Programs Available Under the CARES Act

From Main St. to Wall St., all businesses have been affected by COVID-19 in one way or another.  Businesses that were considered to be essential service business were affected by employees being unable to work due to their need to care for their children, who were now home from school, to employees who are in the high risk category and were advised by their medical providers to shelter in place.  Businesses that were considered to be non-essential were forced to close, forcing a mass layoff of employees.  In an attempt to keep the economy moving forward, the following programs were made available to businesses:

Paycheck Protection Program Loans (PPP) – Advances are available for businesses employing less than 500 employees.  Self-employed individuals and partnerships are also eligible to apply for these loans.  The loan amount is equal to 2 ½ times the average monthly payroll cost.  At the time of this writing, at least 75% of the proceeds must be used for payroll related costs, in order to have the loan forgiven.  The loan is applied for directly through your bank.  Amounts that are not forgiven can be paid back over 2 years at an interest rate of 1%.

Economic Injury Disaster Loans (EIDL) – Advances are available for business employing less than 500 employees.  An initial loan advance of $1,000 per employee, with a cap of $10,000 can be requested.  The SBA will make a determination of the total loan that your business is eligible to receive.  The initial loan advance is eligible for forgiveness; any loan in excess of the initial advance has to be repaid.  The loan period can be stretched out up to a 30-year repayment period.  Interest rates are up to 3.75% for commercial enterprises and up to 2.75% for non-profits.

Delay of Employer Payroll Taxes – Employers are eligible to defer their share of the 6.2% Social Security Tax on wages paid after March 27th through December 31, 2020.  50% of the amount deferred must be repaid on December 31, 2021 and the remaining 50% by December 31, 2020.  Interest is not charged on the taxes that are deferred.  Employers who have received a PPP loan are eligible to defer the liability up through the date that the lender notifies the employer that the PPP loan has been forgiven.

Employee Retention Credit – The credit is available for businesses that have not received funding from a PPP loan.  The credit is equal to 50% of the wages paid to individuals, with a maximum credit of $5,000 per employee.  Restrictions apply and are different for businesses with less than 100 employees from businesses with over 100 employees.

Payroll Credit for Families First Sick Pay and Leave – Employers will receive a payroll credit for sick pay wages and family leave wages that are paid, in response to the First Coronavirus Response Act.  The credit is available to employers with less than 500 employees.  Wages that are eligible for this credit cannot include these wages for consideration under the PPP loan.

In addition to the programs mentioned above, there are other tax incentives that have been enacted as part of the CARES Act.

At BKC, our experienced professionals are available to help businesses navigate through the available options and compliance reporting.  For more information, please contact us at (908) 782-7900 or  Find more helpful articles here.