CARES Act Update for Home Service Providers

The CARES Act is ever changing, sometimes daily, and I’m addressing some of the most frequently asked questions that I get asked plus sharing additional information that may be relevant to your home services business.

This data was based on the best information we had on April 28, 2020. Changes are happening frequently, so please refer to the IRS, SBA, and State Unemployment websites for updates.

  1. How do I check on the status of my personal stimulus payment?

The CARES Act included a provision for Economic Impact Payments (EIP) to individuals.

The personal stimulus payment (EIP) is $1,200 per adult, and $500 per child under the age of 17.  However, these amounts will phase out for higher income earners – joint filers over $150,000, head of household filers over $112,500, and $75,000 for everyone else.

The IRS created a Get My Payment Tool so you can find out the status of your EIP and update your direct deposit information:

https://www.irs.gov/coronavirus/get-my-payment

  1. What is the Paycheck Protection Program?

The CARES Act included a provision for forgivable loans for small businesses to assist them with keeping employees, rent and utilities paid. The first round of the Paycheck Protection Program funds ran out in a few days.  Because of the number of businesses still needed assistance, $310B of funding was added to fund these forgivable loans.

As of 4/28/2020, banks were reporting glitches with submissions. The explanation from SBA was pacing mechanisms to try to make the loan distributions more spread out between lenders, locations, business sizes.

The original funding amount for this program was $349 Billion, but the funds ran out in just a few days.  A second round of funding of $319 Billion was added on 4/27/2020.

For additional information on these PPP Loans, visit the SBA site here:

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program

  1. What are Economic Injury Disaster Loans?

The CARES Act also included a provision to allow the SBA to provide Economic Injury Disaster Loans for states impacted by COVID-19.

In addition to the EIDL loan, loan advances of up to $10,000 were potentially available to applicants.  Over the last week, we’ve heard reports from clients about those advances starting to arrive. Remember these advances reduce forgiveness of PPP loans.

Original appropriations from the CARES Act also lapsed for this program.  However, this funding was expanded to provide for another $50 Billion of loans, and $10 Billion of emergency grants/advances that do not have to be repaid.  New applications are not being taken at this time based on the existing volume of applications.

  1. Unemployment expansion

The three categories of unemployment addressed in the CARES Act that are getting the most attention are:

PEUC – Pandemic Emergency Unemployment Compensation

This extends unemployment benefits by 13 weeks after regular state benefits have run out.

PUA – Pandemic Unemployment Assistance

This allows for self-employed individuals, and a few other categories, to receive some unemployment benefits, even though they are typically excluded from unemployment compensation.

FPUC – Federal Pandemic Unemployment Compensation

This provides a federal unemployment benefit of $600 for week, and applies to folks receiving traditional state unemployment insurance OR Pandemic Unemployment Assistance

A couple ways this unemployment expansion may help small biz owners:

  1. For yourself if you can’t work right now or
  2. For your employees if you are unable to reopen, stay open, or need a reduced workforce for the time being.

A couple problems with the unemployment expansion that may hurt small biz owners:

  1. Most states weren’t able to pay this out to unemployee people right away – systems had to be updated. Idaho is expected to finally start paying this out this week.  When these payments start going out, they should be retroactive back to the date this was put into place.
  2. Some employers who got the PPP loan are getting some push back from employees that were furloughed that employers are trying to rehire to meet the loan forgiveness requirements of the PPP Loan.
  3. Some employees are making more money with the additional $600 per week, so are not interested in coming back to work. This may impact both the employer’s ability to have the PPP Loan forgiveness met AND affect the employee’s ability to continue to collect unemployment if they have been offered their job back. It will be important for employees to get clarification from the Dept of Labor how this could impact their unemployment benefits before making a decision.

  1. Employee Retention Credit

This credit is not as sexy as a forgivable loan, but for people keeping their employees on who didn’t get the PPP Loan, this might be a help.

