How Businesses Can Get Financial Relief from the CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act, just passed by the Senate and House, has been signed by President Trump. The Act has received a great deal of attention regarding the recovery rebate checks going out to individuals and families, which are intended to give them some relief while the economy begins to come back. Less well known, the Act also includes a variety of programs specifically designed to help small businesses (defined in the Act as organizations with 500 employees or fewer) weather the economic storm. At a high level, some of the most important of these provisions are:
Employee Retention Credit—If your business was suspended, forced to close, or had a significant revenue decrease but kept paying employee wages the organization may be eligible for a refundable tax credit. The tax credit can be used for up to 50% of an employee's wages up to $10,000 per employee.
Payroll Protection Program—If your business has fewer than 500 employees, you may be eligible for an immediate loan for employee compensation, including health benefits. If the business maintains a headcount, you may eligible for a loan forgiveness feature that can basically make the loan function as a grant from the government.
Net Operating Losses (NOLs)—If you made improvements, remodeling, or buildouts to your commercial property in the last two years (or had other types of NOLs?), you may be eligible to amend your 2018 or 2019 federal return to carryback the losses, resulting in more cash back for your business.
Deferred Employee Payroll Tax—In order to free up employers’ cash flow and retain workers during quarantine or shutdown, the law will allow you to defer part of your Employee Payroll Tax over the next two years, with 50% due by Dec. 31, 2021, and the balance by Dec. 31, 2022. By delaying these payments, you essentially keep more money for your business.
Retirement Plans—Last but not least, the law allows employees to make early withdrawals from their qualified retirement plans for coronavirus-related distributions without the 10 percent penalty. The Act also waives all required minimum distributions for 2020, whether or not the taxpayer has been impacted by the pandemic.
To learn more about whether your business or organization could benefit from any of these provisions, contact us today. We’ll be glad to meet with you by phone or video call to discuss your options (in plain language!) and help you take advantage of these provisions.