Updates for Businesses & Employees
The information in this article is current as of January 6, 2021, 10:25 a.m. EST. Updated information is in bold.
Our entire nation has been impacted by the coronavirus. Due to the quick spread of the virus, the economy has taken a hit. Business operations nationwide, particularly in small businesses, have been disrupted. Increased isolation means consumers aren’t buying and employees aren’t coming into work. To combat the effects of the virus, the government is working to pass legislation that would provide businesses and workers with financial relief.
In short, the coronavirus pandemic has impacted employers and employees alike. This article offers some practical guidance regarding available resources for your business and employees.
The coronavirus disease, also known as COVID-19, is a global outbreak first reported on December 31, 2019, in Wuhan, China.
Symptoms of the respiratory disease include fever, cough, and shortness of breath, according to the Centers for Disease Control and Prevention (CDC).
The exact number of people with coronavirus is unknown, as some people do not experience symptoms. There are, however, millions of confirmed COVID-19 cases worldwide. On March 11, 2020, the World Health Organization (WHO) labeled it a pandemic.
To slow the community spread of coronavirus, a number of states have responded to coronavirus by canceling school, church events, community gatherings, and other large-scale events. Recently, a number of states, including California, Illinois, Massachusetts, and Ohio, have closed restaurants and bars to dine-in customers.
As the disease spreads throughout the United States, social distancing has become the norm, as workplaces and schools have been forced to change the way they operate.
But with absenteeism comes increased financial strain—for both employers and employees.
To help offset the effects of coronavirus, the government is working on emergency aid packages that will benefit both businesses and workers.
In President Trump’s address on March 13, 2020, he declared a national emergency, saying this action will open access to $50 billion dollars for states and territories in the “shared fight against this disease.”
Further, individuals will have access to telehealth and accelerated coronavirus testing, including drive-thru testing.
On March 14, the House passed the Families First Coronavirus Response Act. And on March 18, the package passed in the Senate and the president signed the relief package into law.
On March 25, the Senate passed a $2 trillion coronavirus stimulus bill, called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). And on March 27, the bill passed in the House and was signed into law by the president.
The third piece of coronavirus-related legislation, known as the Paycheck Protection Program and Health Care Enhancement Act, was signed into law on April 24, 2020.
On December 27, 2020, the Consolidated Appropriations Act (the Act or CAA) was signed into law. It made a number of changes to coronavirus relief measures and programs, including the Paycheck Protection Program, Employee Retention Tax Credit, and Economic Injury Disaster Loan program.
Federal aid for businesses
Navigating your business is nerve-wracking enough without the added stress of a pandemic.
As a result of coronavirus, many businesses are hurting from slowed consumer spending, supply chain disruptions, and workplace productivity and absenteeism.
According to one report, nearly 75% of businesses are dealing with supply chain disruptions due to coronavirus.
If you’re like many small business owners, you may not have room in your budget to handle drops in revenue and provide paid sick leave to employees.
Although it’s easy to do, try not to panic—the government is responding to what businesses, especially small businesses, are going through.
In an effort to immediately relief economic strain due to the coronavirus pandemic, the government has proposed four measures aimed at providing businesses with some financial relief:
- Low-interest loans
- Employer tax credits
- Government cash payment
- Tax deferments
The employer tax credit passed in the House on March 14, passed in the Senate on March 18, and was signed into law on March 18.
On March 25, the Senate passed the coronavirus stimulus package. The CARES Act passed in the House and was signed into law on March 27. The act will send $1,200 checks to qualified individuals, create a $367 billion loan program for small businesses, and establish a $500 lending fund for cities, states, and industries.
1. Low-interest loans
If you’re seeing a drop in sales, you may not have enough funds to cover business expenses like employee wages, rent, or other bills. Applying for a bank loan is one option that you have to make ends meet.
But the added stress of a high-interest rate business loan can be a major deterrent. To help ease this worry, President Trump announced that the government would be providing millions in more funds for federal disaster loans, backed by the SBA.
These Small Business Administration (SBA) loans are known as Economic Injury Disaster Loans (EIDL).
The Economic Injury Disaster Loans provide relief for qualifying businesses in the form of:
- Low interest rates: 3.75% for businesses and 2.75% for nonprofit organizations
- Long-term repayment plans: Up to a maximum of 30 years
Keep in mind that businesses with credit elsewhere are not eligible for these low-interest rate loans.