Credit is calculated as 50% of wages with a Max credit of 5000.  This is tricky to know if you’ll qualify though, because your revenue has to be down at least 50%.

Details from the IRS website:

(https://www.irs.gov/newsroom/covid-19-related-employee-retention-credits-general-information-faqs):

What is the Employee Retention Credit?

The Employee Retention Credit is a fully refundable tax credit for employers equal to 50 percent of qualified wages (including allocable qualified health plan expenses) that Eligible Employers pay their employees. This Employee Retention Credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so that the maximum credit for an Eligible Employer for qualified wages paid to any employee is $5,000.

Who is an Eligible Employer?

Eligible Employers for the purposes of the Employee Retention Credit are employers that carry on a trade or business during calendar year 2020, including tax-exempt organizations, that either:

  • Fully or partially suspend operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
  • Experience a significant decline in gross receipts during the calendar quarter.

  1. Deferral of Employers share of Social security Tax until 2021 & 2022

Section 2302 of the CARES Act provides that employers may defer the deposit and payment of the employer’s portion of Social Security taxes and certain railroad retirement taxes.

Not huge money, but may give you some small relief. The details can be found on the

https://www.irs.gov/newsroom/deferral-of-employment-tax-deposits-and-payments-through-december-31-2020:

The deferral applies to deposits and payments of the employer’s share of Social Security tax that would otherwise be required to be made during the period beginning on March 27, 2020, and ending December 31, 2020. (Section 2302 of the CARES Act calls this period the “payroll tax deferral period.”)

The Form 941, Employer’s QUARTERLY Federal Tax Return, will be revised for the second calendar quarter of 2020 (April – June, 2020).

Information will be provided in the near future to instruct employers how to reflect the deferred deposits and payments otherwise due on or after March 27, 2020 for the first quarter of 2020 (January – March 2020).

In no case will Employers be required to make a special election to be able to defer deposits and payments of these employment taxes.

  1. Small Business Debt Relief program – This portion of the CARES Act applies to small businesses with non-disaster loans. Under this provision, the SBA will cover your payments for 6 months. Guidance from the SBA website on this program follows:

https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/sba-debt-relief:

As part of our coronavirus debt relief efforts, the SBA will pay 6 months of principal, interest, and any associated fees that borrowers owe for all current 7(a), 504, and Microloans in regular servicing status as well as new 7(a), 504, and Microloans disbursed prior to September 27, 2020. This relief is not available for Paycheck Protection Program loans or Economic Injury Disaster loans. Borrowers do not need to apply for this assistance. It will be automatically provided as follows:

  • For loans not on deferment, SBA will begin making payments with the next payment due on the loan and will make six monthly payments.
  • For loans currently on deferment, SBA will begin making payments with the next payment due after the deferment period has ended, and will make six monthly payments.
  • For loans made after March 27, 2020 and fully disbursed prior to September 27, 2020, SBA will begin making payments with the first payment due on the loan and will make six monthly payments.

SBA has notified 7(a), 504 and Microloan Lenders that it will pay these borrower loan payments. Lenders have been instructed to refrain from collecting loan payments from borrowers. If a borrower’s payment was collected after March 27, 2020, lenders were instructed to inform the borrower that they have the option of having the loan payment returned by the lender or applying the loan payment to further reduce the loan balance after SBA’s payment.

Borrowers should contact their lender if they have any questions regarding this payment relief.

Wrapping Up!

There was a LOT of stuff in the CARES Act – $2 trillion worth of stuff….!!!  And even mor after the additional funding was provided.

This provides many options that you and your employees can utilize to make it through this crazy time.

We’ve gone over the most popular topics, but if you want more information about all of the provisions in this 800+ page bill, here are some good summaries:

https://taxfoundation.org/cares-act-senate-coronavirus-bill-economic-relief-plan/

https://www.natlawreview.com/article/president-trump-signs-law-coronavirus-aid-relief-and-economic-security-cares-act

Are there items you still have questions about?  Let us know!

 

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