Utilizing Coronavirus Relief Options For Small Businesses: A Guidemarket and economy tax planning
With most of the country still under stay-at-home orders, many small businesses have been forced to adopt new practices in order to keep their employees and customers safe. For many, this has meant closing completely to help control the spread of coronavirus. Even as states and counties begin to relax measures and reopen, many businesses must still operate in a safe manner that complies with social distancing measures.
In response to the current pandemic, recent legislation including the Families First Coronavirus Response Act, the CARES Act and the Paycheck Protection Program and Health Care Enhancement Act have detailed a number of unemployment benefits, loans and relief for small business owners as well as the self-employed.
If you’re a small business owner in America who has felt the financial devastation of this ongoing pandemic, there are options out there designed to offer relief and help keep your business afloat.
Option #1: Access Loans and Immediate Emergency Funds
During this unprecedented time, small business owners and self-employed individuals are eligible to receive relief through the Paycheck Protection Program (PPP) as well as Economic Injury Disaster Loans (EIDL). SBA-approved lenders began offering these loans on April 3. Funding, however, ran dry on April 15 for the first round of the $349 billion program. To replenish the available funds, an additional $310 billion was approved and allocated to the PPP through the Paycheck Protection Program and Health Care Enhancement Act signed into law on April 24.1
Paycheck Protection Program loans are meant to be used for payroll and compensation costs, healthcare benefits, mortgage interest, rent, utilities and interest incurred on other existing debts.1 They have been offered at an interest rate of one percent and with these loans, you’ll be given six months to one year before you are required to begin making payments.1 Typical fees, personal guarantees and/or collateral are not required to receive a PPP loan.
Alternatively, Economic Injury Disaster Loans are offered directly from the SBA. Grants up to $10,000 are available as an advance within days of applying, in order to provide relief as quickly as possible.2
Option #2: Operational and Payroll Debt Forgiveness
By taking out a loan under the Paycheck Protection Program, a portion will be forgivable as you will not be required to pay back the funds used for payroll, mortgage interest payments, rent and utilities in the eight weeks following its origination date.3
One of the primary goals of this is to help companies stay in business and keep workers paid. The forgivable amount may be reduced if you have to limit either the number of employees you have or the compensation they receive, and those changes aren’t undone by June 30, 2020.3
Option #3: Employer Tax Credits
You may be eligible for an employee retention credit if your business closed to comply with government regulations or suffers a decrease in gross receipts of 50 percent or more, compared to the same period of time last year. This would amount to 50 percent payroll tax credit on wages up to $10,000 per employee and is not available if you’re utilizing a PPP loan.4
The Families First Coronavirus Response Act has some requirements in the interest of public and economic well-being, but the tax credits offset these costs. Employer requirements include:
- Two weeks of paid leave to quarantined employees or those with coronavirus symptoms awaiting diagnosis. This amount is confined to 100 percent of their regular wages or minimum wage (whichever is higher) up to $511 per day, or $5,110 over two weeks.
- Two weeks of paid leave to those who are unable to work because they are caring for a quarantined loved one, limited to two-thirds of the employee’s regular wages or two-thirds minimum wage (whichever is higher) up to $200 per day or $2,000 over two weeks.
- Up to 12 weeks of paid leave for employees who must care for their children whose school or childcare is closed due to COVID-19. These payments are restricted to two-thirds of the employee’s regular pay or two-third minimum wage (whichever is higher) up to $200 per day or $12,000 over the 12-week period. When it comes to leave related to childcare and school closures, small businesses may be eligible for an exemption, provided that paid leave would put the business in jeopardy.5
Employers and self-employed individuals are eligible for reimbursement of these payments and the costs to maintain employee health insurance coverage considering the expense of the associated requirements. In the form of tax credits, reimbursement is available for payments that take place between April 1, 2020 and December 31, 2020.5
Option #4: Deferring Existing SBA Loans
You may have existing business loans guaranteed by the SBA, in which case they will be deferred for a six-month period.6 This means that payments will not be required, but the SBA will pay your lender beginning with the next due payment. If you have a current loan that is already being deferred, it will begin the six-month grace period after your current deferment has ended.
Option #5: Delayed Tax Payments
Lastly, as a small business owner, you may delay payroll tax payments that would otherwise be due between now and January 1, 2021. Instead, half of the delayed taxes will be due on December 31, 2021 and the remaining amount will be due by December 31, 2022.7
While staying in business is undoubtedly difficult during this time, federal and state aid is available. With a number of accessible grants and loan options, understanding the relief programs out there can help your small business get back on its feet in the long run.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.