The Coronavirus Aid, Relief, and Economic Security (CARES) Act

Important information, documents, and resources for the The Coronavirus Aid, Relief, and Economic Security (CARES) Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act

The Law

 

This information is constantly changing and is up to date as of April 29, 2020. Please check back regualry for updated information 

Summary

Outline of the provisions included in the CARES Act (enacted on March 27, 2020) that pertain to payroll and payroll taxes.

 

FICA payment deferral: Under the Act, employers can defer paying the employer share of Social Security tax owed that would otherwise need to have been deposited between March 27 and December 31, 2020. Half of the deferred amount will be due on December 31, 2021 and the remaining half will be due on December 31, 2022.

Employee Retention Tax Credit: Employers may be eligible to get a 50% refundable tax credit on wages paid to employees between March 13, 2020 and December 31, 2020. Qualified employee wages are limited to the first $10,000 (per employee, including allocated health plan expenses). Details are as follows:

  1. Which companies qualify? The credit is available to companies whose operations were partially or fully disrupted due to a virus-related shutdown order or if the company's gross receipts has decreased by 50% or more compared to the same quarter in the previous year.

  2. Which wages qualify? It depends:

    1. Companies with more than 100 employees can take the credit for wages paid to employees that are on payroll but are not working, due to the crisis.

    2. Companies with less than 100 employees may take the credit on wages paid to all employees regardless if they are working or not.

    3. Wages may not exceed the amount the employee would receive for working equivalent hours during the 30 days prior to such period.

    4. Wages also do not include paid family and/or sick leave under the Families First Coronavirus Response Act for which a credit is taken.

  3. How the tax credit works? Employer may reduce their Social Security (employer - portion) tax deposits (or any other 941 taxes available) to offset the qualified wages.

An employer who does not have enough tax funds to reduce, may request an advanced credit from the IRS by submitting Form 7200.

Expanded Family and Sick Leave credits for Rehired employees: Family First Coronavirus Response Act required employees to have been employed for at least 30 days in order to qualify for paid family benefits. Under the CARES Act, however, a rehired employee will immediately qualify for paid family benefits and will not have to wait the 30 days if they fit the following criteria:

  1. The employee was laid off by that employer on or after March 1, 2020.

  2. The employee worked for that employer for at least 30 days within the 60-day period prior to their layoff.

Paycheck Protection Program - SBA Loans: Eligible entities may receive loans for 2 and ½ times monthly payroll expense or $10 million dollars, whichever is less. The loans will be available to cover a variety of expenses including Payroll expenses. The loans may be forgiven if certain criteria are met (used for specific expenses and retention of workforce for required period of time). A flyer provided by the US Chamber of Commerce, which summarizes the loan aspect, can be found HERE.

Expanded Unemployment Benefits: the CARES Act provides enhanced unemployment benefits including:

    1. Additional $600 per week above and beyond benefits provided under state laws.

    2. Extended 13 weeks of compensation for people who are still unemployed after they have exhausted their state benefits weeks (26 weeks in majority of States).

Certain individuals who are typically not eligible for unemployment compensation such as Self-employed and independent contractors, may receive unemployment compensation under CARES Act.


Please note, information such as the above is provided by CHS Payroll as a courtesy to help you understand the impact of the regulatory requirements on your business. However, this should not be construed as tax or legal advice. Such information is also, by nature, subject to revision and may not be the most current information available. Please continue to consult with your legal and/or tax advisors.

 

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