Small Business Relief Options During COVID-19

Paycheck Protection, Disaster Loans, Tax Credits, and More

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Many small businesses have been hit hard by the COVID-19 virus in 2020. The federal government and Small Business Administration (SBA) have responded by creating several programs to help businesses pay their employees and survive the economic impacts of the coronavirus.

Here are the key small business relief options your business may be able to take advantage of during COVID-19:

  • : Gives quick cash to businesses as they apply for disaster assistance.
  • : Forgivable SBA-backed loans to help small businesses meet payroll costs. 
  • : Reduces payroll taxes for employers who agree to keep employees on the payroll.
  • : For those who must pay sick leave and family leave benefits to employees.
  • : Extends unemployment benefits to those not covered by regular unemployment compensation, such as self-employed individuals.

2019精品国产品在线不卡A new funding bill, enacted on April 24, 2020,, the . adds $321 billion to the Paycheck Protection Program. It also adds $60 billion for the Economic Injury Disaster Loan (EIDL) program. Both of these programs are small business loan programs administered by the Small Business Administration (SBA). The Balance is keeping up with this situation and we'll let you know the status of applications (new and pending).

Unfortunately, there are only certain relief options you can take advantage of together. Your business can take the Emergency Paid Sick Leave and Emergency Family and Medical Leave Expansion acts and the Employee Retention Credit, but not for the same wage payments. You also can’t receive the Employee Retention Credit if you receive a loan through the Paycheck Protection Program. 

If your business is in need of relief due to events unrelated to the coronavirus, the SBA also offers general small business disaster relief loans.

Even More Support for Small and Mid-Sized Businesses

On Thursday, April 9, 2020, the even more support for the economy with up to $2.3 trillion in loans to "assist households and employers of all sizes."

2019精品国产品在线不卡One of the key relief efforts announced was the $600 billion Main Street Lending Program, which provides enhanced support for small and medium businesses who were in good financial standing prior to the coronavirus pandemic. Companies with up to 10,000 employees or revenue of $2.5 billion or less, and that are committed to maintaining payroll and retaining employees, can apply for four-year loans, with principal and interest payments deferred for up to one year. Firms can take advantage of the Main Street Lending Program in addition to the Paycheck Protection Program.

The program is still being finalized, and the Federal Reserve is through April 16, 2020.

Economic Injury Disaster Loan and Emergency Advance

The SBA has ramped up its disaster loan programs to give relief to businesses that have been affected by the COVID-19 pandemic. These working capital loans of up to $2 million are available through the COVID-19 Economic Injury Disaster Loan (EIDL).

The program is available for small businesses with fewer than 500 employees, including sole proprietors, independent contractors, self-employed persons, private non-profits, or 501(c)(19) veterans groups. If your business has more than 500 employees, you may still be eligible for an EIDL as long as you meet the for your industry. Sole proprietors seeking these funds must first register with the Federal Emergency Management Agency (FEMA).

Small businesses can also get a loan advance of up to $10,000 within a few days of applying for the EIDL. The loan advance will not have to be repaid.

2019精品国产品在线不卡The SBA is not currently accepting applications, and the COVID-19 Economic Injury Disaster Loan Application is currently unavailable on the SBA website as of Friday, April 17, 2020.

Paycheck Protection Program

As part of the CARES Act, the SBA is directing $349 billion to small businesses with 500 or fewer employees, and businesses in specific industries with more than 500 employees (accommodation and food services businesses). Sole proprietors and independent contractors are also included. The program is available until June 30, 2020.

The Paycheck Protection Program (PPP) loan can be used for all types of payroll costs, including payments for:

  • Salaries, wages, commissions, or tips
  • Vacation, parental, family, medical, or sick leave
  • Group health benefits and insurance premiums
  • Retirement benefits
  • State or local taxes on employee compensation

Covered payments to self-employed individuals include wages, commissions, income, and net earnings for self-employed individuals.

The program specifically excludes payments to employees with annual salaries over $100,000, and for employees who live outside the U.S. Also, if your business receives a tax credit for sick leave payments2019精品国产品在线不卡 or family leave payments under the Families First Coronavirus Response Act, you can't include them in the loan.

Businesses that keep employees on the payroll for eight weeks can get loan forgiveness for payroll, rent, mortgage interest, or utilities, up to 100%. The loan matures in two years and has an interest rate of 1%. Loan payments will also be deferred for six months. You must apply through a bank, credit union, or other lender for this disaster loan.

Small businesses throughout the country are reporting confusion and long wait times around the PPP loan application process and approval.

Employee Retention Credit 

Part of the CARES Act, the Employee Retention Credit (ERC) gives employers a fully refundable tax credit worth up to 50% of qualified employee wages up to $10,000 paid to employees after March 12, 2020, and before Jan. 1, 2021. This means the maximum tax credit for wages paid to any employee during this time period is up to $5,000. The ERC is meant to incentivize employers to keep paying employees.

2019精品国产品在线不卡Qualified employee wages are wages and compensation paid by an eligible employer after March 12, 2020, and before Jan. 1, 2021, including qualified health plan expenses. However, it also depends on the number of employees. 

  • If you averaged more than 100 full-time employees in 2019, qualified wages would be equal to what the employee would have been paid for working the equivalent time during the 30 days immediately before the period of economic hardship. For example, if an employee was working 25 hours per week before March 12, 2020, their wages would be the equivalent of what they would have been paid for 25 hours per week.
  • If you averaged 100 or fewer full-time employees in 2019, qualified wages are wages paid to any employee during the period of economic hardship. 

