The recently passed Coronavirus Aid, Relief and Economic Security (CARES) Act [1] builds upon earlier versions of the CARES Act and is intended to be a third round of federal government support in the wake of the coronavirus public health crisis, succeeding the $8.3 billion [2] in public health support passed two weeks ago and the Families First Coronavirus Response Act [3]. The CARES Act provides support to both individuals and businesses, including changes to tax policy. The bill includes::
- Approximately $350 billion for SBA guarantees of forgivable loans for small and medium sized businesses. The “Paycheck Protection Program” (PPP) loans up to 250% of monthly payroll costs, up to a possible $10 million, and may be forgiven if the business maintains its payroll through June 30, 2020. The program is designed to keep people employed and off the unemployment rolls. Eligible businesses would include those with 500 or fewer employees, self-employed individuals, and “gig economy” workers. There is no minimum number of employees needed for a PPP loan and no collateral or personal guarantee is required to obtain one of these loans. Reach out to your bank as soon as possible to see if they are a qualified lender for the PPP loan program and begin the application process.
- Direct cash payments to Americans; single people making up to $75,000 a year are expected to receive checks for $1,200. Couples making up to $150,000 would receive $2,400, with an additional $500 per child. The agreement removes the phased-in provision that would have excluded lower-income Americans from receiving the full benefit. The payments would decrease for those making more than $75,000, with an income cap of $99,000 per individual or $198,000 for couples.
- Student loan relief, as all loan and interest payments can be deferred through September 30, 2020, without penalty to the borrower for all federally owned student loans. You will have to contact your loan servicer and ask for a forbearance. Contact your loan servicer for more information.
- Unemployment insurance provisions, including an additional $600 per week payment to each recipient for up to four months, and an extension of UI benefits to self-employed workers, independent contractors, and those with limited work history. The federal government will provide temporary full funding of the first week of regular unemployment for states with no waiting period and extend UI benefits for an additional 13 weeks through December 31, 2020 after state UI benefits end.
- A 50 percent refundable payroll tax credit for employers on wages paid up to $10,000 during the crisis. The credit would be available to employers whose businesses were disrupted due to virus shutdowns and those that had a decrease in gross receipts of 50 percent or more when compared to the same quarter last year. The credit can be claimed for employees who are retained but not currently working due to the crisis for firms with more than 100 employees, and for all employee wages for firms with 100 or fewer employees.
- Exclusion of certain payments of student loans on behalf of employees from taxable income. Employers may contribute up to $5,250 annually toward student loans, and the payments would be excluded from an employee’s income.
For more information on how you or your business can take advantage of the benefits offered by the CARES Act, contact your ShindelRock tax professional.