CARES Act Updates: PPP Loans, Tax Relief & Other Information for the COVID-19 Crisis

The CARES Act legislation includes important programs and provisions to help keep your employees on payroll during the COVID-19 crisis. 

While widely available, the benefits of these programs are complicated and you CAN NOT choose all of them, so there are choices to make in deciding how to best utilize them. Here's a link to a detailed guide to help with that process. 

Below is a summary of the three programs aimed at providing assistance with payroll expenses during this crisis.  We strongly recommend speaking with your accountant/financial advisors about these decisions For our clients, we’re ready to help with providing any information and/or records you’ll need to evaluate and/or apply for these programs.

Paycheck Protection Loan Program (PPP Loans):

This loan program provides eligible businesses (under 500 employees) with cash to meet payroll (including benefits) and other fixed costs (such as rent, interest on mortgages, and utility payments) for up to eight weeks. This is different than the existing Economic Injury Disaster Loan (EIDL) also available through the SBA: 

50% Employee Retention Tax Credit:

This program allows employers (regardless of size) uniquely affected by COVID-19 to claim a refundable tax credit against the employer portion of payroll tax equal to 50% of certain wages paid to an employee between March 13, 2020 through the end of the year.

  • Only $10,000 of wages could be taken into account for any employee. 

  • This 50% credit would be available to businesses 

    • (i) that have had their operations fully or partially suspended by government order due to COVID-19 

    • (ii) that experienced a 50% decline in gross receipts during a 2020 calendar quarter when compared with the same quarter in 2019. 

  • Link to Basic FAQ from IRS on Tax Credits

Social Security Tax Deferral:

Another provision that is available to employers of all sizes is the ability to defer the payment of the employer portion of Social Security taxes (6.2% of wages) for the remainder of 2020. Fifty percent of those deferred taxes would have to be repaid by the end of 2021, with the remainder due by the end of 2022. 

Restrictions, Next Steps and What Programs You CAN Choose (aka the small print): 

Each of these programs provide generous tax subsidies to assist employers. But you CAN NOT choose all of then,  you’ll need to make choices. 

  • If you obtain one of the new SBA loans, you are not eligible for the 50% employee retention tax credit.

  • If you have a new SBA loan forgiven, you cannot take advantage of the Social Security tax deferral. 

  • If you claim the 50% employee retention credit, you will no longer be eligible for an SBA loan.

  •  If you take advantage of the Social Security tax deferral, you will no longer be eligible to have your SBA loan forgiven.

  • If you’ve already applied for or received SBA EIDL loans, you can refinance the EIDL into the PPP for loan forgiveness purposes. While you can apply for both, you CAN NOT not take out an EIDL and a PPP loan at the same time and for the same purposes.

To be clear, as of today (March 31) no one is applying for PPP loans because the program does not yet exist, operationally. There are no forms on the SBA site but you can start preparing everything you need to apply starting Friday, April 3rd. It’s important to carefully evaluate these programs since the benefits could vary greatly depending on which path you choose. More details and further guidance will be released from the SBA and IRS.

Reminder: The FFCRA’s COVID-19 Paid Leave Requirements Take Effect April 1st: For more information on the new rules requiring employers to provide paid sick leave and FMLA leave for COVID19-related reasons, please see our communication here. 

We will keep you informed of additional information as it becomes available. Know that we are here as a resource. Please reach out if assistance is needed.

VISIT OUR COVID-19 Employer Resource Center