Following the US Senate’s unanimous vote late Wednesday, the US House of Representatives passed the CARES Act by a voice vote early Friday afternoon. The bill then went to the White House, where President Trump signed the legislation into law. The Hill votes come after intense negotiations over the last week. The CARES Act estimated $2+ trillion price tag includes: extraordinary public health spending to confront coronavirus; immediate cash relief for individual citizens; a broad lending program for small business; and, targeted relief for hard-hit industries. While further clarifications are in the works, below is a quick summary of the key provisions and changes you need to be aware of.
Adding to the FFCRA payroll tax credits for required paid sick leave and payroll tax credit for paid family leave, the Act will provide for payroll tax credits for employee retention as well as add deferral of the employer’s share of OASDI tax liabilities.
Deferral of Payment of Social Security Taxes (Employer Portion)
- Employers may defer employer share of Social Security tax deposits (Code section 3111(a)) due for the period beginning on date of enactment (the date the President signs the bill) through 12/31/2020
- Payment schedule for deferred taxes:
- 50% due 12/31/2021
- 50% due 12/31/2022
- Deferral option not available if taxpayer has had indebtedness forgiven under new SBA loan forgiveness provisions.
- Client employer has sole liability for payment of deferred taxes if it directs Synergy to defer payment under this provision with respect to wages paid by Synergy.
Employer Tax Credit for Employee Retention Related to COVID-19
- Credit is available to any employer:
- that was carrying on a trade or business during calendar year 2020.
- with respect to any calendar quarter had its operations fully or partially suspended under government orders due to COVID-19, or had a decline of at least 50% in gross receipts as compared to the same calendar quarter in the prior year
- Amount of credit is 50% of “qualified wages” with respect to each employee for the quarter.
- Maximum wages considered per employee = $10,000 (max credit $5,000 per EE)
- “Qualified wages” mean:
- Employers with >100 FTEs – wages paid to employees not performing services due to COVID-19-related circumstances (either suspension of operations or reduction in gross receipts)
- Employers with <100 FTEs – all employee wages paid
- Includes employer’s “allocable” qualified health plan expenses
- Excludes wages considered under paid sick/family leave (FFCRA)
- These credits are not available if eligible employer receives a covered loan under SBA’s new Paycheck Protection Loans program.
Paycheck Protection Loans
- The CARES Act amends the Small Business Act (SBA) to create a new Business Loan Program category. For the period from February 15, 2020 to June 30, 2020 (covered period), the law allows the Small Business Administration (Administration) to provide 100% federally-backed loans up to a maximum amount to eligible businesses to help pay operational costs like payroll, rent, health benefits, insurance premiums, utilities, etc. Subject to certain conditions, loan amounts are forgivable.
- For more information about the PPL program, please visit the links below.
If you feel one of these programs is applicable for your company, we encourage you to talk with your accountants to identify which plan will be most beneficial.
Please feel free to reach out to us if you have any questions or concerns about these new options.