A. There is financial relief available for many organizations under various federal stimulus bills, although eligibility for some provisions is dependent on size and other factors, and many benefits are mutually exclusive or have other tax implications. Given the level of complexity in applying these provisions, it is critical organizations consult with tax professionals in order to maximize their savings.
The CARES Act includes a number of programs for employers that keep employees on payroll instead of laying them off. Keeping the employee population intact provides the additional benefits of not having to locate, screen and train new employees upon re-opening, which will accelerate the ability to restart operations.
The most publicized of these programs is the Paycheck Protection Program (PPP), which provides loans to certain employers through the Small Business Association. In addition to providing a very favorable two-year loan at 1% interest, there is an opportunity for the loan to be forgiven if the employer maintains its employee headcount and wage payments at pre-COVID-19 levels.
Eligibility for the PPP and its forgiveness requirements are dependent on many variables. These conditions need to be reviewed thoroughly to determine if an employer organization qualifies.
Employers who don’t take advantage of the PPP 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
are eligible for a 50% credit on qualifying wages paid to employees on March 13 through Dec. 31, 2020.
All employers are eligible to defer their social security tax liability due March 27 through the earlier of PPP loan forgiveness, if applicable, or Dec. 31, 2020.
Recently, the Fed unveiled a new $600 billion Main Street Lending program available to small and midsized businesses with up to 10,000 employees or up to $2.5 billion in 2019 annual revenues. Principal and interest payments on these four-year loans can be deferred for the first year.
Organizations should also check with state taxing authorities for relief and updates on how states are coordinating with the CARES Act, examine all liabilities to see how to mitigate any potential financial issues, engage lenders to confirm existing lines of credit, negotiate terms or seek forbearance on existing loans, or seek additional funds for relief in the near term.