By Robert G. Brody and Mark J. Taglia

This article was originally written on April 3, 2020

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, which President Trump signed into law on March 28, 2020, is a wide-ranging economic rescue package for individuals and businesses.

The CARES Act provides, among other things, direct monetary payments to individuals, help for the unemployed (including freelancers and gig workers), and support for small businesses.  The following is a brief summary of some of the key benefits employers should know.

Direct Monetary Payments to Individuals and Families
The IRS will send direct payments to families of up to $1,200 for individuals, $2,400 for couples, and $500 per child.

Single taxpayers with an adjusted gross income up to $75,000 will receive $1,200 in direct payments and joint filers with an adjusted gross income up to $150,000 will receive $2,400.  As such individuals’ income increases, these benefits will decreases until eliminated for those individuals making more than $99,000 and $198,000 respectively.  The IRS will use individuals 2019 tax filings to determine eligibility.

Help for Unemployed Individuals, Freelancers, and Gig Workers

The CARES Act provides increased unemployment benefits in two primary ways:  

·         First, unemployed individuals eligible for state unemployment insurance will receive  an additional $600 per week in federal aid for their first four months of unemployment.

·         Second, non-traditional employees, often referred to as “gig” workers and Freelancers, as well as individuals not able to work because of COVID-19, will be eligible to receive unemployment insurance.  These workers will be entitled to receive half of their state’s average weekly unemployment benefit, plus the additional $600 federal benefit referenced above; provided their unemployment was related to COVID-19.

Small Businesses and Small Business Administration (the “SBA”) Loans
The CARES Act provides for $349 billion for SBA loan guarantees, which loans can be forgiven in an amount equal to the amount spent by a borrower, if the money is used for payroll support including employee salaries, paid sick and medical leave, health insurance premiums, mortgage, rent, utility payments, etc.   This section of the Act is referred to as the Paycheck Protection Program (PPP).  Under the Act, self-employed individuals, including, sole-proprietors and independent contractors are also eligible for loans.    Brody and Associates will be publishing a new article specifically designed for clients looking to take advantage of the Paycheck Protection Program.

Additionally, the CARES Act provides for billions more in SBA emergency loans and grants through the emergency Economic Injury Disaster Loans (EIDL) and emergency Economic Injury Grants.

These grants, up to $10,000, are advances against the EIDL  and do not need to be paid back, even if the borrower ultimately does not qualify for the underlying loan.  This grant is designed to give immediate relief for small businesses to cover operating costs.  Meanwhile, the rates on EIDL are very favorable with an interest rate of just 3.75% (2.75% for non-profits) and a loan repayment term of up to 30 years.  Brody and Associates will be publishing a new article specifically designed for clients looking to take advantage of Emergency Economic Injury Disaster Loan program.

Employee Retention Tax Credit
A big win for employers in the CARES Act is a refundable payroll tax credit equal to 50% of the wages paid by eligible employers to employees made during the COVID-19 crisis.  To utilize this benefit, employers are not permitted to receive any SBA payroll support loans.  The tax credit is limited to the first $10,000 of compensation paid to an eligible employee, including health benefits.

An employer’s eligibility is conditioned upon its operations being actually impacted by COVID-19.

For eligible employers with up to 100 full-time employees, all wages qualify for the credit, whether the employer is open for business or subject to a shut-down order. 

However, for employers with more than 100 full-time employees, not all wages will qualify.  For those employers, qualified wages are limited to the wages paid to employees when they are not providing services due to the COVID-19-related circumstances described above.

Delay of Payment of Employer Payroll Taxes
CARES gives employers the option to postpone the payment of the employers share of payroll taxes, provided any deferred payment is paid over the following two years
 
We have only highlighted the relevant sections of the CARES Act we think are most relevant to our readers.  Please click here for a link to the actual law to learn more about its details and other benefits not covered here.

The CARES Act has just been released and there is much still to learn about its applications and its practical impact.  We suggest you seek qualified counsel to help guide you.  Brody and Associates is here to assist.

The subject matter discussed in this post can be very technical.  It is an evolving area of law and very fact specific.  Our goal here is to simply alert you to some of the key issues involved.  We urge you to seek competent legal counsel before applying these ideas to your specific situation.  Brody and Associates stands ready to discuss your particular needs.