The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”)

Disasters have been declared in all 50 states for the first time in history, in addition to the disaster declaration by the federal government. Congress has passed the Families First Coronavirus Response Act and the $2 trillion recently enacted CARES Act to provide relief to an economy that is shedding jobs at a rate never seen before in this country. Our country’s leaders hope that these efforts will reach far enough to stave off the depression at which the country is staring.

What relief is there for small businesses?

Paycheck Protection Program

Many of the provisions of the CARES Act were included with small businesses in mind. Under the act the SBA received $349 billion to establish a new loan program to assist businesses of fewer than 500 employees that have been adversely impacted by Coronavirus. The Act permits the SBA to guarantee loans under a new program titled the “Paycheck Protection Program,” and provides for forgiveness of up to the full principal amount of qualifying loans for borrowers that follow certain guidelines. Loans are available for up to the lesser of $10 million or 2.5 times the business’ average monthly payroll. The loans are available on a first-come basis, and the program will cease when the entire $349 billion has been lent.

Other Payroll Assistance

Under the CARES Act impacted employers that meet certain restrictions and that do not enroll in the Paycheck Protection Program will be eligible for a refundable tax credit of 50% of the first $10,000 of employee wages for any quarter through year end. These employers will also be allowed the deferral of payment of the employer portion of social security taxes, half to 12/31/2021 and half to 12/31/2022. 

Section 139 Relief

On March 13th President Trump declared the current crisis surrounding COVID-19 to be a national emergency. This opened the door for employers to provide tax-favored financial assistance to employees affected by the coronavirus pandemic under §139 of the Internal Revenue Code. This little-known section of the IRC allows for employers to provide employees with tax-free payments for expenses such as over-the-counter medications; hand sanitizer and home disinfectant supplies; child care or tutoring due to school closings; expenses associated with teleworking, for example higher Internet costs; increased commuting costs, for example taking a taxi instead of public transportation; and unreimbursed health-related expenses. It bears mention that while these payments under §139 are tax-free to the individual and fully deductible to the business these payments do not include wage replacement, which would still be subject to income and payroll taxes.

Whether you need help understanding how this new legislation will impact your taxes, or you need help navigating these trying economic times as creditors bear down, contact the dual-licensed attorney-CPAs at Daniel Rosefelt & Associates to enlist a trusted advisor today.