The December 2020 COVID-19 legislation includes $20 billion in funding for new EIDL grants for businesses in low-income communities, $43.5 billion for continued Small Business Administration (SBA) debt relief payments, and $2 billion for enhancements to SBA lending.
The EIDL grants will be available for small businesses and nonprofits in low-income communities that had a 30% economic loss and have less than 300 employees. The new COVID-19 legislation also extends the covered period for EIDL grants through December 31, 2021.
SBA Administrator Jovita Carranza addressed how critical it is to provide this relief for small businesses, saying:
Small businesses are vital economic engines in every community and state, and they have helped make our economy the strongest in the world. Our Agency will work directly with state Governors to provide targeted, low-interest disaster recovery loans to small businesses that have been severely impacted by the situation.”
According to the SBA, you can apply for an Economic Injury Disaster Loan to help pay for bills you cannot afford due to the coronavirus, including:
- Payroll expenses
- Fixed debts
- Accounts payable
In addition to the SBA’s low-interest business loans, federal and state financial regulators have encouraged financial institutions to “work constructively with borrowers and other customers in affected communities,” according to the FDIC.
An initiative under the CARES Act (and replenished under the Paycheck Protection Program and Health Care Enhancement Act) is the Paycheck Protection Program (PPP). The PPP provides small businesses (companies with less than 500 employees) with enough funds to pay up to 24 weeks of payroll costs, including benefits. PPP low-interest loans are 100% forgiven if employers use them to cover eligible expenses. Borrowers must use 60% of the loan for payroll costs. And, employers must keep employees on payroll to qualify for full loan forgiveness.
On June 5, 2020, the Paycheck Protection Program Flexibility Act was signed into law. This act made a number of changes to the original PPP, including:
- Changing the repayment plan from 2 to 5 years
- Extending the 8-week period to 24 weeks
- Changing the usage rules from 75% payroll / 25% non-payroll to 60% payroll / 40% non-payroll
- Extending the time frame borrowers have to restore their workforce levels and wages by December 31, 2020, instead of June 30, 2020
You can apply for a loan using the Paycheck Protection Program Application Form.
Both the EIDL and PPP ran out of funding on April 16. But on April 24, the Paycheck Protection Program and Health Care Enhancement Act added an additional $310 billion to the PPP and $60 billion to the EIDL. The deadline to apply for a PPP loan was August 8, 2020. However…
… the CAA signed into law on December 27, 2020 reopened the Paycheck Protection Program and made changes to it. The legislation provides additional funding to the PPP and also made the following changes:
- Expanded eligibility for nonprofits (includes set-asides for very small businesses and community-based lenders)
- Second-time loans for eligible businesses with fewer than 300 employees and at least a 25% drop in gross receipts in a 2020 quarter compared to the same 2019 quarter
- Businesses can claim the Employee Retention Credit (ERC) in addition to a PPP loan (before, businesses were only allowed to opt into one or the other)
- Expenses you can spend your PPP loan on that qualify for forgiveness now also include operating expenses, covered property damage, supplier costs, and worker protection expenditures
- A simplified forgiveness application process for loans up to $150,000
- Businesses can deduct expenses paid with forgiven PPP loans from taxes
2. Employer tax credits
On March 18, 2020, a bill proposing federally-mandated paid sick leave and paid leave benefits passed in the Senate and was signed into law.
With the relief package, employers with eligible employees are required to provide paid sick leave to impacted and eligible employees for 10 days, in addition to any paid sick leave they already offer employees. And, employers are required to provide paid leave to qualifying employees for 10 weeks. Employers can’t change their sick leave policies or discriminate or retaliate against employees who use it. Both types of paid time off are explained later.
To offset these paid time off costs and help alleviate some of the burden from employers, the legislation provides a business tax credit, equal to 100% of the benefits doled out during this time. Business tax credits directly lower a business’s tax liability, dollar-for-dollar.
Self-employed individuals can also claim this tax credit if giving themselves paid sick leave.
Keep in mind that employers who must provide paid sick and paid leave benefits do not have to pay the employer Social Security tax on those wages.
Employers without sufficient payroll taxes to cover the paid sick and paid family leave can ask the IRS for an accelerated payment.
As of January 1, 2021, FFCRA paid leave benefits are no longer mandatory. But, employers who voluntarily continue providing the paid leave to employees can claim the FFCRA tax credit until March 31, 2021.
