Many of you are either small business owners or know someone who is. A variety of relief measures are available through the stimulus package to help small business owners stay resilient during the storm. Additionally, COVID-19 has had a huge impact on how businesses are valued in a divorce and how spousal maintenance obligations are resolved. Here are some answers to some timely questions:
Yes. The income tax return due date for calendar year corporations has been extended to July 15. Tax returns and any income taxes owed will not be due until July 15.
Employers can defer paying the employer (not employee) portion of certain payroll taxes through the end of 2020, with all 2020 deferred amounts due in two equal installments, one at the end of 2021, the other at the end of 2022. However, deferral is not provided to employers that avail themselves of SBA 7(a) loans designated for payroll.
An employee retention tax credit is available for struggling businesses that are not eligible or choose not to participate in the new SBA Paycheck Protection Program (more on that below). Any business that has been forced to fully or partially suspend operations, or that has seen a significant drop in revenues is eligible for a credit for wages paid to furloughed or reduced-hour employees. For businesses with 100 employees or less, the credit is based on all wages paid, regardless of whether an employee is furloughed. There is an overall limit on wages per employee of $10,000.
The credit can be claimed against the business’s quarterly payroll tax liability and is fully refundable to the extent of excess. There will also be options to receive advance payments. Small business owners should lookout for information at IRS.gov and talk to their payroll service provider, as applicable.
$350 billion is made available for a new Small Business Administration Paycheck Protection Program (PPP). The program would provide cash-flow assistance through 100% federally guaranteed loans to employers who maintain their payroll during this emergency. If employers maintain their payroll, the loans would be forgiven. Loans are available through June 30, 2020.
PPP has a host of attractive features, such as forgiveness of up to 8 weeks of payroll based on employee retention and salary levels, no SBA fees and at least six months of deferral with maximum deferrals of up to a year. Small businesses and other eligible entities will be able to apply if they were harmed by COVID-19 between February 15, 2020 and June 30, 2020.
The program is retroactive to February 15, 2020, in order to help bring workers who may have already been laid off back onto payrolls.
$17 billion is available for immediate relief to small businesses (including freelancers and sole proprietors) with non-disaster SBA loans, in particular 7(a), 504, and microloans. Under it, SBA will cover all loan payments on these SBA loans, including principal, interest, and fees, for six months. This relief will also be available to new borrowers who take out loans within six months of the President signing the bill into law. The soonest you can apply is April 3, 2020.
The loans are available to pay payroll costs, rent, mortgage interest (not principal) and utilities. You must provide documentation of these costs. All banks and credit unions that are federally insured will be able to make the loans, not just SBA lenders. Most borrowers can likely apply online.
The CARES Act creates a new SBA Economic Injury Emergency Grant Program which will advance up to $10,000 to small businesses and private non-profits harmed by COVID-19 within three days from the date the SBA receives an application for an SBA Economic Injury Disaster Loan (EIDL). The advance does not need to be repaid as long as the money is used to keep employees on payroll, to pay for sick leave, meet increased production costs due to supply chain disruptions, or pay business obligations, including debts, rent and mortgage payments.
These tips are just intended to highlight certain aspects of the Stimulus package that may be helpful to small business owners and is not intended to be a substitute for your tax professional’s advice. The McCarthy Law Firm is not an accounting or tax firm. You should check with your accountant for more information.
Message from The McCarthy Law Firm
The McCarthy Law Firm is a full service family law firm that serves many small business owners going through a divorce. If you are going through a divorce or have questions about filing for divorce, we are here to assist you. At this time we are offering no charge initial phone consultations for those on the front lines, including medical professionals, first responders, law enforcement, and military personnel. Please call us at 520-623-0341 to explore your options.