What Is the CARES Act?
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law on March 27, 2020 and provides more than $2 trillion in relief to businesses and individuals. Through a combination of direct payments and emergency business lending, the CARES Act promises to help American families and businesses.
What Are The Key Provisions?
Under the CARES Act business and will receive both tax payment relief as well as tax incentives. These include but are not limited to the following:
- Payback Protection Program: $367 billion will be available in small business loans. $150 billion has been set aside for state and local governments. The loans will be forgiven if businesses pledge not to lay off their workers.
- Business who experience a 50% decrease in gross receipts or are forced to suspend operations may be eligible for a tax credit of up to 50% of wages paid during the crisis as long as they keep their workers employed throughout the crisis.
- The Treasury Department will distribute $500 billion in loans to business critical to maintaining national security.
- Health care providers will receive $100 billion in grants to help fight the coronavirus and compensate for lost revenue.
- The Federal Communications Commission will receive $200 million to help health care providers create telemedicine services. Another $25 million will go to grants helping rural communities purchase broadband equipment for these services.
- Retailers, restaurateurs and hotels may immediately deduct amounts spent on property improvements from their taxes.
- Employers can defer the 6.2% tax they pay on wages to fund Social Security.
The CARES Act also includes a number of benefits for individuals including:
- Single Americans will receive up to $1,200 and married couples will receive up to $2,000 based on household income. Additionally, parents will receive $500 for each child.
- Unemployed individuals will get an extra $600 per week for up to four months. These payments are in addition to state unemployment benefits.
- A new assistance program will provide benefits to unemployed or partially employed individuals because of COVID-19 that don’t qualify for traditional benefits.
- The Department of Education will suspend payments on student loans without penalty through September 30th.
- Individuals receive protections against mortgage foreclosures and rental evictions.
Explanation of Major Provisions
Loans and Tax Credit for Small Businesses
Businesses employing 500 or fewer people who pledge not to lay off their workers can apply for a federally guaranteed loan program. Loans will be available during an emergency period ending June 30. Loans used for approved purposes will be forgiven if the business maintains the average size of its full-time workforce, based on when it received the loan. Small businesses forced to suspend operations or that see receipts fall by 50% from the previous year can apply for a tax credit worth up to 50% of wages paid during the crisis. To receive the loan, the business must keep their workers employed during the crisis. Wages remain eligible until business operations resume or gross receipts for a quarter reach 80% of the prior year.
Expansion of Unemployment Benefits
The CARES Act extends unemployment insurance by 13 weeks and includes a four-month benefits enhancement. In states that provide 26 weeks of unemployment benefits, individuals may receive an additional 13 weeks of unemployment benefits for a total of 39 weeks. Additionally, the benefits provide an additional $600 per week on top of any state unemployment funds. Many individuals who do not qualify for unemployment will qualify under the new package. This includes independent contractors and self-employed individuals.
Individual Checks to Taxpayers
U.S. residents with adjusted gross incomes up to $75,000 ($150,000 for married couples) will receive a $1,200 ($2,400 for couples) payment from the IRS. Families will receive an additional $500 per child as a way to create a safety net. Payments phase out for those with adjusted gross incomes on their 2019 federal tax return of $75,000 per individual or $150,000 per couple. Several online calculators exist such as the one at the Washington Post or Turbo Tax to help calculate your stimulus payment amount.
How Can I Take Advantage of the Stimulus?
How Can I Obtain A Small Business Loan?
The U.S. Small Business Administration (SBA) offers loans for qualifying small businesses. These low-interest loans have terms up to 30 years at interest rates of 3.75% for small businesses and 2.75% for nonprofits. You can apply for an SBA loan through it’s website. Please visit our COVID-19 Legislation page for key documents needed and an overview of the Paycheck Protection Program.
How Can Employees Collect Unemployment Assistance?
If your business closes due to COVID-19 and your employees cannot work from home, they can likely collect unemployment. The same holds true for those unable to work due to the disease or to care for those with the disease. Each state administers a separate unemployment insurance program. Employees should visit their state’s unemployment website to understand the details of the programs. Employees will need their social security number and driver’s license or state ID. To find the details of your state’s unemployment program, you can visit the U.S. Department of Labor’s CareerOneStop resource page and select your specific state.