Another tax credit available for employers was established under the CARES Act: the Employee Retention Credit. This fully refundable tax credit is equal to 50% of qualified wages paid to employees. Although you can claim both the Employee Retention Credit and the tax credits associated with paid leave, you can’t claim them on the same wages.
The Consolidated Appropriations Act expanded the Employee Retention Tax Credit through June 30, 2021. The bill also made the following changes to the ERC:
- Increases the refundable payroll tax credit from a maximum of $5,000 to a maximum of $14,000 by changing the calculation from 50% of wages paid up to $10,000 to 70% of wages paid up to $10,000 per quarter
- Expands eligibility by reducing the required year-over-year gross receipts decline from 50% to 20%
- Provides a safe harbor allowing employers to use previous quarter gross receipts to determine eligibility
- Increases the limit on per-employee creditable wages from $10,000 for the year to $10,000 each quarter
- Removes the 30-day wage limitation
- Allows businesses with 500 or fewer employees to advance the credit anytime during the quarter based on wages paid in the same quarter in a previous year
- Allows new employers (including employers that did not exist for all or part of 2019) to be eligible for the credit
One major change to keep in mind is that businesses can now take the Employee Retention Tax Credit and participate in the PPP. Businesses were only allowed one or the other before.
3. Government cash payment
Another relief measure is a stimulus check, known as Economic Impact Payments. With the CARES Act, checks will provide direct assistance to most U.S. adults, including business owners and workers alike.
This scenario began gaining bipartisan support on March 17, with the U.S. Treasury Secretary Steven Mnuchin also in support.
On March 19, the Senate GOP released their proposal containing the government-issued cash payments to U.S. adults. Again, the proposal passed in the Senate on March 25 and in the House on March 27. President Trump signed the CARES Act into law on March 27. The act provides cash payments of up to $1,200 per person (up to $2,400 for couples). Payments increase by $500 per child. Individuals who earned above $75,000 in adjusted gross income (AGI) on their 2018 income tax returns will receive a lesser amount.
Economic Impact Payments takes the place of a previous proposal of cutting payroll taxes temporarily. This idea was not included in the passed Families First Coronavirus Response Act, and it was not part of the Senate’s stimulus plan.
The Act passed in December 2020 also includes a second round of stimulus checks. This second time around, the economic impact payments are $600 per individual. The $600 checks will only go out to individuals making less than $75,000 a year or couples making less than $150,000. Individuals will also receive $600 per dependent child (under the age of 17).
4. Tax deferments
Another form of financial relief for businesses comes in the form of tax deferments. This includes a federal income tax deferment for employers as well as a possible Social Security payroll tax deferment.
Sole proprietors, single-member LLCs, and corporations ending their year on December 31 have a business tax return deadline of April 15.
The deferment extends the April 15 deadline for businesses negatively impacted by the coronavirus—without penalties—for 90 days. The new deadline for filing federal tax returns and paying taxes is now July 15.
Based on the CARES Act, corporations also have an estimated tax payment postponement until October 15.
States have also implemented tax filing and payment guidelines. You can view a state-by-state tax filing guidance for coronavirus pandemic here.
You would not owe penalties on your taxes if you took advantage of the federal income tax deferment.
In addition to the federal income tax deferment, business owners are also able to defer the employer portion of Social Security tax due to the CARES Act. Qualified companies are able to delay remitting their share of Social Security tax to the IRS. The employer portion of Medicare tax is due to the IRS as usual. Employers would still need to withhold and remit the employees’ entire portion of payroll taxes.
Before the Paycheck Protection Program Flexibility Act was signed into law on June 5, employers who received a PPP loan could only defer payroll tax payments until their loan was forgiven. Now, employers can defer payments throughout all of 2020.
Employers can delay remitting the employer portion of Social Security tax until January 1, 2021 (50% owed by the end of 2021 and the other half due by the end of 2022).
The president also issued four executive orders on August 8. One of them was for an employee Social Security tax deferral. And on December 27, 2020, the Consolidated Appropriations Act extended the payroll tax deferral repayment deadline to December 31, 2021. Originally, the deferral repayment deadline was April 30, 2021.
Federal aid for employees
With the virus spreading and businesses panicking, more employees are working from home or not working at all. The fear of community spread of the coronavirus has led to the shuttering of nearly all major public events and institutions across the nation. To relieve employees during this pandemic, the government is working on passing new laws to help aid employees impacted by the virus.
