The historic $2.2 trillion economic stimulus plan was signed into law March 27
This article was originally published on March 27, 2020
In an unprecedented move, President Trump signed a $2 trillion relief bill to keep the economy moving forward. As it stands, the legislation (known as the CARES Act) will help taxpayers, main street businesses, and industries impacted by the coronavirus pandemic. It’s the largest relief bill in U.S. history.
UDPATE: President Trump signs the $2 trillion coronavirus relief bill into law.
The 800-page plus bill includes many provisions to help small and medium-sized businesses (SMBs).
We’ve broken down what the stimulus package means for SMBs and their employees.
Small business interruption loans
The Act provides $350 billion worth of loans to businesses that continue to employ workers during the COVID-19 outbreak.
Note: This is in addition to the Small Business Administration (SBA) Economic Injury Disaster Loan program, which provides loans up to $2 million and is available to SMBs in all 50 states.
Small businesses, non-profit organizations, sole proprietorships, and self-employed individuals with 500 or fewer employees per location are eligible for loans up to $10 million under the Paycheck Protection Program, administered by the SBA. The maximum interest rate is 4%.
Update: On March 31, the SBA uploaded the application form for the Paycheck Protection Program. The U.S. Treasury Department and the Small Business Administration expect to have this program up and running by April 3rd.
The loan can be used to provide:
- Mortgage or rent payments
- Utility payments
- Healthcare premiums
- Other debt obligations
Any portion of the loan used for payroll and existing debt obligations will be eligible for loan forgiveness for an 8-week period from the beginning of the loan, given they can maintain the equivalent number of full-time employees through June.
Organizations that have already laid off workers due to the pandemic will still be eligible for the loans and loan forgiveness if they rehire their staff members.
Portions of the loan used for payroll issued to workers who earn over $100,000 will not be forgiven.
The stimulus legislation states portions of the loans used for covered expenses will convert to grants, but interest will still have to be paid.
Loan forgiveness is reduced proportionately to any reduction in workforce or wages compared to the prior year.
Businesses that receive funding under the “Paycheck Protection Program” are not eligible for the SBA EIDL loans.
Relief for all businesses
The Act also provides a refundable payroll tax credit equal to 50% of “qualified wages” for eligible businesses during the COVID-19 crisis.
The credit is for wages paid from March 13, 2020 through December 31, 2020, and it’s designed to help businesses not reduce staffing.
Recovery rebates for individuals
The CARES Act also provides relief for taxpayers. Qualified individuals will receive up to $1,200 per person (or $2,400 for married filing jointly) with an additional $500 per child.
The amount an individual receives is based on their gross adjusted income.
The benefit decreases by $5 for every $100 in income over $75,000 and will not be paid to single taxpayers who make $99,000 (or $198,000 for married filing jointly).
For individuals with no tax liability, the payment will be at least $600 (or $1,200 for joint returns).
The government will use 2018 tax return data to determine payment amounts.
Taxpayers who filed their 2018 return using direct deposit can expect the deposit will be made soon after the bill is passed. Those who mailed payment/refunds will be paid by mail.
USA Tax deadline delays
The law extends tax deadlines as follows:
- Federal Income Tax Returns normally due on April 15 will not be due until July 15, 2020
- S-Corporation and Partnership returns will not be due until September 15, 2020
- C-Corporation returns will not be due to October 15, 2020
- For payroll tax payments extended through the end of 2022, 50% of will be due by the end of 2021
Unemployment insurance payments
The CARES Act provides extended unemployment benefits for workers impacted by the outbreak.
Those whose business has been closed due to mandated shutdowns, whose children’s schools have been closed, and those directly impacted by COVID-19 will be eligible for benefits.
The Act extends unemployment benefits from 26 weeks to 39 weeks. The benefit amount is calculated under state law, plus $600 in federal funding per week up to 4 months. It will also waive the one-week waiting period.
It also provides unemployment benefits for self-employed workers and contractors. These previously ineligible workers can receive the $600 federal supplement for up to 39 weeks if their business has been impacted by COVID-19.
As more details emerge, we will continue to update this article.
Editor’s Note: Neither Workest nor Zenefits is affiliated with the Small Business Administration (SBA) or a lending organization. This article is intended for informational purposes only.