What You Need to Know About The CARES Act

We know the transition is a lot and all your energy may be going into keeping your business afloat while feeding the kids, but there are some important updates with business relief you should be kept up to date on. So we break it down in this quick article you can review before nap time is over.
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One day you are sending out invoices and calling a team meeting, the next you are on a zoom call trying to learn common core math. What happened?


What is The CARES Act? 

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27th, 2020. This stimulus package includes over $2 trillion aimed toward mitigating the impact COVID-19 had on Americans.  

Among this relief implemented by the CARES Act, there are several new options that small businesses can take advantage of. Many of the funds are used for public health purposes so that America’s healthcare industry can have a fighting chance against COVID-19. 

Other funds will be used for economic stimulus purposes like personal stimulus checks funding unemployment, offering tax credits, offering grants to retain employees, low-interest loans for small businesses, and debt relief for small businesses.


It Passed

Now that the CARES Act has passed, you have most likely benefited from it by receiving the stimulus payment for individuals and families. However, you may still be wondering, how does this legislation affect the survival of my small business? 

To stop the spread of unemployment in the United States, the CARES Act has implemented some assistance to small businesses. Therefore, the assistance is largely based on providing businesses an incentive to keep their payroll going and retain employees.

In many instances, the funds must be repaid or even denied if they are not used to fund payroll expenses, rent, utilities, or other unavoidable costs during the COVID-19 shelter in place. In other words, be very careful about spending these funds on capital investments or expansion of your business because you may have to pay the funds back in full if you do.


Small Business Loans

There are new SBA Loan options available for small businesses.  


These include:

Paycheck Protection Program Loan

This is more of a grant and can be 100% forgiven if you are sure to spend the funds on qualified expenses like payroll costs, rents, employee benefits, and utilities. The loan matures within 2 years with an interest rate of 1%.  

The deadline to apply for the program is June 30, 2020. To be fully forgiven 75% of the loan proceeds should be used for payroll costs. The funds may not be forgiven if you fail to retain your full-time employees or if salaries and wages decrease. 

Also, any loan payments are deferred for six months, so you can have plenty of time to weather the storm of low revenues while retaining your employees.


Low-Interest Federal Disaster Loans

The small business association is providing no-interest loans to businesses in all 50 states and United States territories to help cover costs during times of temporarily diminished revenues.


SBA Debt Relief

The Small Business Association is offering debt relief for SBA loans already existing before the COVID-19 pandemic.


Tax Credits

In case your business is not seeing an inflow of cash right now because it does not qualify for the PPP loan, you can expect some kind of benefit when you file your 2020 tax return. If you do not participate in the Paycheck Protection Program (PPP), your business may be eligible for a payroll tax credit of 50% of the first $10,000 of wages paid to employees between March 13, 2020, and December 31, 2020.  

As of now, you may still be eligible for this credit even if you participate in the Low-Interest Federal Disaster Loans or SBA Debt Relief.


To find more information about the options available for your small business, please schedule a free consultation with us.

This publication is designed to provide information on federal tax and accounting laws and/or regulations. It is presented with the understanding that the author is not rendering legal or accounting services.

This text is not intended to address every situation that arises or provide specific, strategic tax and/or accounting planning advice. This text should not be used solely to answer tax and/or accounting questions and you should consult additional sources of information, as needed, to determine the solution to tax and/or accounting questions.

This text has been prepared with due diligence. However, the possibility of mechanical or human error does exist and the author accepts no responsibility or liability regarding this material and its use. This text is not intended or written by the practitioner to be used and cannot be used by a taxpayer or tax return preparer, for the purpose of avoiding penalties that may be imposed.

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