How the Coronavirus Aid Relief and Economic Security Act (CARES) Affects Your Business
RJH Consulting is invested in the success of our clients and small business in general. We will be doing our best to communicate new legislation and help as it becomes available. The relief package voted on by the U.S. Senate passed 96-0 and heads to the House for a vote on Friday, March 27. As long as that passes, here are some details on what you can expect for your employees and your business.
- Expanded Unemployment Insurance (UI): We will see an additional $600 per week increase in benefits for up to four months with additional federal funding of unemployment benefits to those not normally eligible such as those who are self-employed or independent contractors. Additionally, the federal government is incentivising those state governments that have a waiting week before benefits kick in, by offering to cover that cost. Finally, they are offering to fund an additional 13 thirteen weeks through the end of year 2020, after state benefits are exhausted.
- Rebate checks for individuals will be based on 2019 tax returns, or 2018 if 2019 aren’t filed yet.
- 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 and those that had a decrease in gross receipts of 50 percent or more 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.
- Employers may now contribute up to $5,250 annually toward employee student loans which will now be tax exempt.
- $350 billion will be set aside in a program called Paycheck Protection Program to help small businesses of less than 500 employees. This is for the period February 15-June 30 2020. Small businesses may take up to $10 million in loans and it covers employees who make up to $100,000 a year. The amount each business is eligible for us is tied to a formula based on payroll costs. Loans may be forgiven if a firm uses the loan for payroll, interest payments on mortgages, rent, and utilities and would be reduced proportionally by any reduction in employees retained compared to the prior year and a 25 percent or greater reduction in employee compensation. The forgiveness clause incentivises keeping employees on the payroll.
- The bill would provide a $1,200 refundable tax credit for individuals ($2,400 for joint taxpayers). Additionally, taxpayers with children will receive a flat $500 for each child. The rebates would not be counted as taxable income for recipients, as the rebate is a credit against tax liability and is refundable for taxpayers with no tax liability to offset. The rebate phases out at $75,000 for singles, $112,500 for heads of household, and $150,000 for joint taxpayers at 5 percent per dollar of qualified income, or $50 per $1,000 earned. It phases out entirely at $99,000 for single taxpayers with no children and $198,000 for joint taxpayers with no children (see Chart 1). 2019 or 2018 tax returns will be used to calculate the rebate advanced to taxpayers, but taxpayers eligible for a larger rebate based on 2020 income will receive it in the 2020 tax season.
Keep an eye out for more details in the coming days, as we expect there may be changes and fine tuning. Also, here are some great resources for more information: