02 Apr CARES Act COVID-19 Relief Options: How Do The Programs Stack Up?
The Families First Relief Act and CARES Act have been approved and businesses, like yours, are scrambling to figure out what it all means. The information is coming fast and furious so it can be hard to make sense of what is right for your business. Below is a current assessment of the landscape as compiled by Ascend Consulting, Fogged In Bookkeeping, and Prix Fixe Accounting. This should not be taken as individual tax advice but rather as a guide. Always consult with your individual tax advisor to see how such programs may apply to your individual situation.
EIDL, FFML, PPPL, Unemployment: How Do They Stack Up
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Families First Medical Leave | Add’l Unemployment Benefit | Paycheck Protection Loans | EIDL |
| Program type | Tax Credit | Employee Direct Benefit | Loan | Loan |
| What is this good for? | – Assistance paying medical leave
– Paying employee wages to current employees home caring for children who have had school cancelled due to Covid-19 – When you don’t want or need other funding |
Funds to employees who are laid off and who you cannot currently employ due to a business closure or necessary layoffs due to Covid-19 | Paying payroll, rent, and interest on debt as long as you are maintaining or bringing back your full-time equivalent headcount | Companies who have an economic impact but may not call back all of their employees or have low payroll costs. Also, companies who need funds for reasons other than payroll, rent, utilities, interest on mortgage obligations. This loan can be used for operations. |
| Who does this NOT help? | – Employers who have had to lay off employees
– Employees who have those on leave other than illness due to Covid-19 – Those who do not have children home from a closed school due to COVID 19; – Employers who had employees who were on leave prior to COVID |
Employers who still have their staff on payroll but need financial assistance to cover wages and benefits | Companies with low or no payroll costs, clients who do not expect to call back their workforce, | – Companies who will not be able to pay back a loan;
– Companies without a negative economic impact. |
| When can I apply? | NA | Immediately when there is loss or reduction of work | 4/3/2020 for small business and sole proprietorships with employees
– 4/10/2020 for independent contractors and self-employed |
NOW |
| Approval timeline | None | 1-7 days | Depends on the financial institution | – If you request the initial $10k they say 3 days but that has been slow coming
-Response on loan 2-3 weeks |
| Limits | $200/day $2000/2 weeks per employee $10,000 aggregate/ employee | – Ends 7/31/2020
– Extension of employee claim period can go as late as 12/31/2020 without addition federal $600 supplemental funds. |
– $10M or 2.5x average monthly payroll costs whichever is less
– Payroll costs include wages, health insurance, retirement benefits, state taxes paid on wages, it excludes federal taxes withheld or paid |
$150,000 Reduced from $2M |
| Deferral | 6-12 months | 1 Year from date of note | ||
| Interest | NO | NO | 0.5% | Up to 3.75% (2.75% for Non-Profits) |
| Term | 2 Years | Up to 30 Years | ||
| Loan Forgiveness/Grant | Yes | Yes | ||
| Loan Forgiveness Limit | Varies based on formula and likely no more than 25% can be used for non-payroll related costs | Shall not exceed $10k | ||
| Payroll Forgiveness | tax credit | paid direct | Y | $10k forgiveness not dependent on payroll use |
| Rent Forgiveness | No | No | Y if lease is in force prior to 2/15/2020
Subject to maximum of total forgiveness limit of $25% |
$10k forgiveness not dependent on utility |
| Utilities | No | No | Y for things in place prior to 2/15/2020 | $10k forgiveness not dependent on rent |
| Forgiveness criteria | No | No | – You must maintain the same average number of employees for the first eight-week period beginning on the origination date of the loan as you did from February 15, 2019 – June 30, 2019 or from January 1, 2020 until February 15, 2020. incur additional reductions if you cut compensation for employees who make under $100,000 by more than 25%, as compared to the most recent quarter
– You won’t be penalized for a reduction in employment or wages during the period from February 15, 2020 to April 26, 2020, if you rehire employees that you previously laid off or restore any decreases in wages or salaries by June 30, 2020. |
