What you should know about coronavirus stimulus package that could help your business

The coronavirus is causing financial difficulties for businesses across the U.S. On Friday, March 27, 2020, President Trump signed into law the CARES Act (total $2 trillion aid), which provides significant new provisions intended to help small business owners and independent workers. Those assistances are intended to help employer retain employees and continue business operations during the current public health emergency. In a March 25 interview, House speaker Nancy Pelosi said the CARES Act “is not going to be the last bill”. We will continue watch the COVID-19 regulation movement and provide information and assistance to small business owner and individual.

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Small Business Loan

CARES Act would authorize $349 billion in total lending from Feb. 15 through June 30, as know as “paycheck protection program” to provide loans up to a maximum of $10 million to eligible business with not more than 500 employees. The covered loan period begins Feb 15 and ends on June 30, 2020. Interest rates during the covered period would be capped at 4%.

Loans would be available during the covered period for:

• Any business with 500 or fewer employees

• Sole proprietors, independent contractors, and eligible self-employed workers.

• Hotel and food service chains with 500 or fewer employees per location.

Recipients could use the loans to cover eligible payroll costs -- including salaries, commissions, regular paid leave, and health-care benefits -- as well as mortgage interest and utility payments. They’d have to make a “good faith certification” that they’ll use the funds to retain workers, maintain payroll, and pay for rent and similar expenses.

Loan Forgiveness

Recipients of SBA-guaranteed loans under the Paycheck Protection Program could apply for loan forgiveness over eight weeks for eligible payroll costs and for mortgage interest, rent, and utility payments.

The SBA would pay lenders for any canceled debt plus accrued interest. Lenders generally wouldn’t be subject to enforcement actions under the Small Business Act related to loan forgiveness.

Loan forgiveness would be reduced for businesses that fire employees or cut their pay. Businesses could receive additional forgiveness for wages paid to tipped employees. Covered loans would have a maximum maturity of 10 years following a borrower’s application for forgiveness. Canceled debt would be excluded from borrowers’ gross income for tax purposes.

Disaster Loan

The Act would expand the disaster loan program from Jan. 31 through Dec. 31 to cover businesses, cooperatives, employee stock ownership plans, and tribal businesses with 500 or fewer employees, as well as sole proprietors and independent contractors.

The Act also would advance as much as $10,000 to existing and newly eligible disaster loan recipients within three days of receiving their applications. Recipients could use the advance funds to pay sick leave to employees affected by Covid-19, retain employees, address interrupted supply chains, make rent or mortgage payments, and repay debt. They wouldn’t have to repay the advance funds.

Payroll Tax Deferral

The act would defer employer payroll tax payments from date of enactment through the end of 2020. Deferred funds would be paid over two years in 2021 and 2022. Deferral wouldn’t apply to employers with small business loan debt forgiven under the bill. The Act would defer the employer potion of FICA taxes or 50% of self-employed Social Security tax payments.

Employee Retention Credit

The ACT would establish a refundable credit against employer payroll taxes for certain employers that are hurt by the coronavirus but retain their employees. The credit would be for 50% of eligible employee wages paid after March 12, 2020, and before Jan. 1, 2021.

It would be provided for as much as $10,000 of compensation, including health benefits.

Employers could receive the credit if a government order related to the pandemic requires them to partially or fully suspend operations, or if their gross receipts declined ((defined as a reduction in gross receipts of more than 50% when compared to the same quarter in the prior year).

Employers couldn’t receive the credit if they receive a loan under the Paycheck Protection Program for loans established by the bill (see above).

Qualified disaster relief payments

The tax law enables employers to make non-taxable qualified disaster relief payments to employees for reasonable and necessary expenses resulting from the coronavirus pandemic.

Qualified disaster relief payments are excluded from gross income and wages for payroll tax purposes. In addition to being exempt from payroll taxes, such payments are not subject to information reporting on either Forms W-2 or Forms 1099-MISC.

Business Losses

The Act would allow business losses for tax years 2018, 2019 and 2020, to be carried back five years. The provision temporarily removes the current-law 80% taxable income limitation to allow an NOL to fully offset income. A separate deduction limit would be established for tax years beginning after Dec. 31, 2020.

An NOL limitation applicable to pass-through business and sole proprietors is modified to permit utilization of excess business losses for tax years beginning before Jan 1, 2021.

Recovery Rebate

The Act would provide one-time recovery rebate up to $1,200 for individuals / $2,400 for married couples / $500 per child.

The credit would be reduced by 5% for the amount a taxpayer’s income exceeds $150,000 for joint returns, $112,500 for heads of household, and $75,000 for other filers. The rebate would completely phase out for incomes exceeding $198,000 for joint filers, $146,500 for heads of household, and $99,000 for individual filers.

The rebate would base on a taxpayer’s 2019 tax return if filed, or otherwise on their 2018 return. A social security benefit statement will be used for individuals who have not filed tax return for either 2018 or 2019.

Retirement Plans

Individuals could withdraw as much as $100,000 from their retirement accounts in 2020 without being subject to a 10% penalty. Funds would be treated as a tax-exempt rollover contribution if repaid in the next three years. If funds weren’t repaid, they would be taxed as income over three years.

Individuals would be eligible to make withdrawals if they, their spouse, or their dependent are diagnosed with Covid-19, or if the pandemic hurts their finances, such as through layoffs or reduced hours

Charitable Contributions

Up to $300 above-the-line individual charitable contribution allowance for individuals who don’t itemize their returns for tax years beginning in 2020. The measure also would suspend for 2020 the limit on the individual charitable deduction, which is available to filers who itemize. The deduction is limited to 60% of individual taxpayers’ adjusted gross incomes through 2025.

Unemployment Assistance

The Act would provide an additional $600 per week in “federal pandemic unemployment compensation” to individuals receiving unemployment benefits. The extra payment would remain available through July 31, 2020.

The measure would allow individuals affected by the coronavirus to receive pandemic unemployment assistance for as long as 39 weeks, which would include any week for which they receive regular compensation or extended benefits.

Unemployment benefits under that program would be available to individuals who are in quarantine, caring for a diagnosed family member, or out of work because their employer closed due to the coronavirus. It also would be available to those who are self-employed, have limited work history, or otherwise wouldn’t qualify for unemployment benefits. Benefits wouldn’t be provided to individuals who can telework with pay or who are receiving other paid leave benefits.

The benefit provisions would apply retroactively to Jan. 27 and remain in place through Dec. 31. Compensation would be provided without any waiting period.

Work-Sharing Programs

States would have 100% of their costs covered for supporting “short-time compensation” programs through Dec. 31, 2020. The voluntary programs provide workers with prorated unemployment benefits to offset work reductions made by their employer in lieu of a layoff. It wouldn’t apply to seasonal or temporary workers.

Mortgage Payments, Foreclosures & Evictions

Eligible borrowers who attest that they’re experiencing financial hardship due to Covid-19 could suspend their payments for 180 days, with a possible 180-day extension. They wouldn’t accrue additional interest or fees during that period.

The Act would also prohibit foreclosures on homes with federally backed mortgages for at least 60 days starting March 18.

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