What You Need to Know About COVID-19 Relief Provisions

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There are several pieces of relief in play to help combat COVID-19’s impact on the business community. Each has a specific focus and many have guidelines for how funds or credits are used. We’ve broken down what you need to know about some of the most substantial COVID-19 relief provisions and what can be used together.

Families First Coronavirus Response Act
The Families First Coronavirus Response Act was designed to protect employees who are affected by COVID-19. Specifically, it requires private employers with fewer than 500 employees and all public employers to provide paid sick and expanded family and medical leave for absence due to COVID-19.

A tax credit equal to the amount of sick leave paid plus related healthcare costs can be used to offset the payroll tax and withholding amounts an employer is required to deposit with the IRS.

The CARES Act and Its Various Provisions
The Coronavirus Aid, Relief and Economic Security (CARES) Act is a substantial piece of relief legislation aimed at helping those affected by COVID-19. Many of the most well-known relief provisions in play are part of the overall CARES Act.

These include:

The goal of the CARES Act is to help the American public in the wake of an economic downturn caused by COVID-19. It’s a sweeping and substantial piece of legislation with many important facets.

SBA Loan Programs
There are two primary SBA loan programs that were modified by the CARES Act: the Paycheck Protection Program and the Economic Injury Disaster Relief Loans.

Economic Injury Disaster Relief Loans
The EIDLS program aims to provide working capital for small businesses and other entities who can’t meet their ordinary and necessary financial obligations due to a disaster like COVID-19.

While this loan program has always existed through the SBA, the CARES Act made modifications to it, including expanded eligibility and waiver of previous requirements.

Borrowers cannot receive assistance under both the Paycheck Protection Program and the EIDLS program for the same expenses.

Paycheck Protection Program
The Paycheck Protection Program (PPP) is designed to help small businesses keep employees on their payroll. If certain requirements are met during the 24 week covered period, the PPP loans are eligible for forgiveness.

Key components of PPP loans include:

  • The majority (60%) of the loan proceeds must be used to fund payroll. The rest can be used for other “approved” costs.
  • By accepting the PPP loan funds, organizations are making a “good faith certification” that the loan funds are needed during economic uncertainty caused by COVID-19.
  • Proper planning and documentation is critical to maximizing loan forgiveness.

Employee Retention Credits
The Employee Retention Credits (ERC) are a refundable tax credit of up to $5,000 per employee. The credits are designed to keep employees on the payroll and are an alternative option to those who chose not to take a PPP loan.

Specifically, the ERC is available to all businesses affected by COVID-19 in one of two ways:

  1. Business is fully or partially suspended by government order during the quarter.
  2. Business 2020 gross receipts fall below 50% of the same quarter in 2019.

Unlike loan programs, the ERC is a tax credit. The credit is taken by reducing a quarter’s required payroll tax deposits.

Additional Relief Legislation
Due to the impact of COVID-19, much of the funding in the original CARES Act was used quickly. In response, Congress passed an additional round of relief funding and legislation. This relief package included four specific components:

  • SBA Paycheck Protection Program additional funding
  • SBA Economic Injury Disaster Loan Program additional funding
  • Funding for hospitals and healthcare providers
  • COVID-19 testing funding

How to Know What Types of Relief Legislation You Can Use
There are a number of requirements for each type of relief legislation. Some are focused on small businesses, such as Families First, while others are broadly applicable, such as the employee retention credit. Some can also be stacked on top of one another, while others cannot.

We’ve outlined various relief provisions and how they work together.

Understanding the Type of Relief Available
Relief is here for many organizations, especially small businesses. Understanding how this relief affects your organization and what you do with it will be vital as you move forward and plan for recovery.

Have questions about relief?

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