In addition to the global health crisis the current pandemic brings, businesses across all industries are also experiencing the economic downturns brought about by state-wide lockdowns. In an effort to aid small businesses impacted by the crisis, the United States government passed a $2 trillion stimulus package – the biggest economic stimulus package in history. The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was passed in late March and allocates funds to citizens, and relief aid to government branches, and businesses.

The CARES Act has a single purpose and it is to provide urgent relief to those affected by COVID-19. As a business owner, you have many options. However, in between adjusting to a new work environment, adjusting processes to stay compliant with amended labor laws, and keeping the business afloat, we know it can be difficult to stay abreast of changes affecting your business. To help you learn how your business can take advantage of the stimulus package, we have highlighted four major benefits the act offers:

Paycheck Protection

$350 Billion out of the $2 trillion stimulus fund is allocated for small businesses under the Paycheck Protection Program. The program provides loans to business owners with the goal to keep their workers in the payroll and out of unemployment. The loan can be used for compensation costs, group health benefits, paid leaves, and mortgage payments.

Are you eligible?

Small businesses with 500 or less employees are eligible for the Paycheck Protection Plan. Individuals who operate as a sole proprietor, eligible tribal business, and businesses operating as a franchisee are also eligible. Specifically for hotels and food businesses, the 500 employee limit can be applied on a per location basis.

How does it work?

Starting April 3, 2020, businesses may start the application process for a Paycheck Protection Plan (PPP) loan. The US Small Business Association will be handling these applications and they have created a page with detailed instructions. Business owners have until June 30 this year to submit their applications.

Employer Social Security Taxes Deferral

Originally, business owners pay 6.2% of Social Security taxes on the first $137,700 of employee wages. To provide financial relief for businesses, the CARES Act has deferred all payments of all employer Social Security taxes owed after March 12, 2020 up until the end of 2020.

Are you eligible?

There are no employer eligibility requirements. However, the deferral does not apply to employee income tax withholding, employee or employer portion of the Medicare tax, or employee portion of the Social Security tax. Furthermore, if you have indebtedness forgiveness under the Payroll Protection Plan, you are not eligible.

How does it work?

As a first step, business owners should consult with their payroll department or providers to immediately begin deferring the employer Social Security taxes. It’s also important to remember that 50% of these taxes are due on December 31, 2021 and the remainder will be due on December 31, 2022.

Paid Leave and Employee Retention Tax Credits

Under the Families First Coronavirus Response Act (FFCRA), employers are required to provide employees with Paid Sick and Family Care leaves if they are affected by the coronavirus. These tax credits are aimed to help eligible employers keep employees on their payroll despite the economic hardships.

Are you eligible?

Eligible employers are those that operate businesses during 2020 who have fully or partially suspended operations due to COVID-19. Those that have experienced a decline in gross receipts are also eligible. Government employers and self-employed individuals are not eligible for the tax credit.

How does it work?

The tax credits may be claimed on your federal employment tax returns. In the specific forms, you may report the total qualifying leave wages, health plan expenses, and employer share on the Medicare tax.

The IRS is continuously adding amendments to the CARES Act. To fully appreciate the contents of the stimulus package and how it can help your organization, you may visit the IRS Coronavirus Tax Relief.

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