Don’t forget about the EIDL program, employee retention tax credit, Social Security deferral, and the sick and family leave credit to help your small business
The original deadline to file a Paycheck Protection Program loan application was June 30, but Congress extended the deadline to August 8. Whether you forgot to file or the PPP wasn’t right for you, don’t forget about these other relief options to help your small business.
Here’s what to look for:
The Small Business Administration (SBA) recently reopened its EIDL advance grant portal. Small businesses impacted by the COVID-19 pandemic can apply for a forgivable advance up to $10,000.
Loans will have a 3.75% interest rate, which is deferrable for the first year with a 30-year repayment span.
EIDL loans can be used for expenses outside the PPP program, which is primarily for employee wages. EIDL money can be used to cover costs of operation (including supplies, rent, and utilities).
Employee Retention Tax Credit
As part of the CARES Act, the IRS is providing a tax credit for businesses that retain workers during the COVID-19 pandemic. Businesses can receive half (50%) of the employment taxes due for qualified wages. It applies to wages paid after March 12, 2020 and through January 1, 2021.
Note: An employer cannot get a PPP loan and the payroll tax credit.
SMBs and tax-exempt organizations are eligible for the credit if they were open for business in 2020 and the following apply:
- They needed to fully or partially suspend operations because of government shutdowns due to COVID-19
- They experienced a significant decline in gross receipts
Wages the relief covers vary based on the size of the organization. For businesses that had more than 100 full-time employees in 2019, qualified wages are funds paid to employees (and some healthcare costs) up to $10,000 for each employee who is laid off because of closures or declines in revenue. The amount can only include what the employer would normally pay the employee during the 30 days immediately prior to the closure or period of economic hardship.
For businesses with 100 or less full-time employees in 2019, qualified wages include any salary, and some healthcare costs, up to $10,000 per employee who is either laid off because of closures or decline in revenue or still working for the employer.
Taxes available for the credits include:
- Withheld federal income taxes
- Employee and employer share of Social Security and Medicare taxes
Social Security tax deferral
Employers are required to withhold Social Security tax at 6.2% from their employees’ wages, up to the annual wage limit ($137,700 for 2020). In addition, they must pay their own share of Social Security tax at the same rate as employees.
Usually, employers must submit their share of Social Security tax plus their employees’ portion to the IRS either monthly or semiweekly.
Under the CARES Act, employers can defer paying their share of Social Security tax; 50% of the deferred amount must be paid by Dec. 31, 2021 and the remaining 50% is due by Dec. 31, 2022.
Social Security tax for employees and self-employed individuals must be paid as normal.
The deferral does not pertain to Medicare tax.
Sick and family leave credit
The Families First Coronavirus Response Act has offered some relief for businesses to help employers when workers contract COVID-19 or have to care for a family member.
Businesses can expect to be fully reimbursed by the federal government for leave pay they issue to employees through refundable tax credits.
Under the FFCRA, self-employed workers receive reimbursement in the form of tax credits if they calculate their “average daily self-employment income” and provide themselves with EPSLA payments during their leave.
Self-employed workers should calculate their net earnings for the taxable year, then divide by 260. This amount, subject to the limitations of $511 per day/10 days maximum or $200 per day/10 weeks maximum, should be fully refundable in the form of annual or quarterly tax payments.
Additional Private Funds