Loans:
Economic Injury Disaster Loan (EIDL)
The EIDL loan is a loan for up to $2 million for small businesses (fewer than 500 employees) at an interest rate of 3.75% for for-profit businesses and 2.75% for non-profit businesses. The term of this loan is up to 30 years. There is also the potential to qualify for an emergency grant of up to $10,000. Funds from this loan can be used to pay for operating expenses, but can not be used to refinance debt, payment of other SBA loans, tax penalties, civil fines, repairs of property or other physical damage, nor to pay dividends or distributions. For more details and to see if you qualify for this loan please contact an SBA lender.
Paycheck Protection Program (PPP)
The PPP loan is a small business loan in the amount of the lesser of a) $10 million or b) 2.5 times your average monthly payroll costs for the 12 months prior to the loan date. The entire amount of this loan is eligible to be forgiven if all the funds are used for the allowed purposes. These funds may be used for payroll and related benefits, interest on mortgage payments, rent, and utilities. At least 75% of the funds must be used for payroll. These qualifying expenses are for the 8 weeks following the date of the loan. If any of your employees have been laid off, you can, and very likely should, bring them back on immediately upon receiving this loan. Any portion of the loan that is not forgiven will have an interest rate of no more than 4% and a term of up to 10 years. (Note that salaries and wages in excess of $100,000 are not included in the average monthly payroll, nor are they a qualifying expense that the funds can be used for.) For more details and to see if you qualify for this loan please contact an SBA lender.
Other tax savings opportunities:
Deferral of employer Social Security tax
The 6.2% employer Social Security tax on wages paid from March 27,2020 through December 31, 2020 can be deferred and paid 50% on December 31, 2021 and the remaining 50% on December 31, 2022. This also applies to the 50% of self-employment tax paid by partners and sole proprietors. Note that this deferral is not available if you take advantage of the loan forgiveness under the PPP loan described above.
Employee retention credit
This credit is limited to the first $10,000 of compensation paid to each worker and is a 50% credit (ie. up to $5,000). To qualify for this credit your operations must be fully or partially suspended due to a COVID-19 related shutdown order, OR your gross receipts must have declined by more than 50% when compared to the same quarter of the prior year. Again, please note that if you take advantage of the loan forgiveness under the PPP described above you do not qualify for this credit. Also, this credit is not available for compensation taken into account in computing the sick leave or family medical leave credits under the Families First Coronavirus Response Act (FFCRA). (See FFCRA details below.)
Families First Coronavirus Response Act (FFCRA)
The FFCRA is comprised of two paid leave requirements 1) Emergency Paid Sick Leave Act (EPSLA) and 2) Emergency Family and Medical Leave Expansion Act (EFMLEA). Under EPSLA, certain employers are required to provide up to 80 hours of paid sick leave to employees who need to take leave for specific COVID-19 related reasons. Under EFMLEA, certain employers are required to provide up to 10 weeks paid and 2 weeks unpaid emergency leave for employees whose child’s school or place of care is closed due to COVID-19 related reasons. EFMLEA may be waived if you are an employer of under 50 employee and the absence of the employee would jeopardize the viability of your business as a going concern. Both of these paid leave requirements are reimbursable to employers through tax credits. Please see the attached FFCRA employee rights poster for more details.
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