What You Need to Know About the CARES Act

The spread of COVID-19 worldwide has upended our lives and our businesses. To avoid spiraling into an economic recession that would be worst that the Great Depression, last Friday March 27th, 2020, the Coronavirus Aid Relief, and Economic Security Act (CARES Act) was signed into law. This legislation has been designed by the Congress to help American businesses and people to weather this storm.

Here is a brief guide to the CARES Act for small business and individuals.


Paycheck Protection Program 

  • Small businesses with 500 or fewer employees during the “covered period” – February 15 through June 30, 2020 are eligible. Some industries may qualify with more employees, depending on the Small Business Administration’s applicable industry size standards.   
  • Offers a loan of up to $10 million based on a formula, which is essentially 2 ½ times the monthly payroll, plus certain other costs, up to $100,000 per employee. 
  • No personal guarantees are required. 
  • Also available for self-employed individuals. 
  • Loan may be used for salaries, paid sick or medical leave, insurance premiums, and mortgage, rent and utility payments. 
  • Loans will be made through eligible FDIC lenders, so you will need to contact your banker for application procedures. 
  • Loans will be forgiven if employment and wage levels are maintained. There is a cure period for reductions that occurs between February 15, 2020 and 30 days after date of enactment as long as released employees are rehired or salary reductions are reversed by June 30, 2020. 
  • Loan forgiveness is not taxable. 
  • Loan forgiveness may NOT be combined with the Employee Retention Credit or the Payroll Tax Deferral (see below). 


Employee Retention Credit for Employers Subject to Closure Due to COVID-19 

The bill provides a refundable payroll tax credit equal to 50% of wages paid by employers to employees during the COVID-19 crisis. Eligible employers are those: 

  • Whose operations were fully or partially suspended due to COVID-19 related shutdown orders, or 
  • Who had gross receipts decline by more than 50% as compared to the same quarter in the prior year. Qualifying based on credit amount and qualified wages criteria: 
  • For employers with more than 100 employees, qualified wages are wages paid to employees not providing services due to the COVID-19 related circumstances. 
  • For employers with 100 employees or less, all wages qualify for the credit. 
  • The credit is provided for first $10,000 of compensation, including health benefits. Credit applies to wages paid between March 13, 2020 and December 31, 2020. 
  • This credit may NOT be combined with loan forgiveness under the Paycheck Protection Program (see above). 


Delay of Payment – Employer Payroll Tax

Applies to employers and self-employed individuals. 

  • Effective for payments as of the date of enactment of the legislation (3/27/2020). Includes payments through December 31, 2020. Defer the payment of the 6.2% employer portion of Social Security Tax for two years. 
  • Half will be due December 31, 2021 with the other half due December 31, 2022. 
  • Delay of Payment may NOT be combined with loan forgiveness under the Paycheck Protection Program. 


2020 Recovery Rebates for Individuals  

  • All US residents with Adjusted Gross Income (AGI) up to $75,000 ($150,000 married filing joint) are eligible for a full stimulus payment of $1,200 ($2,400 for joint filers). 
  • Recipients cannot be a dependent of another taxpayer or a non-resident alien. Qualified taxpayers will receive an additional $500 per child. 
  • There is a phase-out to AGI of $198,000 for joint returns. 
  • Will be based on 2019 return or, if not filed, 2018. Non-filers such as certain Social Security or Disability recipients are also eligible. 
  • Taxpayers do not need to apply. They will receive a rebate check.