contractors and hotel and food service chains with 500 or fewer employees per location.
Amount: Up to $10 million or 250% of average monthly total payroll costs, with interest rates .5%, and payments deferred for at least six months, and possibly up to a year. Borrowers under the PPP can apply for loan forgiveness for up to eight weeks of payroll costs, mortgage interest, rent, and utility payments. The SBA will pay lenders for accrued debt plus interest.
Payroll tax deferral.
Employers may defer payroll taxes through 12/31/20 and pay deferred taxes over a two-year period ending December 2022.
Employers with small business loan debt forgiven under the Paycheck Protection Plan are not eligible for this deferral.
Self-employed taxpayers may defer 50% of their Social Security tax.
Employee retention credit. Employers may receive refundable credits of up to 50% of employee wages paid between 3/12/20 and 1/1/21 if they must partially or fully suspend operations because of a pandemic-related government order, or if their income drops below a certain threshold. Employers with more than 100 full-time employees in 2019 will receive credit for wages paid to employees who aren’t working; employers of fewer than 100 people will receive credit for wages paid while operations are suspended, or during a quarter when the company suffers a significant decline in gross receipts. PPP loan recipients are not eligible for these credits, nor are employers who receive the work opportunity tax credit or for paid leave.
Interest Expense. Businesses may deduct 50% of their interest expenses for 2019 and 2020, up from 30%.
Please note: The information above is not legal advice, represents only a summary of the Act and by no means encompasses the entire Act, which is close to 900 pages. Please make sure to confer with your attorney, accountant and/or banker in connection with your situation and circumstances. And, please contact us at 305-222-7282, if we may be of assistance to you and/or your business.