Some legislation in the works includes:
- Paid family leave
- Paid sick leave
- Government cash payment
- Unemployment benefits
- Food aid
- Income tax deferment
A number of the federal aid proposals, including paid leave, unemployment benefits, and food aid, passed in the House—with the president’s support—just before 1 a.m. on March 14, 2020. Now, this legislation heads to the Senate. On March 18, the president signed a coronavirus relief package that includes paid sick and family leave into law.
1. Paid leave benefits
One of the proposals aimed at helping employees who are impacted by coronavirus is paid leave. On March 14, a bill including paid leave benefits passed in the House. And on March 18, a revised package passed in the Senate and was signed into law by the president.
The federal paid family and medical leave bill provides up to 10 weeks of paid leave at a rate of two-thirds their regular wages (limited to $200 per day). This benefit applies to employees who have to stay home with a child whose school or childcare facility is closed due to the coronavirus, as well as workers with family members affected by the coronavirus. Quarantined workers, or those who were caring for affected family members, are not eligible for the benefit. Instead, they are eligible for paid sick leave (explained below). This temporary, federal paid family and medical leave benefit is available through December 31, 2020.
The Families First Coronavirus Response Act provision on paid leave benefits applies to all employers with fewer than 500 employees. Some small businesses with fewer than 50 employees may be exempt from providing workers with the paid leave. Businesses with more than 500 employees are also excluded from the mandatory paid leave.
Employees who have been employed by an employer for at least 30 calendar days are eligible. Employers with 25 or more employees must allow job restoration for employees who use the leave.
Employers are responsible for providing impacted employees with the percentage of their regular wages. Again, employers will receive a tax credit for providing this benefit.
Self-employed individuals are also entitled to receive the same paid leave benefits as employees. Self-employed individuals can claim a tax credit for their paid leave.
The Act passed in December 2020 did not extend the FFCRA’s mandatory paid leave programs. But with the new legislation, employers can opt to extend the paid leave program for employees through March 31, 2021.
If you voluntarily extend the paid leave program, you can continue to claim the payroll tax credit under the same rules. Keep in mind that employers are not required to provide FFCRA leave between January 1, 2021 – March 31, 2021. But if you opt to offer paid leave, you are eligible for the tax credits for wages paid.
2. Paid sick leave
Twelve states currently have paid sick leave laws in place. But, what about paid sick leave laws related to coronavirus?
With coronavirus rising in the U.S., the government put an emergency, federally-mandated sick leave benefit for private businesses into action. The bill passed in the House on March 14, passed in the Senate on March 18, and was signed into law by the president.
The law requires all employers to allow their qualifying employees 10 days of paid sick leave (up to $511 per day or $200 per day, depending on the reason). Employees who qualify for their regular wages (up to $511 per day) while taking paid sick leave are those who are being tested for, treated for, or diagnosed with the coronavirus. Employees are also eligible if they have been told by a doctor or government official to stay home due to exposure or symptoms. And, employees qualify for two-thirds of their wages (up to $200 per day) if they must take paid sick leave to care for an individual who meets the COVID-19 care criteria.
Depending on the size of the business, part-time employees are entitled to the number of hours of paid sick time equal to the average number of hours they work over a two-week period.
Employers will receive a tax credit for providing this benefit.
Self-employed individuals are also entitled to receive the same paid sick leave benefits as employees. Self-employed individuals can claim a tax credit for their paid sick leave.
Again, the FFCRA mandatory paid leave programs expired December 31, 2020. But, employers can opt to extend the paid leave program for employees through March 31, 2021 thanks to the Act passed in December 2020.
3. Government cash payment
The CARES Act, which includes legislation about a government-issued cash payment to individuals, passed in the Senate on March 25. On March 27, the proposal of the $2 trillion coronavirus aid package passed in the House and was signed into law. The package will provide cash payments of up to $1,200 per person.
These $1,200 government-issued cash payments take the place of a previously touted idea of a payroll tax cut.
The previously proposed idea of a possible payroll tax cut would have resulted in employees no longer needing to pay payroll taxes temporarily, raising their wages. But again, there was no mention of the payroll tax cut idea in the passed House bill or in Senate negotiations.
Again, employees may be eligible to receive a $600 stimulus check. If signed into law by the president, individuals should begin receiving stimulus check payments within a few weeks. As of December 22, 2020, the president has not signed the new coronavirus relief package into law.
The Consolidated Appropriations Act provides a second round of stimulus payments. This time around, the payments are $600 per individual or $1,200 per married couple. Children under 17 years old also receive $600 each. And, there is no cap on household size. However, children who are 17 or older are ineligible, including adult dependents (e.g., college students).
