On March 27, the U.S. federal government passed a new COVID-19 stimulus package designed to give businesses and individuals relief during these tough times. New information on the law is still being released, but we’ve put together an overview of how it can help our small business partners based on what we know so far.
What it is: The CARES Act is a new federal stimulus package just signed into law. Full information is still being released, but The CARES Act will provide greater relief for small businesses, those who are self-employed, and individuals.
Who is eligible: Small businesses (500 employees or fewer), sole proprietors, freelancers, those who are self-employed, gig workers, part-time workers, temporarily furloughed workers, and individuals who can’t work because they have symptoms of COVID-19 or are quarantined.
How it works: It is designed to provide relief for small businesses, those who are self-employed, and individuals in several key ways:
- Help you keep your workers paid and employed:Over $350B in new low-interest loans to small businesses → apply through the SBA small business loan program. New program called the Paycheck Protection Program (PPP) that builds on the SBA’s existing Section 7(a) SBA financial assistance loan programs (which are separate from disaster assistance loans) and allows small businesses to take out partially forgivable loans of up to $10 million that cover the period from February 15, 2020 to June 30, 2020.
- How the loan amount is calculated: The amount is based on a formula, which considers your annual payroll and other business expenses. You’ll have to submit your payroll documentation to get the loan, including your tax filings showing business income and expenses if you’re a sole proprietorship, or your payroll tax filings or IRS Form 1099-MISC if you’re self-employed or an independent contractor.
- How the PPP loan is forgiven: PPP loans can be forgiven if used to maintain existing employees (including those who went to zero hour schedules) and/or help pay for other expenses like rent, mortgage, healthcare costs, and utilities for up to 8 weeks. If you’ve already had to lay off some or all of your employees, you might still be eligible for these loans to pay for your other business expenses (e.g. rent, mortgage payments, healthcare plan costs and utilities) or you may be able to apply the loan to payroll if you increase worker hours or reinstate / rehire them.
Where to learn more: More information on how PPP loans work is in this government FAQ, and on the SBA website, which will have more details on how to apply in the coming weeks. Payroll tax credit for employee retention of up to 50% of wages paid to employees (for employees earning up to $100,000/year) during the COVID-19 crisis.
Helps you and your employees when you’re unable to keep them employed: Extended eligibility for unemployment benefits, including to gig workers, freelancers, part-time workers who’ve seen reduced hours because of COVID-19, the self-employed, temporarily furloughed workers and individuals who can’t work because they have COVID-19 symptoms or are quarantined.
$600/week more in unemployment benefits (for up to 4 months) and an additional 13 weeks of unemployment benefits on top of state-provided benefits until December 31, 2020.
Gives employees laid off March 1, 2020 or later access to paid family and medical leave in some cases if you rehire them after the COVID-19 crisis and gives employers an advance tax credit to pay for that paid leave.
Helps you cover monthly expenses: New SBA loan advances of up to $10,000 under the EIDRL program to provide immediate relief while waiting on other loan applications and disbursements. Remember that if you do get this advance, it may not be eligible for forgiveness if you later apply for a PPP loan.
- Up to $17 billion to cover 6 months of loan payments for small businesses with existing SBA loans.
- For hospitality companies (e.g. hotels), eligibility for SBA small business loans will be determined by size of physical location or property instead of the overall employer (e.g. a large hotel chain).
- Temporary suspension of student loan interest or payments until 2021.
- Waives the early withdrawal penalty for individuals withdrawing money early from their retirement accounts due to COVID-19 related challenges.
- Gives you tax relief (individual and business)
Individual tax relief: $1,200 in immediate tax rebates for individuals making up to $75,000 a year, or $2,400 for married couples making up to $150,000 a year, plus $500 per child, scaling down for higher income brackets. For example, a family of 4 making less than $150,000 could receive up to $3,400. Tax rebates are expected to pay out within 3 weeks. Temporarily suspends caps on deductibility of charitable contributions to help you and your customers support your local businesses.
Business tax relief: Defers Social Security payroll tax payments that would otherwise be due in 2020 for up to 2 years.
- Increases carry back time period and tax deductions for net operating losses.
- Expands the tax deduction limit for net interest payments from 30% to 50%.
- Allows immediate expensing of qualifying business property improvements.
How to Apply: You can check the SBA and the IRS COVID-19 resource pages for updates on how to apply for these new relief measures as they are implemented. We will also update this Q&A as new information becomes available.
Helpful Tip: Loan amounts may be partially determined by your monthly payroll costs for the last year, so you may want to start calculating this.You can learn more about PPP loans here.
About the author: Meghan Stolar Brown is Director of Marketing at The Knot Worldwide. She has extensive marketing and event management experience and understands the challenges and opportunities creative entrepreneurs face. Meghan has been a featured speaker at Wedding MBA, Showit United, and on The Goal Digger Podcast. Growing up with a booking agent and a wedding band leader for parents, there is no doubt that marketing and events are in Meghan’s DNA (follow along via Instagram @meghan_sb).
Photo Credit: EpagaFOTO