In order to address COVID-19, Congress and President Trump have enacted three major pieces of legislation to fight this disease and help as many Americans as possible stay employed, with the goal of resuming our strong economy as soon as possible when this pandemic subsides. While agencies such as Treasury and the Small Business Administration (SBA) are working to roll out these programs as quickly as possible, I hope the information below will be helpful to you in this challenging time. With any of these programs for small businesses, I strongly recommend you work with your accountant and regular lender as soon as possible to understand the full parameters of each program, review your eligibility, and determine which options are most appropriate for you. Please contact any of my offices if I may be of further assistance.
Paycheck Protection Program (PPP) Loans
PPP loans are designed to help eligible small businesses and non-profits (501(c)3 and 501(c)19) with 500 or fewer employees keep employees on the payroll through this challenging period. These loans are fully guaranteed by SBA, available through most financial institutions, and amounts spent by eligible employers on up to eight weeks of wages, benefits, rent, mortgage interest, and utilities are fully forgivable. In order to allow employers to bring back employees already furloughed, this program is retroactive to February 15, 2020.
Businesses may not participate in PPP and also receive Employee Retention Tax Credits to offset employee compensation. Businesses ineligible for PPP may participate in the tax credit instead, if they qualify.
Economic Injury Disaster Loans and Grants
Small businesses with 500 or fewer employees, including sole proprietorships, independent contractors, cooperatives, and small tribal businesses, may apply for EIDL loans of up to $2 million, with principal and interest deferment. The first $10,000 of any EIDL is payable as a grant, which may be used to address increased production costs, meet payroll, pay sick leave, or meet other business obligations.
Debt Relief Program
In order to assist small businesses with existing non-disaster SBA loans through this time, SBA will cover all loan payments, including principal, interest, and fees, for six months, for small businesses harmed by COVID-19. While PPP loans are not eligible for this relief, small businesses may receive this debt relief and also take a PPP loan to assist with payroll.
To access these programs, contact your local lender. CARES Act allows most lenders, including those not normally providing SBA products, to offer these loans.
The employee retention tax credit is available to eligible employers, including non-profits, whose businesses have been fully or partially suspended due to government orders limiting commerce, travel, or large gatherings, as well as employers who demonstrate a 50 percent or greater reduction in quarterly receipts, year-over-year. The credit, covering 50% of eligible payroll, up to $10,000 per employee, is refundable against Social Security or Railroad Retirement payroll taxes.
For entities under 100 employees, the credit may be applied to any eligible wages between February 12 and December 31, 2020. For employers of over 100, the credit is only applicable to wages paid when the business is shut down.
This credit is not available to employers participating in PPP.
Employer Payroll Taxes
To assist with cashflow concerns, all types of businesses, including sole proprietorships, may choose to defer paying the 6.2% employer share of Social Security payroll taxes for the remainder of 2020. Employers choosing this option must pay half of the outstanding balance in 2021, and the remainder in 2022. Employers participating in other types of payroll assistance programs may not be eligible for this deferral.
Tax Credits for Families
In order to help families in this difficult time, nearly every American adult with an eligible Social Security Number, earning less than $75,000 as an individual or $150,000 as a married couple, will receive an Economic Impact Payment of $1,200 per adult. Individuals earning between $75,000 and $99,000 and married couples earning between $150,000 and $198,000 will receive a pro-rated portion of $1,200. Families may also be eligible to receive up to $500 per dependent child. Social Security beneficiaries will not need to file a tax return to receive their payment – Treasury will use existing information to determine eligibility and will send payments through the same method Social Security benefits are received – direct deposit or check.
Delayed Filing Deadlines
Both the IRS and Nebraska Department of Revenue extended April 15 tax filing deadlines out to July 15, 2020. Individuals and families who expect to receive tax refunds are still encouraged to file as soon as possible to access those funds.
Enhanced Unemployment Insurance
Unemployment Insurance (UI) operates as a federal-state partnership, with states setting many parameters for the program, including pay rates, maximum weeks, and tax rates. In Nebraska, unemployment typically pays up to 50% of weekly salary up to $440, for up to 26 weeks. Beneficiaries must typically wait one week to receive benefits and must actively search for work. Some workers, including the self-employed, contract employees, and employees of non-profits and religious institutions are exempt from UI taxes but are also usually ineligible for benefits.
The CARES Act provides an additional $600 per week for every UI recipient for up to 8 weeks and provides an additional 13 weeks of unemployment beyond what each state typically offers though the end of 2020. For a limited time, the self-employed and many exempt employees may also claim UI.
Because of the extenuating circumstances leading to most current UI filing, Governor Ricketts temporarily waived the one week waiting period and work search requirement for Nebraskans.
For information on accessing UI, visit neworks.nebraska.gov/