The Top 7 Tax Relief Programs for Businesses affected by COVID-19
The Coronavirus pandemic has caused a ripple effect across the world that no one could have imagined just a few months ago. Businesses are struggling as they must close their doors to customers. To help combat the difficult economic climate that our country is experiencing, the federal government has passed the CARES ACT.
This piece of legislation puts safeguards in place for businesses, nonprofits, individuals, and state and local agencies. It is designed to sustain these entities throughout the drastically changing economic landscape. Here are some of the key features of the CARES ACT that are most likely to affect your business.
1. Paycheck Protection Program (PPP)
Highlights: This program directs $349 billion towards business operating expenses and job retention
About: Provides a direct incentive for small businesses to cover payroll, employee salaries, and certain other expenses like rent, utilities, and mortgage payments.
Eligibility: Businesses including non-profits, sole proprietorships, self-employed, and independent contractors described in the Small Business Act – with 500 or fewer employees are eligible to apply for this loan.
The SBA (U.S Small Business Administration) will forgive the portion of loans if all the employees are kept on the payroll for eight weeks.
2. Economic Injury Disaster Loans (EIDL)
Highlights: This program can fund up to $2 million to small businesses
About: This program funds small businesses or private including non-profits that suffer from the economic injury due to declared disaster regardless of the physical damage of the applicant.
Eligibility: Small businesses must have suffered by the economic injury and should be located in the disaster declared county or a contiguous county.
There are no upfront fees and early-payment penalties charged by the SBA.
3. Employee Retention Tax Credit
Highlights: This program provides a refundable payroll tax credit for 50 percent of qualified wages paid by employers
About: This program provides the businesses including nonprofits that are affected due to COVID-19 with the federal tax credits for the wages paid from March 13, 2020, to December 31, 2020.
Eligibility: Employers whose business is fully or partially suspended due to COVID-19 shut-down or the business experienced the 50% reduction in gross receipts for a calendar quarter compared with the same quarter last year.
4. Deferral of Employer Payroll Tax Payments
Highlights: Allows businesses and self-employed to defer certain payroll taxes
About: This program enables businesses and self-employed individuals to defer the employer portion of social security tax through the end of 2020. Half of the deferred amount will be due by the end of 2021 and another half will be due by the end of 2022.
Eligibility: All the businesses and the non-profits are eligible to defer their payroll taxes unless they receive a loan under the SBA Paycheck Protection Program.
5. Net Operating Loss/Excess Business Loss Changes
Highlights: CARES Act modify the Rules Relating to Net Operating Losses Carrybacks
About: Previously, net operating losses cannot be carried back to prior years. But now the CARES Act permits a five-year carryback of net operating losses.
Eligibility: All the businesses that suffer a loss in 2020 as a result of the COVID-19 pandemic.
6. Business Interest Deduction
Highlights: CARES Act increases the business interest deduction limitation to 50%
About: Previously the business interest deduction limitation defined by the Tax Cuts and Jobs Act was 30%. This allows the businesses to calculate the limitation for the taxable year beginning in 2020 based on the adjusted taxable income for the taxable year beginning in 2019.
Eligibility: All the businesses that suffer a loss in 2020 as a result of the COVID-19 pandemic.
7. Families First Coronavirus Response Act
Highlights: FFCRA brings substantial changes to Paid sick and FMLA leave for employees in 2020. Businesses can now seek reimbursement for this through tax credits.
About: Employers are now required to provide employees with up to 10 weeks of paid FMLA. Also, they must offer paid sick leave to those who are unable to work because their employees got affected by COVID-19 and in self-quarantine or in isolation or caring for their family members.
Eligibility: Any business with fewer than 500 employees is eligible to claim tax credits using this Families First Coronavirus Response Act.
The above are just a few opportunities that your business can claim.
If you still want additional information, please visit the following links or discuss it with your accountant for further assistance.
As the pandemic continues, the TaxBandits team is here to track any changes that may affect your small business. We want to remind you that our team is here for you and we are on your team. If there is any way that we can assist your business this tax season, we are willing to go the extra mile to do so! We know that the most important thing to you is your business, that’s why we want to make your IRS E-filing experience as quick and easy as possible!
