Additional Relief Options for Small Business Owners in the CARES Act

Congress and the President put into law one of the most expansive stimulus packages in our country’s history in March. The Coronavirus Aid, Relief and Economic Security (CARES) Act is aimed at getting cash into the hands of individuals and businesses while much of the country is forced to stay at home under quarantine, and our economy is in a partial shutdown.

In previous communications we have summarized and offered recommendations around the most notable programs created by the CARES Act, including the PPP program, EIDL grants, Employer Retention Credit and expanded unemployment pandemic assistance.

Below is a summary of the other most applicable financial relief programs and provisions of the CARES Act for small businesses. We define and note how these measures could help our clients and/or their employees navigate these unprecedented economic times. Part one of this blog summarizes the additional relief options for individuals.

RESOURCES FOR SMALL BUSINESSES

SBA Loan Relief

The SBA will forgive 6 months worth of payments beginning with the next payment for existing or newly-obtained SBA loans obtained between March 27 and September 27, 2020. This applies whether or not the borrower was already in deferment on these loans.

CWA Insight: Most CWA clients who have qualifying SBA loans have already been notified by their lender. If your loan is in 3-month deferment, the 6-month forgiveness will kick in after the 3-month deferment.  This will help significantly with cash flow during the closure and the ramp-up period after reopening.

Retirement Plan Funding Extension

Payments for the minimum required contributions to defined benefit (DB) plans for the 2019 plan year are extended from September 15, 2020 to January 1, 2021.

Delayed contributions will be adjusted for interest.

Payments for 401(k) contributions are still due by the extended due date of your tax return, or at the latest, September 15, 2020.

CWA Insight: CWA clients should work with their planners on whether they should defer their DB contributions until January due to cash flow limitations. Please note that if this option is chosen, you will not receive a tax deduction on your 2019 tax return for the amount funded after September 15.

Delay of Payment of Employer Payroll Taxes

Note: This is only available to employers who do NOT participate in the PPP program.

The IRS will allow employers to delay their portion of social security tax on wages paid from March 27, 2020 through December 31, 2020.

• 50% of those taxes must be paid by December 31, 2021.
• The remaining taxes must be paid by December 31, 2022.

CWA Insight: CWA clients that do not participate in the PPP could utilize this as a way to help preserve cash flow as they look to reopen and rehire their employees. Note that in this case, we would recommend you still “set aside” these funds and only spend them if needed; that way, when they are due, you will not have to worry about “finding” the cash.

Qualified Improvement Property Changes

100% bonus depreciation is now allowed for Qualified Improvement Property (for example, leasehold improvements). This applies to all assets placed in service through 2023 and retroactively to 2018.

This allows taxpayers to retroactively claim 100% bonus depreciation on this property placed in service in 2018 and 2019 via a tax return amendment.

CWA Insight: CWA clients who had significant leasehold improvements during 2018 and 2019 could benefit from this amendment of the law. If you think this may apply to you, please work with your CWA planner on this topic.

Net Operating Losses (NOLs) for C-Corporations

The 80% taxable income limitation on NOLs for C-Corporations is increased to 100% of taxable income for the tax year 2020 only.

A 5-year NOL carryback is allowed for losses incurred in 2018, 2019 and 2020.

CWA Insight: Most CWA clients are not operating in the C-Corporation business structure. For those that are, there could be offer potential to carryback losses to previous years where your C-Corporation generated a taxable profit. This would apply to a client that sold his or her practice in one of those years and had taxable profit not “zeroed out.”

As you can see from the above, the federal government is going to great lengths to ensure consumers and businesses have liquidity during a very uncertain time. Please work with your CWA planner and/or CPA on the application of these provisions to your personal situation and business strategy. Read our blog on how the additional financial relief programs and provisions of the CARES Act will impact individuals.