On Friday, March 27, the President signed the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act. For more recent posts on the CARES Act since this post on March 28, check out:
- Unemployment Benefits Under the CARES Act
- Small Business Owners’ Guide to the CARES Act
- The CARES Act for Retirement Plans and Health Plans
- Coronavirus Emergency Loans Infographic
- CARES Act PPP and EIDL Flow Chart
The new law is a $2 trillion economic stimulus package designed to repair the economic damage caused by COVID-19 and provide additional protection to individuals and businesses who may lose income due to the pandemic. While most of the act pertains to direct payments and loans, there are some sections that affect employers.
The CARES Act: Alternatives to Closure and Layoffs
The CARES Act gives employers the following options and benefits, which may allow them stay open and keep more people employed:
- Small businesses may be eligible for emergency grants of up to $10,000 to cover immediate operating costs.
- The Small Business Administration (SBA) may provide loans of up to $10 million per business. Any portion of that spent to pay employees, keep workers on payroll, or pay for rent, mortgages, or existing debt could be forgiven, provided workers remain employed through the end of June.
- Additionally, small businesses with existing SBA loans may have up to six months of payments waived.
- Businesses who have experienced a decline in gross receipts of 50% as compared to the same quarter of 2019 or who have been fully or partially shut down by order may be eligible to receive a refundable tax credit. This tax credit is equivalent to 50% of qualified employee wages up to $10,000 per employee. Note that this is unrelated to the dollar-for-dollar payroll tax credit that can be taken for FFCRA leaves.
- Finally, businesses may defer payment of employer payroll taxes imposed between the enactment of this law and December 31, 2020. Under this deferral, employers must pay half of the deferred taxes by December 31, 2021 and the rest by December 31, 2022. This is unrelated to the dollar-for-dollar payroll tax credit that can be taken for FFCRA leaves.
At this time, we are unable to advise on these topics as they are outside the scope of our expertise. However, we encourage you to follow the IRS Coronavirus Tax Relief page and the SBA Coronavirus Loan Resources page.
Additionally, we recommend you consult with your tax professional or financial advisor. Detailed guidance on how to access these financial resources should be coming soon from those sources.
Impact on Unemployment Insurance
The act expands unemployment benefits by 13 weeks and adds $600 to the weekly amount an individual would usually receive. While these unemployment benefits are generous, employers should still consider their options and incentives under the CARES Act before making decisions about reduced hours, furloughs, or layoffs.
Employees who experience reduced hours, furloughs, or layoffs should be encouraged to file for unemployment insurance as soon as possible. Beyond this, we recommend that both employers and employees visit their state’s unemployment insurance department website. Here, they can track local and state news as departments across the country update their rules to facilitate displaced workers.
We know that the weeks to come will bring unexpected challenges due to the Coronavirus. However, we are prepared to respond to these challenges as they arise. Additionally, we will continue to provide ongoing communications as more details unfold.
If you have any questions or concerns, please feel free to contact us at (866) 946.2032 or by emailing our support team. And don’t forget to follow us out on Facebook, Twitter, and LinkedIn for even more Coronavirus and business updates!