If you're a business owner in any industry other than accounting, you probably have questions about changes to your business taxes. In addition to the Paycheck Protection Program and Economic Injury Disaster Loans, the Cares Act contains tax relief options for business owners.
Here are some of business owners' frequently asked questions about the type of relief available, pulled directly from Inc.'s weekly Town Hall webinars with the U.S. Chamber of Commerce as well as official information from the IRS.
What tax relief options are included in the Cares Act?
The Cares Act contains a payroll tax deferment, as well as the Employee Retention Credit and the Credit for Sick and Family Leave.
What is the payroll tax deferment?
The deferment allows businesses to defer payment of the employer portion of payroll taxes, which is equal to 6.2 percent of wages. If you defer, you'll repay 50 percent of the tax at the end of 2021 and the other 50 percent at the end of 2022. It's important to note that you can't take the payroll tax deferment if you've received a PPP loan.
What is the Credit for Sick and Family Leave?
This is a tax credit available to companies with employees who are unable to work because they've tested positive for Covid-19 or have symptoms and are seeking a diagnosis. The employee in question is entitled to paid sick leave for up to 10 days at their usual pay rate, up to a maximum of $5,110. Your business can receive a tax credit for the full amount paid to such employees, plus your business's share of Medicare tax and related health plan expenses, during the leave.
The same type of credit is available for businesses with employees unable to work because they have to care for someone with Covid-19 or have child care issues as a result of the virus. For those employees, the tax credit is worth two-thirds of their usual pay for up to two weeks, up to a maximum of $2,000.
What is the Employee Retention Credit?
This is a tax credit for 50 percent of an employee's wages up to a maximum of $5,000 per employee, including health care expenses.
Who is eligible for the Employee Retention Credit?
Businesses that have been partially or fully suspended due to governmental orders as well as businesses that have suffered at least a 50 percent drop in gross receipts in a quarter compared with the same quarter a year ago.
What limitations are there on the Employee Retention Credit?
If you have 100 or fewer employees, you can receive the credit whether or not the employee in question is providing services to your company while you're partially or fully shut down. If you have more than 100 employees, the credit only applies to wages you pay to an employee when they're not providing services.
Additionally, you can't receive the credit if you've received a PPP loan.
Can I get tax relief in addition to getting a PPP loan?
No--there's no double-dipping on payroll relief. "Across all of these programs, we have to remember that you can't get benefit for the same thing multiple times," says Sarah Jennings, CPA and principal at accounting firm Maner Costerisan.