Coronavirus COVID-19 Overview
The coronavirus disease, also known as COVID-19, is a global outbreak first reported on December 31, 2019, in Wuhan, China. Symptoms of the respiratory disease include fever, cough, and shortness of breath, according to the Centers for Disease Control and Prevention (CDC).
The Federal Government has passed the following legislation to provide relief for small businesses during the COVID-19 Pandemic.
A. Families First Coronavirus Response Act passed March 18th, 2020 - includes;
1 and 2. Paid Sick Leave and Family Leave
The FFCRA requires most employers with fewer than 500 employees to provide eligible employees with 10 days of paid sick leave and 10 weeks of paid family leave.
Employees can take paid sick and family leave for coronavirus-related situations. Paid sick leave is for employees who have the coronavirus or are caring for someone who has it. Paid family leave is for employees who must watch a child whose school or daycare is closed because of it.
If you have fewer than 500 employees and aren’t exempt from the FFCRA (e.g., have fewer than 50 employees), you must provide these benefits between April 1, 2020 – December 31, 2020.
Employees can take paid sick leave and receive their regular wage ($511 maximum daily rate) for 10 days if they are:
- Subject to a quarantine or an isolation order
- Advised by a healthcare provider to self-quarantine
- Experiencing COVID-19 symptoms and waiting for a diagnosis
- Caring for someone subject to a quarantine or isolation order or advised by a healthcare provider to self-quarantine (paid sick leave, 10 days)
- Advised by a healthcare provider to self-quarantine
- Caring for a child under 18 whose school or place of care is closed due to COVID-19 (paid family leave, 10 weeks)
- The job no longer exists due to economic hardship caused by the coronavirus
- You make reasonable efforts to return the employee to a similar position
- You try to contact the employee if anything comes up within a year of when they would’ve returned to work
- You have to fully or partially suspend operating during any quarter in 2020 due to the coronavirus or
- Your gross receipts significantly decline as a result of the coronavirus
- Salaries, wages, commissions, and tips ($100,000 max per employee)
- Employee benefits (e.g., sick leave)
- State and local taxes
- Self-employed individuals
- Sole proprietors
- Nonprofit and veteran organizations
- Independent contractors
- Tribal businesses
- Self-employed individuals
- LLC or S Corp owners
- Independent contractors
- Gig workers
Employees can take paid leave and receive two-thirds their regular wage ($200 maximum daily rate) if they are:
If you have part-time employees, the FFCRA also applies to them. Use their average number of hours worked over a typical two-week period to determine how many hours they’re eligible for
3. FMLA Expansion
The FFCRA’s Emergency Family and Medical Leave Expansion Act extends the guidelines to all employers with fewer than 500 employees. Regular Family and Medical Leave Act (FMLA) rules only apply to businesses with 50 or more employees.
Again, the expansion requires qualifying employers to provide paid family leave to employees who meet the criteria (explained in the previous section).
The expanded FMLA under the FFCRA also protects most employees’ jobs for 12 weeks when they take paid family leave to care for a child. Again, employees are entitled to 10 weeks of paid family leave. The first two weeks of paid family leave can either be unpaid or the employee can use their 10 days of FFCRA paid sick leave.
If you have fewer than 25 employees, you do not have to reinstate an employee after they use paid family leave if you meet all three of the following conditions:
4. Employee Tax Credit
To help employers offset the cost of providing paid sick and family leave, the FFCRA provides COVID-19 paid leave payroll tax credits. Employers use these refundable payroll tax credits to get reimbursed, dollar-for-dollar, for the cost of providing paid sick and family leave.
The total credit amount you can claim includes the paid leave you give the employee, plus the employer Medicare tax on those wages and health plan expenses associated with them.
You can claim these paid leave tax credits if the FFCRA requires you to provide leave and you pay employees paid leave wages.
You “fund” the paid leave wages by holding onto federal employment taxes on wages between April 1 – December 31 instead of depositing them with the IRS. Then, you claim the amount as a tax credit on your federal employment tax return.
Employers whose employment taxes don’t cover the leave wages have the option to file Form 7200, Advance Payment of Employer Credits Due to COVID-19. Use the form to request a payment advance from the IRS.
