CARES Act - How Small Business and Self-Employed Individuals Can Get Stimulus Money
The Coronavirus Aid, Relief, and Economic Security (CARES) Act expands unemployment benefits to cover self-employed individuals, and offers loans, tax credits and deferrals to small business owners. If you are a small business owner or self-employed person, read on to learn what it could mean for you.
Unemployment assistance for the self-employed
Under the CARES Act, self-employed persons and independent contractors are temporarily eligible for unemployment benefits. The exact amount that you receive will depend on your state’s unemployment insurance program. In addition to your state’s unemployment benefit, the federal government will pay you $600 per week.
You’re covered if you were available to work, but unable to do so any time after January 27, 2020 until the end of the year because of the Coronavirus pandemic
You can receive up to 39 weeks of unemployment assistance
There is no waiting period for benefits to begin
File a claim through your state’s unemployment assistance program
Paycheck Protection Program
Small businesses with less than 500 employees and self-employed individuals and independent contractors can qualify for SBA guaranteed loans for up to $10 million or 2.5x average payroll cost (not counting those who earn greater than $100,000).
You must apply between April 3, 2020 (small businesses) or April 10, 2020 (independent contractors) until June 30, 2020
The loans are granted on a first come, first served basis and there is a funding limit, so apply as early as possible
The maximum allowable interest is 4%
Paycheck Protection Program Loan Forgiveness
The loan described above will be completely forgiven if you use the loan proceeds within eight weeks after loan issuance for payroll costs (for those earning less than $100,000), group health insurance premiums, and rent and utilities. However, you must maintain the same employee headcount from February 15, 2020 through June 30, 2020 compared to either of the following periods:
February 15, 2019 – June 30, 2019, OR
January 1, 2020 – February 15, 2020
Additionally, you must not have reduced compensation for any employees earning under $100,000 by greater than 25% compared to the most recent quarter.
Payroll Tax Deferral
Under the new law, employers and individuals can defer 50% of 2020 payroll taxes until 12/31/2021, and the remaining 50% until 12/31/2022.
Self-employed individuals may defer the “employer” portion (50%) of their self-employment taxes.
Employee Retention Credit
Employers whose operations have been partially or fully suspended due to government restrictions will get a fully refundable tax credit equal to 50 percent of qualified wages (including health plan expenses) that they pay their employees.
Qualified wages are those paid between March 13, 2020 and December 31, 2020
The maximum amount of qualified wages considered is $10,000 per employee
To be eligible, employers must have experienced a significant decline in revenues
If you are a small business owner or self-employed individual, please consult with a trusted financial planner to evaluate all your options before taking any action.