As there is much information and law changes occurring lately, below is a brief summary of some relief programs for businesses effected by the COVID-19 pandemic.
Paycheck Protection Program (PPP)
Provides 100 percent federally-backed loans for certain payroll expenses through June 30, with up to eight weeks of forgiveness for small businesses, certain nonprofits, and self-employed individuals. The loans are forgivable if employers retain employees at comparable salary levels prior to the crisis.
This has been a very popular program due to the debt forgiveness feature and total loan eligibility. The program was designed to quickly infuse cash into small businesses so they survive the economic downturn. The banks and SBA does not have the electronic infrastructure to deploy these funds as rapidly as hoped for, but we have seen some early appliers receive their funding.
Contact your bank for more details and apply quickly if you want to participate in this program. We caution to read this entire article first.
Emergency Economic Injury Disaster Grants (EEIDG)/Economic Injury Disaster Loans (EIDL)
Allows employers to receive up to $10,000 in advance after they apply for an EIDL. An EIDL is a lower-interest rate loan of up to $2 million with principal and interest adjustments available at the SBA’s discretion.
EEIDGs can be applied for within three days after applying for an EIDL. EEIDGs are available for small businesses with up to 500 employees, self-employed individuals, and private nonprofits harmed by the downturn in the economy due to the coronavirus outbreak. Businesses must first apply for an EIDL and then request the advance (EEIDG).
Contact the SBA or review the SBA’s website for further details on how to apply.
Employee Retention Payroll Tax Credits
Employers are eligible for a 50 percent refundable payroll tax credit 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 or those that had a decrease greater than 50 percent in gross receipts 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.
Companies that opt into the PPP cannot take the employee retention credit.
As the IRS is still developing the forms and regulations that will govern this credit, we will produce further articles about this particular credit in the near future.
Payroll Tax Deferred Payments
Additionally, under the CARES Act, certain employers may opt out of having to pay employer-side Social Security payroll taxes until January 1, 2021. Once those payments restart, 50 percent will be owed on December 31, 2021 and the other half on December 31, 2022. The Social Security Trust Fund will be backfilled by general revenue in the interim period.
Companies that opt into the PPP cannot defer payroll taxes.