5. Expanded Unemployment Benefits
The Emergency Unemployment Insurance Stabilization and Access Act of 2020 expands unemployment benefits for employees impacted by COVID-19. Under the FFCRA, the federal government provided states with additional funding for unemployment benefits.
Expanded unemployment benefits include eased eligibility requirements and waived waiting periods. This allows more employees to qualify for benefits, and employees do not have to wait a week to receive benefits or search for work to be eligible.
The expanded benefits also let employers furlough or lay off employees without increasing their SUTA tax accounts.
6. Nutrition assistance
The FFCRA’s nutrition waivers expand nutrition assistance program benefits to ensure children and those in need have food.
The expanded nutrition aid provides additional funds to child nutrition programs, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), the Supplemental Nutrition Assistance Program, and USDA Foods Programs.
7. COVID-19 testing coverage
COVID-19 testing coverage lets individuals receive coronavirus testing and diagnosis without involving deductibles, copayments, or coinsurance. This coverage also covers office visits, urgent care visits, and emergency room visits resulting in an order for coronavirus testing.
B. CARESAct (Coronavirus Aid, Relief and Economic Security Act) passed March 27th, 2020 includes
1. Employee Retention Credit
The Employee Retention Credit is another CARES Act relief measure for small businesses. It is a fully refundable coronavirus tax credit eligible employers can claim that is equal to 50% of qualifying wages paid to employees after March 12, 2020 and before January 1, 2021.
The maximum credit per employee for all calendar quarters is $5,000 (up to $10,000 in qualified wages per employee).
You are considered to be an eligible employer for the Employee Retention Credit if:
Self-employed individuals and government workers are not eligible for the Employee Retention Credit.The credit reduces your employer Social Security tax liability. If your credit is more than your Social Security tax liability, you will get a refund.
To claim the credit, report your total qualified wages and related credits for each calendar quarter on your federal employment tax returns (e.g., Form 941). Qualified wages are the compensations and wages employers pay to employees during this period of time (including qualified health plan expenses). The number of full-time equivalent employees you had in 2019 also determine qualifying wages. You cannot claim the credit on FFCRA paid leave wages.
Employers can claim the Employee Retention Credit if they don’t receive a PPP loan. You cannot receive both the Employee Retention Credit and a PPP loan. Employers who receive a PPP loan cannot claim the Employee Retention Credit, regardless of if the PPP is forgiven or not.
2. Paycheck Protection Program (PPP)
The Paycheck Protection Program (PPP) is one of the biggest relief measures for small businesses under the CARES Act. The program’s forgivable loans incentivize small businesses to keep employees on payroll in the midst of the pandemic.
The PPP provides small businesses with funds for up to eight weeks of payroll costs, interest on mortgages, rent, and utilities. Borrowers must use 75% of the loan for payroll-related expenses. Payroll costs include things like:
Interest on mortgages, as well as rent and utility bills must be from before February 15, 2020.
Businesses receiving assistance can receive a loan equal to their average payroll costs for the last eight weeks, plus an additional 25% (maximum set at $10 million per applicant).
To qualify for the loan, you must be a small business with fewer than 500 employees. If you have more than 500 employees, you still may be eligible to receive the protection loan depending on your industry. Small businesses also include the following:
The PPP loan has a repayment plan of two years and a fixed interest rate of 1%. If you receive a PPP loan, your loan payments are deferred for six months, with interest accruing immediately. The loan forgiveness amount decreases if you’re not able to retain or rehire all of your employees before June 30, 2020. Paycheck protection loans are 100% forgiven (principal amount of the loan, plus accrued interest) if employers use them to cover eligible expenses.
To request loan forgiveness, submit a request to your lender after the eight-week loan period. Lenders have 60 days to make a decision on your loan forgiveness. Your loan forgiveness request should include the number of full-time equivalent employees and pay rates and eligible mortgage, lease, and utility payments. Be sure to keep detailed records to prepare for requesting loan forgiveness.
There is a time frame where employers can receive PPP loan and defer paying the employer portion of Social Security tax. You can defer paying the employer portion of Social Security tax while waiting to hear if your PPP loan is forgiven. Keep in mind that the SS tax deferment is not the same thing as claiming the Employee Retention Credit. Employers can defer the SS portion that is owed between March 27, 2020 and the date your lender issues a forgiveness decision.
