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What Is the CARES Act

Congress’s latest coronavirus relief package, the Coronavirus Aid, Relief, and Economic Security (CARES) Act, is the largest economic relief bill in U.S. history and will allocate $2.2 trillion in support to individuals and businesses affected by the pandemic and economic downturn. Many people have questions about how the new law impacts their families and businesses.

Paycheck Protection PRogram (PPP )

SBA loans for payroll and related expenses (PPP Loan )

Options for loan forgiveness

Already have a PPP Loan?

See the steps to ensure PPP loan forgiveness in the FAQs below

PPP Summary Update: 4-20-20

$350 billion allocated for the Paycheck Protection Program, which is meant to help small businesses (fewer than 500 employees) impacted by the pandemic and economic downturn to make payroll and cover other expenses from February 15 to June 30. Notably, small businesses may take out loans up to $10 million—limited to a formula tied to payroll costs—and can cover employees making up to $100,000 per year. Loans may be forgiven if a firm uses the loan for payroll, interest payments on mortgages, rent, and utilities and would be reduced proportionally by any reduction in employees retained compared to the prior year and a 25 percent or greater reduction in employee compensation.

Who’s Eligible? As of March 23, 2020, businesses in every state plus American Samoa, Guam, the Northern Mariana Islands, Puerto Rico and the U.S. Virgin Islands can apply.

PPP - Frequently asked questions

1. Review what loan uses will be forgiven.

Remember: Lenders will forgive your PPP loan if you spend 100 percent of the funds on payroll, mortgage interest, rent, and utilities in the eight weeks after receiving the loan. You must spend at least 75 percent specifically on payroll. The other 25 percent can be divided up between rent, utilities, and mortgage interest (if applicable).

  • You can also use your loan to cover existing debt obligations, such as credit card payments, but you will not receive loan forgiveness on those costs.
  • The idea is that this loan will keep your workers employed and your lights on for the next two months after you receive the funds.

2. Understand how your loan forgiveness can be reduced.

PPP loan forgiveness is not binary. It can be reduced by various degrees, depending on how you spend your loan. There are two main actions that will reduce your loan’s forgiveness:

  • Using more than 25 percent of your loan on non-payroll costs: In this case, your maximum forgivable amount will be equal to payroll costs divided by 0.75.
  • Reducing head count or “material” salary: To maintain 100 percent forgiveness, you’ll need to either keep your payroll as it was before February 15, 2020, or hire back and undo wage reductions by the end of the PPP “covered period” on June 30. The total amount forgiven will be reduced proportional to the reduction in head count, or decreased by the total amount of reduced salary if you cut an employee’s wages by more than 25 percent.

If you laid off employees or reduced their wages and then received a PPP loan, it’s time to hire them back or reinstate their salary. Every dollar that you don’t spend on doing so is a dollar you will need to repay, plus interest.


3. Document all of your loan expenses.

A lender won’t simply take your word for it if you tell them you spent your loan proceeds appropriately. From the moment your loan hits your bank account, you’ll need to be diligent about how you appropriate your funds and document every expense you make with them.

When it’s time to apply for loan forgiveness, bring the following documentation with you to the table, assuming you spent your loan proceeds on all eligible categories:

  • Documents verifying the number of full-time equivalent employees on payroll, and their salary/wages for the period you used the loan to pay them. These could include payroll reports from a payroll provider, payroll tax filings, income/payroll/unemployment insurance filings from your state, and paperwork that verifies retirement and health insurance contributions.
  • Documents showing payments of mortgage interest, rent, and utilities. These could include canceled checks, payment receipts, or account statements.

Sole proprietors and other self-employed workers can use loan proceeds to replace lost income (up to $100,000 annualized), but if you do this, the remainder of your loan must be used on non-payroll costs in order to qualify for full forgiveness.


By Jared Hecht, Co-Founder and CEO, Fundera

EmployeE Retention Tax Credit (ERTC)

50% Retention Tax Credit

50% Retention Tax Credit Against Employer Portion of SS Taxes

ERTC Summary Update: 4-20-20

Employers are eligible for a 50 percent refundable payroll tax credit on wages paid up to $10,000 during the crisis. The credit would be available to employers whose businesses were disrupted due to virus shutdowns and those that had a decrease in gross receipts of 50 percent or more when compared to the same quarter last year. The credit can be claimed for employees who are retained but not currently working due to the crisis for firms with more than 100 employees, and for all employee wages for firms with 100 or fewer employees.