Employers are eligible for this tax credit if they have partially or fully suspended operations during 2020 due to government orders of the suspension of travel, commerce, meetings, and more, or if they had a significant decline in revenue.

Self-employed individuals are not eligible for this credit for their self-employment services or earnings. 

How Is It Fully Refundable?

2019精品国产品在线不卡This tax credit is also different because it’s fully refundable. This means you can get a refund if the amount of the credit is more than the federal employment taxes you owe.

First, calculate the amount of the credit for a tax quarter for an employee. Let’s say you paid the employee $10,000 for the quarter. Your tax credit is 50% of those wages, or $5,000 (which is the maximum). Then, you can deduct this from your share of Social Security wages paid to all employees for the quarter.

If the amount of tax credits for employees is greater than the employer part of the Social Security tax on all wages paid to all employees, the excess is considered an overpayment. The overpayment is applied to offset other tax liability on Form 941 (the employer’s quarterly tax report) and after reducing it for certain other tax liabilities. Anything left is refunded to you.

2019精品国产品在线不卡If you need the funds before you file your quarterly tax return, you can request an advance payment from the IRS via .  

Tax Credits for Emergency Paid Sick and Family Leave

Employers with fewer than 500 employees must now give paid sick leave to employees affected by COVID-19. To offset these costs, the employer may get a refundable tax credit to cover the cost of the leave.

The sick leave benefit can include time for the employee’s own health leave or to care for family members who are sick because of the coronavirus.

2019精品国产品在线不卡This applies if the employee: 

  • Is under a quarantine or isolation order
  • Has been advised by a health care provider to self-quarantine
  • Is experiencing symptoms of COVID-19 and is seeking a medical diagnosis
  • Is experiencing any “substantially similar condition” specified by the U.S. Department of Health and Human Services
  • Is caring for a family member who is subject to quarantine or isolation orders or has been advised by a health care provider to self-quarantine
  • Is caring for their child if the school or place of care is closed or child care is unavailable

2019精品国产品在线不卡If the employee is caring for themselves, then they are entitled to paid sick leave for up to 80 hours at their regular rate of pay or, if higher, the federal, state, or local minimum wage, up to $511 per day, up to a maximum total of $5,110 during that time.

2019精品国产品在线不卡The paid sick leave for employees acting as caregivers is up to two-thirds of their regular pay, up to 80 hours, with a maximum of $200 per day, up to a total of $2,000 during that time.

In addition to the paid sick leave credit, the Family Medical Leave Act (FMLA) provisions for employers with 50 or more employees have been expanded. The expanded benefits are for employees who can’t work (including telework) because they are caring for a child whose school or place of care is closed or child care is not available.

The benefit is equal to two-thirds of the employee’s regular pay, up to $200 per day, with a maximum total of $10,000, for up to 10 weeks.

How the Tax Credits Work

The tax credit for employers is equal to 100% of the amount of the required paid sick leave or family/ medical leave plus the employer cost of Medicare tax on those wages and the cost of health insurance coverage for the employee during the leave period. In addition, the employer is not subject to the employer portion of the Social Security tax on those wages.

You can get the tax credits by keeping them instead of depositing them with the IRS. Normally, employers must make payroll tax deposits2019精品国产品在线不卡 semi-weekly or monthly, depending on the amount of taxes. If you pay qualified leave wages, you can keep the amount of federal employment taxes up to the total amount of the credits instead of depositing them with the IRS. If your credits are greater than the employment taxes, you can request an advance payment from the IRS. 

2019精品国产品在线不卡Businesses will also use Form 941 to claim the credits, and can use Form 7200 to claim an advance credit, if needed.

Paid Sick and Family Leave Credits for Self-Employed Individuals

Paid sick and family leave tax credits are also available to self-employed persons, including: 

  • Sole proprietors or independent contractors
  • Partners in a partnership or members of an LLC

2019精品国产品在线不卡The benefits for individual paid sick leave are available for those who can’t work due to the impacts from the coronavirus that are listed in the above section “Tax Credits for Emergency Paid Sick and Family Leave.” The tax credit is then equal to the number of days during the year that the person can’t work multiplied by the lesser of $511 or 100% of the average daily self-employment income.

2019精品国产品在线不卡The credit for family leave is equal to the number of days out of work multiplied by the lesser of $200 or 67% of the average daily income from self-employment.

In both instances, the maximum number of days is 10, and those days must have occurred after April 1, 2020, and before Jan. 1, 2021.

You can claim the tax credit against your self-employment taxes on your 2020 tax return (Form 1040 or 1040-SR). If you need the money before filing your return, you can reduce the amount from your quarterly estimated tax payments.

Unemployment Benefits for Self-Employed People

Self-employed small business owners have not historically been able to get unemployment benefits, but that’s now changed with the addition of a Pandemic Unemployment Assistance (PUA) program. If you are self-employed and you have lost income due to the coronavirus, you may be eligible for up to 39 weeks of benefits, retroactive for weeks starting on or after Jan. 27, 2020. PUA benefits cannot be paid for weeks of unemployment ending after Dec. 31, 2020. Additionally, you may be eligible for an additional $600 beyond the amount of your state benefit through July 31, 2020.

To qualify, you must be unemployed, partially unemployed, or unable or unavailable to work due to COVID-19 related reasons. To find out more about this unemployment assistance program, contact your .

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