The federal government is offering loans to help small businesses keep workers on their payroll and tax advantages to support businesses during the COVID-19 outbreak. Review these five provisions contained in the economic stimulus packages to see if they are right for your business:
- Paycheck Protection Program from the U.S. Small Business Administration (SBA)
This loan program is designed to provide a direct incentive for small businesses to keep their workers on the payroll. The SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for eligible expenses, such as payroll costs, rent under leases in effect before Feb. 15, 2020, interest on mortgages incurred before Feb. 15, 2020, or utilities for service that began before Feb. 15, 2020. The program is available through June 30, 2020. Learn more.
- Employee Retention Credit for Eligible Employers
This provision provides a refundable payroll tax credit for 50 percent of certain wages paid by qualifying employers to employees during the COVID-19 crisis.The payroll tax credit is available to employers whose:
- operations were fully or partially suspended due to a COVID-19 related stay-at-home order; or
- gross receipts declined by more than 50 percent when compared to the same quarter in the prior year.
An employer that accepts a PPP loan is not eligible for the credit under this provision. Learn more.
- Delay of Payment of Employer Payroll Taxes
Employers will be allowed to defer payment of the 6.2 percent employer share of Social Security taxes on employee wages that employers are otherwise responsible for paying to the federal government with respect to their employees. The provision requires that the deferred employment tax be paid over the following two years, with half due by Dec. 31, 2021, and the remainder due by Dec. 31, 2022. An employer whose SBA loan has been forgiven under the PPP loan forgiveness program is not eligible to defer payment under this provision.
- Modifications for Net Operating Losses
Limitations on a company’s use of losses from prior years will be relaxed. A net operating loss from 2018, 2019 or 2020 can be carried back five years. The provision temporarily removes the taxable income limitation to allow a net operating loss to fully offset income.
- Emergency Sick and Family Leave*
This provision provides businesses with fewer than 500 employees refundable tax credits to reimburse them for the cost of providing paid sick and family leave wages related to COVID-19. An employer that uses refundable tax credits outlined in this provision is not eligible for the employee retention credit for the same wages. .
For more information, visit Coronavirus and Economic Impact Payments: Resources and Guidance on the IRS website.
*This provision is contained in The Families First Coronavirus Response Act, which was signed by President Donald Trump on March 18, 2020. All other provisions highlighted in this article were introduced in The Coronavirus Aid, Relief, and Economic Security Act, which became law on March 27, 2020.