Financial Relief & Tax Breaks For Small Businesses Under The CARES Act

April 10, 2020 by Moertl, Wilkins & Campbell, S.C.

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into effect on March 27, 2020. The Act seeks to provide financial relief to those effected by the COVID-19 pandemic and stabilize the economy. In addition to the stimulus checks that are being sent to individuals and families, the Act also created options for small businesses that are impacted by the economic shutdown.

 As part of the Act, the following relief is available to small businesses with up to 500 employees:

Small Business Paycheck Protection Program Loans

Businesses and nonprofits with 500 or fewer employees may apply for a Paycheck Protection Program loan up to 2.5 times their average monthly payroll costs, up to $10 million total. Interest rates on the loan are locked-in at a maximum rate of 4%.

Sole proprietors, freelancers, and gig workers are also eligible to apply. No personal guarantee or collateral is required, and applicants will not be asked if they were denied a line of credit in the past.

All or some of the loan may be forgiven depending on how the funds are used. Businesses that maintain their normal payroll rates for at least eight weeks after the loan is dispersed will be eligible for forgiveness.

Deferred Payment of Employer Payroll Taxes

Businesses, including self-employed individuals, that do not receive forgiveness on a Paycheck Protection Program loan may delay payment of their payroll taxes, including the employer share of the Social Security tax. The deferred tax payments are required be paid back over a two-year period. Half of the amount owed must be paid by Dec. 31, 2021, and the remainder by Dec. 31, 2022.

Employee Retention Tax Credit

Businesses that were forced to partially or fully close due to a shutdown order are eligible for a 50% tax credit. The credit will also apply to businesses whose gross revenue declined by more than 50% compared to the same quarter last year, as a result of the pandemic. The tax credit will apply to wages paid to workers during the pandemic, up to $10,000, from March 13 to Dec. 31, 2020.