CARES ACT for businesses
Please note the CARES Act (the Act) is a significant piece of legislation and we are not attempting to fully cover all changes made by the Act. The items below are those we believe are most important to our clients.
Net Operating Loss(NOL) Relief -
Employer Payroll Tax Deferral - The CARES Act allows employers and self-employed individuals to defer payment of the employer's portion (6.2%) of Social Security tax from the date the CARES Act was passed through December 31, 2020. Deposits of deferred payroll taxes will be deemed timely paid if 50% of the deferred payroll taxes are paid by December 31, 2021 and the remaining amounts are paid by December 31, 2022.
Employers that receive a Paycheck Protection Program loan (covered later), and have this debt forgiven, are not allowed a payroll tax deferral.
Employer Payroll Tax Retention Credit - employers can receive a payroll tax credit against applicable payroll taxes equal to 50% of qualified wages if operations during a 2020 calendar quarter were either 1) fully or partially suspended as a result of a COVID-19 shut-down order from an appropriate government authority or 2) if gross receipts declined by more than 50% compared to the same quarter the prior year.
Paycheck Protection Program (PPP) - amount available is the lesser of
PPP Loan Application
PPP Borrower Fact Sheet
PPP Lender Fact Sheet
- Temporary Repeal of Taxable Income Limitation - The Tax Cuts and Jobs Act enacted in 2017 (the “TCJA”) imposed a 80% of taxable income limitation on the use of NOL carryforward deductions for NOLs arising after 2017. The CARES Act has amended those provisions to allow net operating losses incurred in 2018, 2019, and 2020 to be fully deductible.
- Temporary Restoration of NOL Carrybacks. The TCJA repealed the ability of a taxpayer to carry back an NOL to a prior year effective for NOLs arising after 2017. The CARES Act restores the ability for a taxpayer to carry back an NOL arising in 2018, 2019 and 2020 to each of the five prior tax years.
Employer Payroll Tax Deferral - The CARES Act allows employers and self-employed individuals to defer payment of the employer's portion (6.2%) of Social Security tax from the date the CARES Act was passed through December 31, 2020. Deposits of deferred payroll taxes will be deemed timely paid if 50% of the deferred payroll taxes are paid by December 31, 2021 and the remaining amounts are paid by December 31, 2022.
Employers that receive a Paycheck Protection Program loan (covered later), and have this debt forgiven, are not allowed a payroll tax deferral.
Employer Payroll Tax Retention Credit - employers can receive a payroll tax credit against applicable payroll taxes equal to 50% of qualified wages if operations during a 2020 calendar quarter were either 1) fully or partially suspended as a result of a COVID-19 shut-down order from an appropriate government authority or 2) if gross receipts declined by more than 50% compared to the same quarter the prior year.
- Eligible wages are up to $10,000 for each employee
- Employers taking advantage of a Paycheck Protection Program loan cannot receive the retention credit
Paycheck Protection Program (PPP) - amount available is the lesser of
- average monthly payroll costs for the prior one year multiplied by 2.5, or
- $10,000,000
PPP Loan Application
PPP Borrower Fact Sheet
PPP Lender Fact Sheet