Congress recently passed the CARES Act, which was immediately signed into law on March 27.
The economic stimulus bill consists of a historic $2 trillion meant to help taxpayers, including individuals and businesses alike, weather the storm wrought by COVID-19.
Other than the direct payments that individual taxpayers will receive from the IRS, there are several provisions included in the CARES Act that should be considered by American small and medium sized businesses who are struggling to stay afloat due to a lack of liquidity in these trying times.
Here are some of the key aspects of the CARES Act that U.S. businesses should take a look at now:
- SBA Loans- The CARES Act included $349 billion in loan commitments for a “Paycheck Protection Loan Program” through the Small Business Administration’s 7(a) program. These loans are limited to either $10 million or 2.5 times the average monthly payroll, whichever is less and interest rate will be no more than 4%.
- Emergency EIDL Loans- These are emergency loans limited to $10,000 that can be used to provide paid sick leave, maintain payroll, increase supply chain costs or pay rent along with other business expenses.
- Payroll Tax Deferral- The CARES Act will postpone taxes for employers, allowing companies to pay their 2020 payroll taxes through the end of 2020.
- Employee Retention Credit- The bill also provides a credit for employers subject to closure but who continue to pay employees or those who see a significant decline in gross receipts in a 2020 quarter. It should be noted that those who claim loans through the Paycheck Protection Program are not eligible for the credit.
- Availability of Retirement Funds- Individuals can now withdraw up to $100,000 for “coronavirus related distributions” and the 10% early withdrawal penalty will not apply.
- NOL Modifications- The CARES Act allows losses generated from 2018 to 2020 to be carried back five years and used against 100% of taxable income.
- Payroll Credit for Required Sick/ Family Leave- Allows a refundable, 100% credit for up to 10 days of sick and/or family leave for all employers required to provide.
Take note that for the majority of these provisions, several requirements apply that were not covered here.
These are trying times for taxpayers across the country, and the opportunities for businesses and individuals included in the CARES Act are certainly welcome relief. These tools can help you maintain payroll and satisfy other business expenses while we continue to work through this pandemic day by day.
Make sure to check to see guidelines for these provisions, particularly the SBA loans, are expected in the coming days. For more information, make sure to check out alliantgroup’s COVID-19 Business Resource Center for all your questions and concerns.
alliantgroup is a management consulting company with a mission to strengthen American businesses through reinvestment in innovation and job growth. We educate businesses, the industry groups that serve them and the accounting firms that advise them on federal and state credits and incentives that are legislated by our government to keep the U.S. competitive in the global landscape. We are proud to have helped over 18,000 businesses claim nearly $10 billion in credits and incentives. alliantgroup is headquartered in Houston, Texas with additional offices located in Austin, Boston, Chicago, Indianapolis, New York, Irvine, Sacramento, Washington, D.C.; and Bristol and London in the U.K.