50% Retention Tax Credit

Payroll Tax DeferRAL

Payroll Tax Deferral Summary Update: 4-20-20

Employer-side Social Security payroll tax payments may be delayed until January 1, 2021, with 50 percent owed on December 31, 2021 and the other half owed on December 31, 2022. The Social Security Trust Fund will be backfilled by general revenue in the interim period.

Unemployment Insurance Provision

Unemployment Insurance (UI) – Unemployment Insurance is a joint state-federal program that provides cash benefits to eligible workers who are unemployed through no fault of their own. Benefits are subject to federal and most state income taxes and must be reported on your income tax return. You may choose to have the tax withheld from your payment.

Non-Exempt Employees

Salaried Exempt employees-​ Options to preserve status

Temporary Layoff

  • Employee should be told estimated return date (maximum of 35 days)
  • Employee won’t be expected to job hunt
  • Employee should remain eligible for health insurance coverage
  • No final paycheck due. Employee may use or save paid time off (PTO)

Permanent Layoff

  • Make sure final paycheck is paid plus any accrued leave (if policies provide for payout)
  • Employee is considered discharged

UI Summary Update: 4-20-20

Expanded unemployment insurance (UI) for workers, including a $600 per week increase in benefits for up to four months and federal funding of UI benefits provided to those not usually eligible for UI, such as the self-employed, independent contractors, and those with limited work history. The federal government is incentivizing states to repeal any “waiting week” provisions that prevent unemployed workers from getting benefits as soon as they are laid off by fully funding the first week of UI for states that suspend such waiting periods. Additionally, the federal government will fund an additional 13 weeks of unemployment benefits through December 31, 2020 after workers have run out of state unemployment benefits.

Recovery Rebate for individual taxpayers

Use the CARES Act Rebate Calculator to estimate your rebate amount.

Other important benefits

  • Creates a $300 partial above-the-line charitable contribution for filers taking the standard deduction and expands the limit on charitable contributions for itemizers
  • Waives the 10 percent early withdrawal penalty on retirement account distributions for taxpayers facing virus-related challenges. Withdrawn amounts are taxable over three years, but taxpayers can recontribute the withdrawn funds into their retirement accounts for three years without affecting retirement account caps. Eligible retirement accounts include individual retirement accounts (IRAs), 401Ks and other qualified trusts, certain deferred compensation plans, and qualified annuities. The bill also waives required minimum distribution rules for certain retirement plans in calendar year 2020
  • Certain employer payments of student loans on behalf of employees are excluded from taxable income. Employers may contribute up to $5,250 annually toward student loans, and the payments would be excluded from an employee’s income

REBATE Summary Update: 4-20-20

The bill would provide a $1,200 refundable tax credit for individuals ($2,400 for joint taxpayers). Additionally, taxpayers with children will receive a flat $500 for each child. The rebates would not be counted as taxable income for recipients, as the rebate is a credit against tax liability and is refundable for taxpayers with no tax liability to offset. The rebate phases out at $75,000 for singles, $112,500 for heads of household, and $150,000 for joint taxpayers at 5 percent per dollar of qualified income, or $50 per $1,000 earned. It phases out entirely at $99,000 for single taxpayers with no children and $198,000 for joint taxpayers with no children). 2019 or 2018 tax returns will be used to calculate the rebate advanced to taxpayers, but taxpayers eligible for a larger rebate based on 2020 income will receive it in the 2020 tax season.

Taxpayers with higher incomes in 2020 will see the overpayment associated with their rebate forgiven. For example, a single taxpayer with $100,000 in 2019 income would not receive an advance rebate but would receive the $1,200 credit on their 2020 return if their income for the year fell below the phaseout. On the other hand, a single taxpayer with $35,000 in income receives a $1,200 advance rebate but would not have to pay the rebate back on the 2020 return if they make $100,000 this year. This is structurally similar to the 2008 rebate design.

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