The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020. Three provisions of the Act that help small and medium-sized businesses are the Paycheck Protection Program, payroll tax deferral and an employee-retention tax credit.
Paycheck Protection Program
Under the CARES Act, businesses qualify for loans available through the U.S. Small Business Administration (SBA). The program provides loans to eligible businesses that are partially forgivable to encourage businesses to retain employees during the COVID-19 crisis.
Funds loaned under the Paycheck Protection Program (PPP) may only be used for the following items (although the Act does provide some exceptions):
- Payroll costs
- Costs related to group health care benefits during paid sick, medical or family leave, and insurance premiums
- Employee salaries
- Mortgage interest payments
- Rent
- Utilities
- Interest on any other debt obligations incurred before the Act’s covered period (February 15, 2020 through June 30, 2020).
A loan funded under PPP is eligible for forgiveness and cancellation for up to the full amount of the loan’s principal. The amount of the loan eligible for forgiveness is subject to reduction if the borrower terminates employees or reduces employee salaries and wages during the eight-week period that begins on the date that the loan is funded.
Loans for this program are available until June 30, 2020. Contact your bank now to learn more about this important program and whether it is right for your business.
Learn more about the Paycheck Protection Program
Payroll tax deferral
The CARES act also provides for the delay of payment of Employer Social Security tax (6.2% of applicable wages) and some self-employment taxes incurred between March 27, 2020 and December 31, 2020. 50% of deferred amounts are due by December 31, 2021 and the remainder is due December 31, 2022. However, payroll tax deferral is not available to businesses that obtain a loan under the Paycheck Protection Program that is later forgiven. Further guidance on this restriction is still forthcoming. Employers should exercise caution utilizing the payroll tax deferral option until they fully understand the effect on their ability to obtain an SBA Paycheck Protection Program loan or determined that they will not seek such a loan.
PayNW will defer your employer social security tax payments only at your direction, however employers are reminded that those payments are still due and payable under the deferred deadlines.
Employee Retention Tax Credit
The CARES Act provides payroll tax credit equal to 50% of qualified wages paid up to $10,000 per employee. Employers are eligible for the credit for any quarter in which they have either had to fully or partially suspend operation of business because of governmental orders due to COVID-19, or if they have had more than a 50% decline in gross receipts as compared to the same quarter a year ago. Employers who receive a Small Business Interruption Loan under the CARES Act cannot claim the employee retention credit.
For all three of these options under the CARES Act, employers should consult with their tax advisor.
The Families First Coronavirus Response Act (FFCRA) goes into effect on April 1, 2020. For a good synopsis of the key points of the FFCRA from the IRS, click here.
The Basics:
The FFCRA mandates that employers of less than 500 employees must provide paid leave for employees affected by and unable to perform their work due to the coronavirus. This paid leave is of two types:
- Paid sick leave. 80 hours of paid sick time available at the employee’s full regular rate of pay subject to dollar caps. This is reduced to two-thirds pay if the leave is due to caring for others (sick or quarantined family member or child whose school or childcare is unavailable)
- Paid Emergency FMLA. Ten additional weeks of paid FMLA for those who must stay home to care for a child whose school or childcare is closed. The ten weeks are to be paid at two-thirds the employee’s rate of pay, subject to dollar caps. Provisions are made to calculate part-time workers’ regular rate of pay.
Payroll Tax credits are available to employers to offset all costs of providing these paid leaves. Credits also include the portion of health insurance costs that is attributable to the paid leave provided. Credits can be used immediately by offsetting the cost associated to FFCRA leave against all federal employment taxes in the pay period.
Notification Requirements
HR 6201 requires employers to post this notice in a conspicuous location in the workplace (or each work location, if employees report to different buildings). Employees who are working from home must receive the notice as well; employers can distribute it via email, snail mail, or by posting to an internal or external website intended to provide information to employees.
Download the required FFCRA notice
FFCRA Notification Requirements FAQ
Required Employer Documentation for Leave Tax Credits
The documentation required to claim an FFCRA payroll tax credit is listed below. Employers may not require more documentation from employees than is described below. The IRS has a very helpful overview and FAQ that covers other common questions about the tax credits in detail.
Employers can substantiate eligibility for FFCRA sick leave or family leave credits by receiving a written request from the employee that includes the following:
- Their name
- The date or dates for which leave is requested
- A statement of the COVID-19 related reason they are requesting leave and written support for such reason
- A statement that they are unable to work, including by means of telework, for such reason.
For leave based on a quarantine order or self-quarantine advice, the request should include the name of the governmental entity ordering quarantine or the name of the health care professional advising self-quarantine. If the person subject to quarantine or advised to self-quarantine is not the employee, that person’s name and relation to the employee should be included.
For a leave request based on a school closing or child care provider unavailability, the statement should include the name and age of the child (or children) to be cared for, the name of the school or place of care that has closed, and a representation that no other person will be providing care for the child during the leave. If a child who needs care is 15 or older, the employee must affirm that there are special circumstances (but need not explain them) — the IRS otherwise assumes kids 15 and older can take care of themselves for the length of a workday.
According to the DOL, this is the extent of the documentation employers may require.
Download a sample FFCRA leave request form
On March 20, 2020, DHS announced new flexibility in Form I-9’s physical proximity requirements. Employers who are implementing physical proximity precautions due to COVID-19 may defer the review of an employee’s identity and employment authorization documents in the employee’s physical presence. However, Section 2 documents must still be inspected remotely, and employers must obtain a copy of these documents.
Employers must write “COVID-19” as the reason for the physical inspection delay in the Additional Information field of Form I-9 once normal operations resume.
Read the full details of this change from DHS