– $10k max can be forgiven even if you choose not to accept the rest of the funding;
– You must role this into the PPL forgiveness if you later accept a that loan |
| Emergency cash forgiven | if used for paid leave, payroll, increased costs due to supply chain disruption, mortgage or lease payments and paying obligations that cannot be met due to revenue loss | |||
| Total Pool | $15B | $260 Billion | $350B | $50B |
| Approved based on credit score without tax return and repayment ability | Not Applicable | Not Applicable | Yes | Yes |
| Personal Guarantee | No | >$200k ONLY | ||
| Will it be secured with collateral? | No | Yes – Business assets | ||
| Emergency cash | Must Apply but available | Quick but not instant | No | Shall not exceed $10,000 |
| Available to Sole Prop or independent contractors | Sole proprietors who pay payroll for employees and file a 941 form can access this benefit for their employees but not for themselves | The bill states that yes sole proprietors and contractors can claim but at this time there is not a mechanism to do so. | Yes had to be in operation before 2/15/2020 | YES |
| Can you apply if you already have a credit line? | Other credit does not impact this benefit | Other credit does not impact this benefit | Yes | Yes |
| Where do you apply? | Via your payroll tax filings | State unemployment offices | SBA lender/ bank | Direct at www.sba.gov/disaster |
| Do I need to have completed by 2019 tax returns to apply? | It will depend on the lender | No | ||
| Loan Fees | No | No | ||
| Prepayment Fee | No | No | ||
| Had to be in business 2/15/2020 | No | NO | Yes | Yes |
| Employee Limit | 500 | 500 | Must fit small business criteria but there are exceptions for some businesses that exceed 500 employees | |
| Wage Maximum | – 2 Weeks of regular wages up to 80 hours if the employee is quarantined
– 2 weeks (up to 80 hours) at 2/3 rate of pay if they are caring for a sick person or are caring for children home from school – If an employee has been employed for at least 30 days prior then an additional 10 weeks at 2/3s of regular rate if the employee must care for a child whose school or childcare provider is closed related to Covid-19 |
Prior earnings | $100k per employee | N/A |
| Impact on credit and current tax rates | none | none | Yes | Yes |
| Can someone apply for me? | Yes, your payroll preparer or PEO can apply for the credits as a third party on your behalf. | No | No | No |
| Can I get benefits if I laid off workforce or closed BEFORE Covid happened? | No | This is dependent upon the state and circumstance. Some employees may be able to extend benefits and get additional funds but may need to reapply. This will vary by state | No | No |
| Are benefits available to me if I own a company that isn’t federally legal? | Maybe | Maybe | No | No |
| Can I apply as a farmer? | Yes | Yes | No | No |
| Can I pay owner draw or guarantee payments to owner with the funds? | No | No | Not a covered use of funds | Not unless it is for services directly related to the business |
| Can I refinance my old SBA loans into this? | No | No | No | No |
| Do I have to demonstrate substantial economic injury? | No | No | No. You must demonstrate economic uncertainty not impact | Yes |
| Is there an end date? | 12/31/2020 | 12/31/2020 | 6/30/2020 | When disaster qualification ends |
| Are 1099 workers allowed to be paid with the funds included in the forgiveness/grant portion? | No | No | sections 2 f and 2h conflict in the SBA release. | Yes |
| Can I combine benefits? | Cannot take tax credit and get forgiveness on loans | Yes | Cannot take tax credit AND get forgiveness; must refinance EIDL loan into this. | No |
| Is this taxable income? | An Eligible Employer must include the full amount of the credits for qualified leave wages (and any allocable qualified health plan expenses and the Eligible Employer’s share of the Medicare tax on the qualified leave wages) in gross income | Yes to the employee, not the employer | No | No |
| Do I have to open back up for business? | Yes | No | Yes. If you are not open for business employees should be furloughed or laid off and are eligible for unemployment | No |
| Revision Date 04/02/2020 Information should not be taken as direct legal or tax advice. Always consult with your individual advisors as to how this may apply to you and your business | ||||
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