If your loan is forgiven, stop deferring Social Security tax payments based on the date of forgiveness. Per the IRS, the Social Security tax your deferred must be deposited by the following due dates:
December 31, 2021 (50%)
December 31, 2022 (remaining amount)
PPP loans are on a first-come, first-served basis. Businesses interested in a PPP loan should apply through an approved lender as soon as possible using the Paycheck Protection Program application. The deadline to apply for the program is June 30, 2020.
3. Employer Social Security Tax Deferral
Under the CARES Act, employers can defer payments for the employer portion of their Social Security tax liability. The Social Security tax deferral is not a payroll tax credit. Instead, it’s a benefit under the CARES Act offered in addition to the Employee Retention Credit and the FFCRA tax credit.
Employers can defer SS tax payments that are due from March 27, 2020 – December 31, 2020. As a reminder, the deferred Social Security tax payments are due December 31, 2021 (50% of the deferred amount) and December 31, 2022 (remaining amount).
Again, employers that apply for a PPP loan must stop deferring Social Security tax payments when they receive an issuance from their lender that says their PPP loan is forgiven.
4. Economic Injury Disaster Loan expansion
The Economic Injury Disaster Loan (EIDL) existed pre-CARES Act and is operated by the Small Business Administration (SBA). However, the CARES Act declared the coronavirus a disaster and extended the EIDL to businesses impacted negatively by the pandemic. And, the act authorized low-interest EIDLs of up to $2 million per business.
The EIDL is another coronavirus loan option that provides relief for qualifying businesses by providing low interest rates (3.75% for businesses and 2.75% for nonprofit organizations) and long-term repayment plans (maximum of 30 years). Business owners can use an EIDL to cover employee wages, rent, accounts payable, and other expenses.
The EIDL is available to small businesses affected by the coronavirus pandemic. This includes businesses with fewer than 500 employees, including sole proprietorships, independent contractors, and self-employed individuals. Nonprofit and veterans organizations impacted by COVID-19 can also apply for the loan. Companies with 500 or more employees in some industries may still be able to apply if they meet the SBA’s size standards.
Small businesses in the U.S. can apply for an Economic Injury Disaster Loan forgivable advance of up to $10,000. Aside from the advance (up to $10,000), the rest of the loan is not forgivable. You do not have to repay the loan advance if you use the funds for things like providing COVID-19 paid sick leave to employees, maintaining payroll to retain employees during the pandemic, or making rent or mortgage payments.
Businesses can apply for both the EIDL and PPP. But, you can’t double-dip and get funds from both loan programs for the same purpose. To apply for an EIDL, fill out an online application through the SBA’s website.
5. Health Care
If you provide health care benefits to employees at your business, the CARES Act might also impact your health care.
Along with other types of relief, the CARES Act provides health care relief for workers and employers who provide coverage.
Because of the new legislation, insurers are now required to include COVID-19 testing and diagnostics as well as preventive services without any cost-sharing. Additionally, the act also provides more funding and support for telehealth services related to COVID-19, without cost-sharing.
6. Pandemic Unemployment Assistance
The CARES Act also expanded unemployment benefits with the Pandemic Unemployment Assistance (PUA). Benefits now apply to workers who used to be deemed ineligible.
With PUA, the following individuals are now eligible for unemployment:
Eligible workers include individuals who were laid off, became ill, or had to care for someone else with coronavirus.
To qualify, individuals must be out of work due to the coronavirus. Individuals who work from home do not qualify for the PUA.
The PUA is a federal initiative, meaning that states must sign up and implement a system before individuals can apply.
The CARES Act also offers eligible workers an additional $600 per week for four months in addition to what the state program pays. State programs have also been extended for an additional 13 weeks.
7. Student Loan Help
Although it’s not something businesses can take advantage of, the CARES Act also pushes back most federal student loan payments for individuals. With the act, individuals do not need to make federal student loan payments until September 30, 2020. Loans will also not accrue interest until September 30.
Individuals must continue making payments if they have a Perkins loan and/or Federal Family Education Loan.
As an employer, you can also provide up to $5,250 in tax-free student loan repayment benefits per employee until the end of the year.
* This is not intended as legal information., Please consult with a qualified accounting professional for advice for your business.