Economic Injury Disaster Advance Loan
In response to the COVID-19 pandemic, small business owners in all U.S. states, Washington, D.C., and territories are eligible to apply for an Economic Injury Disaster Loan advance of up to $10,000. Please consult with your tax advisor to understand how this loan impacts the application of any other relief you may be applying for related to COVID-19.
This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. Funds will be made available within three days of a successful application, however we understand this is taking longer. This loan advance will not have to be repaid.
Apply for the Loan Advance
Coronavirus Aid, Relief, and Economic Security (CARES) Act
Employee retention credit for employers.
Eligible employers can qualify for a refundable credit
against, generally, the employer's 6.2% portion of the Social Security (OASDI) payroll tax (or
against the Railroad Retirement tax) for 50% of certain wages paid to employees during
the COVID-19 crisis. The IRS has authority to advance payments to eligible employers and to waive penalties for employers who do not deposit applicable payroll taxes in reasonable anticipation of receiving the credit. The credit is not available to employers receiving Small Business Interruption Loans.
The credit is available to employers carrying on business during 2020, including non-profits (but
not government entities), whose operations for a calendar quarter have been fully or partially
suspended as a result of a government order limiting commerce, travel or group meetings. The
credit is also available to employers who have experienced a more than 50% reduction in quarterly
receipts, as compared to the corresponding quarter in 2019. The credit is provided for wages paid after March 12, 2020 through December 31, 2020.
For employers with more than 100 employees in 2019, the eligible wages are wages of employees
who aren't providing services because of the business suspension or reduction in gross receipts
For employers with 100 or fewer full-time employees in 2019, all employee wages are eligible,
even if employees haven't been prevented from providing services. The credit is provided for
wages and compensation, including health benefits, and is provided for the first $10,000 in eligible
wages and compensation paid by the employer to an employee. Thus, the credit is a maximum
$5,000 per employee.
Wages don't include required paid sick leave or required paid family leave, or wages in a period in which an employer is allowed for an employee a work opportunity credit (under Code Sec. 51). An employer can elect to not have the credit apply on a quarter-by-quarter basis.
Delayed payment of employer payroll taxes.
Taxpayers (including self-employeds) will be able to
defer paying the employer 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. Taxes that can be deferred include the 6.2% employer portion of the Social Security
(OASDI) payroll tax and the employer and employee representative portion of Railroad Retirement
taxes (that are attributable to the employer 6.2% Social Security (OASDI) rate).
The relief isn't available if the taxpayer has had debt forgiveness under the CARES Act for certain loans under the Small Business Act as modified by the CARES Act (see below). For self-employeds, the
deferral applies to 50% of the Self-Employment Contributions Act tax liability (including any related
estimated tax liability).
Certain SBA loan debt forgiveness isn't taxable
. Amounts of Small Business Administration Section 7(a)(36) guaranteed loans that are forgiven under the CARES Act aren't taxable as discharge of indebtedness income if the forgiven amounts are used for one of several permitted purposes. The loans have to be made during the period beginning on February 15, 2020 and ending on June 30, 2020.
Charitable Deduction Liberalizations
The CARES Act makes four significant liberalizations to the rules governing charitable deductions:
(1) Individuals will be able to claim a $300 above-the-line deduction for cash contributions made, generally, to public charities in 2020. This rule effectively allows a limited charitable deduction to taxpayers claiming the standard deduction.
(2) The limitation on charitable deductions for individuals that is generally 60% of modified adjusted gross income doesn't apply to cash contributions made, generally, to public charities in 2020. Instead, an individual's qualifying contributions, reduced by other contributions, can be as much as 100% of the contribution base. No connection between the contributions and COVID-19 activities is required.
(3) Similarly, the limitation on charitable deductions for corporations that is generally 10% of (modified) taxable income doesn't apply to qualifying contributions made in 2020. Instead, a corporation's qualifying contributions, reduced by other contributions, can be as much as 25% of (modified) taxable income. No connection between the contributions and COVID-19 activities is required.
(4) For contributions of food inventory made in 2020, the deduction limitation increases from 15% to 25% of taxable income for C corporations and, for other taxpayers, from 15% to 25% of the net aggregate income from all businesses from which the contributions were made.
Please contact us if you have any questions or if you would like us to run an evaluation of how these provisions might apply to you or your organziation. We will be happy to assist with any tax matter, related to COVID-19 or not.