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The Coronavirus Aid, Relief, and Economic Security (CARES) Act and the Families First Coronavirus Response Act and the Paycheck Protection and Health Care Enhancement Act contain important provisions to help businesses cover critical operating costs and provide tax relief as a result of the coronavirus pandemic. Here's a summary of key provisions for businesses, as well as supplementary resources.
The PPP provides federally guaranteed loans to small businesses to cover business operating costs for eight weeks. Significantly, these loans may be fully forgiven (including interest) if the small business uses the loan proceeds for payroll costs (including benefits), mortgage interest, rent and/or utilities, while maintaining their staff and payroll during the crisis.
While the CARES Act originally allocated $349 billion for the Paycheck Protection Program, the funds were exhausted within three weeks. An additional $310 billion in funding was authorized by the Paycheck Protection Program and Health Care Enhancement Act, which was signed into law on April 24, 2020.
Businesses interested in securing a loan through the Paycheck Protection Program should immediately contact their Small Business Administration lender, federally insured depository institution, federally insured credit union or Farm Credit System institution.
The CARES Act provides a refundable payroll tax credit up to $5,000 per eligible employee for businesses impacted by COVID-19.
The CARES Act expands eligibility for access to Economic Injury Disaster Loans for businesses with 500 or fewer employees, including Tribal businesses, cooperatives, and ESOPs, or any individual operating as a sole proprietor or an independent contractor during the covered period (Jan. 31, 2020 to Dec. 31, 2020). The Paycheck Protection Program and Health Care Enhancement Act clarifies that agricultural businesses with 500 employees or fewer can also access loans from the program.
For eligible businesses that have applied for an EIDL due to COVID-19, the CARES Act also establishes an Emergency Grant enabling the business to request up to a $10,000 advance of that loan. This can be forgiven if used to:
The Paycheck Protection Program and Health Care Enhancement Act includes an additional $60 billion in funding for Emergency Injury Disaster Loans, including $10 billion for Emergency Grants. We anticipate there will be considerable demand for these resources and encourage businesses interested in the EIDL program to contact the Small Business Administration immediately.
The Families First Coronavirus Response Act establishes credits for sick and family leave costs for businesses with fewer than 500 employees.
The CARES Act permits employers and self-employed individuals to defer payment of the employer share of the Social Security tax incurred from March 27, 2020, through Dec. 31, 2020. Deferred taxes must be repaid over two years, with half the amount due by Dec. 31, 2021, and the remaining due by Dec. 31, 2022.
The CARES Act includes other economic relief for businesses, including the following:
It's important to note that certain provisions described above cannot be used in conjunction with others. Here are some considerations when determining which programs to use:
Benefits generally limited to employers with up to 500 employees (also available to self-employed individuals) include:
Benefits not limited by employer size (generally also available to self-employed individuals) include:
Work with your Edward Jones financial advisor to consider these key aspects of the COVID-19 relief legislation as part of your broader financial strategy. As with any decision that could involve tax implications, consult with your tax professional on considerations and impacts to your specific situation. Your financial advisor can partner with him or her to provide additional financial information that can help in the decision-making process.
*Applicable for employers with fewer than 500 employees.
These materials are for general education only and any specific questions related to their individual circumstances should be discussed with their personal financial, tax or legal adviser, as appropriate.
Edward Jones has not independently verified and is not responsible for third-party content.
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