4. Unemployment benefits
Unemployment benefits help workers who are unemployed at no fault of their own. Workers who receive unemployment benefits get a percentage of the wages they would have earned if they were still employed.
On Thursday, March 12, 2020, the U.S. Department of Labor gave states flexibility to amend their laws to provide unemployment benefits to individuals affected by the events related to the coronavirus. And on March 18, 2020, the president signed these expanded unemployment benefits into law.
Workers laid off due to the outbreak are already eligible for unemployment benefits. However, the legislation would provide $1 billion for additional caseloads and administrative costs to encourage furloughed workers to acquire unemployment benefits.
The CARES Act also boosts unemployment insurance benefits for workers by expanding eligibility and offering eligible workers an additional $600 per week for four months in addition to what the state program pays.
A number of states are providing employers with a special mass-layoff number to use for coronavirus-related layoffs. This not only speeds up the process of employees receiving benefits, but it may also prevent employer SUTA tax accounts from increasing.
The new legislation passed by Congress on December 21, 2020 includes an 11-week extension of the unemployment insurance compensation benefits first provided in the CARES Act that are set to expire on December 26, 2020. If this legislation is signed into law by the president, it will extend unemployment benefits for qualified individuals.
The CAA passed in December 2020 increased the Pandemic Unemployment Assistance (PUA) by 11 weeks (through March 14, 2021).
The Act also reinstated the Pandemic Unemployment Compensation program (expired in July) to provide supplemental payments of $300 per week to any individual eligible for state unemployment benefits.
The new legislation also extends the Pandemic Emergency Unemployment Compensation (PEUC) program through March 14, 2021. This extension will provide additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits.
5. Food aid
As the pandemic spreads, more businesses and schools are shutting down. This means lost school lunch benefits for children as well as the need for emergency food aid across the country.
The House bill passed on March 14 “provides $500 million to women, infants, and children nutrition program; nullifies existing work requirements on the food stamp program; and provides $100 million in food grants to U.S. territories … It provides additional funding to nutritional programs for children and the elderly,” according to the Washington Post. On March 18, the package passed in the Senate and was signed into law.
6. Income tax deferment and student loan interest postponement
Along with business owners, individuals also have the opportunity to defer tax payments. On Wednesday, March 11, 2020, it was announced that the Treasury Department is working to allow individuals negatively impacted by coronavirus to defer their tax payments.
The deadline for individual filing tax returns and paying taxes also has a new deadline of July 15 (normally April 15).
In addition to deferring income tax, the government is also planning on waiving interest for federal student loans, announced in President Trump’s March 13 address, until further notice to help students and families impacted by the virus.
The IRS has set up a “Coronavirus Tax Relief” page, which they will update as new information is available, to educate taxpayers about tax-related resources and relief. Additionally, the IRS announced that individuals with high-deductible health plans (HDHPs) can pay for coronavirus-related testing and treatment without losing the HDHP status, according to the IRS.
Coronavirus fast facts: Protecting your business
Phew, that was a lot of information to soak up.
Here’s an overview of key information to take away about the coronavirus and federal aid for employers and employees:
- There are millions of confirmed COVID-19 cases worldwide
- To slow the spread of the virus, many states are canceling school, church events, and public gatherings
- The government signed into law an emergency aid package, the Families First Coronavirus Response Act, to benefit individuals and businesses impacted by coronavirus; this package passed in the House on March 14 and in the Senate on March 18
- The government has proposed four measures to aid businesses: low-interest loans, employer tax credits, a government cash payment, and tax deferments
- The government signed into law a CARES Act stimulus package to help individuals and businesses impacted by the pandemic; this package passed in the Senate on March 25 and in the House on March 27
- To help aid employees, the government has established or is looking into establishing laws pertaining to paid leave benefits, paid sick leave, a government cash payment, unemployment benefits, food aid, and income tax deferment
- The Consolidated Appropriations Act was signed into law on December 27, 2020. The new legislation reopened the PPP and made changes to it, extended and expanded the ERC, and replenished funds for the EIDL program. The Act also makes changes to unemployment insurance compensation benefits, provides a second round of stimulus checks, and extends the employee Social Security tax deferral repayment period. Under the Act, employers can also voluntarily continue providing paid leave to employees and can claim the FFCRA tax credit until March 31, 2021.
For more information about state-specific initiatives, you can search for your state health department website on the USA Gov website.
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