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The CARES Act: Your Guide to the $2 Trillion Coronavirus Stimulus Package

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Key Points about the Coronavirus Aid, Relief and Economic Security (CARES) Act:

  • The CARES Act provides economic relief to industries, organizations, and individuals affected by the COVID-19 pandemic.
  • Key features include direct payments to workers, expanded unemployment benefits, additional loans for small businesses, and delayed tax deadlines.

On March 27, 2020, President Trump signed a third coronavirus stimulus bill. The Coronavirus Aid, Relief and Economic Security (CARES) Act is worth over $2 trillion and aims to stabilize the economy by giving direct cash to workers, additional aid to small businesses, and necessary resources to healthcare professionals.

This is the largest economic relief package in American history. As such, it covers a wide range of industries and introduces a variety of new regulations. The highlights of the bill include:

Direct Payments to Workers

Under the CARES Act, millions of workers will receive a one-time direct check. The amount you receive will depend on your marital status and gross annual income:

  • Single adults who earn less than $75,000/year will receive a $1,200 check.
  • Single adults who earn more than $75,000/year will receive a reduced check amount. The amount will decrease by $5 for every $100 the individual makes over $75,000/year. For example, if you earn $80,000/year, you’ll receive a $950 check.
  • Single adults who earn more than $99,000 are not eligible and will not receive a check. 
  • Couples who earn less than $150,000/year will receive a $2,400 check. 
  • Couples who earn less than $198,000/year will receive a reduced check amount that depends on their combined income amount.
  • Couples who earn more than $198,000/year are not eligible and will not receive a check.
  • Parents will receive an additional $500 per child under the age of 17.

Payment Delivery

The IRS will use your 2019 (or 2018) tax return to determine your eligibility and payment amount. If your previous tax return was mailed to you, you’ll receive your payment as a check in the mail. If your previous tax return was a direct deposit, you’ll receive your payment as a direct deposit. You may also be able to receive your payment as a direct deposit, even if the IRS does not have that information on file for you. More details about this process are to come.

The IRS hopes to deliver these payments within the next 3 weeks. Please visit their website for the most up-to-date information.

Enhanced Unemployment Benefits

The CARES Act expands unemployment eligibility and benefits until December 31, 2020. Highlights of these enhanced benefits include:

Extended Benefits Period

Unemployed individuals will receive an additional 13 weeks of unemployment benefits. This increases the total unemployment benefits period from 26 weeks to 39 weeks. 

The CARES Act also eliminates the usual 1 week waiting period. This means that unemployed individuals won’t need to wait 1 week before they receive their benefits. States can choose to pay individuals as soon as they file for unemployment. 

Federal Pandemic Unemployment Compensation

Qualifying unemployed individuals will also receive an extra $600/week for 4 months, on top of any aid they receive from their state (which averages $200-550/week, depending on the state). 

For more information about state aid, visit this page for quick links to your state’s official website.

Pandemic Unemployment Assistance (PUA) Program

The Act also details a Pandemic Unemployment Assistance program that gives financial assistance to workers who wouldn’t typically qualify for unemployment benefits. This includes people who are jobless or unable to work due to COVID-19, including freelancers, self-employed individuals, and gig economy workers (like Uber drivers). These individuals will also receive the Federal Pandemic Unemployment Compensation of $600/week. 

Paycheck Protection Program (PPP)

The CARES Act calls for an additional $350 million in loans to help small businesses stay afloat during the pandemic. This new program is called the Paycheck Protection Program.

Purpose

These loans are meant to reduce unemployment and ensure job security. Qualifying organizations can use these loans for payroll and other expenses.

Eligibility

In general, you’re eligible for a loan from the PPP if:

  • You’re a small organization with less than 500 employees
  • You’re an individual who is a sole proprietor, independent contractor, or self-employed worker
  • You’re an organization that qualifies as a “small business concern” under existing SBA rules

There may be exceptions for franchises, as well as businesses in the accommodation and food service industries. For the full list of eligibility requirements, click here.

Use

You can use the funds to cover payroll (including health benefits), mortgage, rent, utilities, and other payments you’re unable to meet due to revenue loss from COVID-19. Any mortgage, rent, and utilities payments you make under this loan must have been incurred before February 15, 2020.

Amount

You can borrow up to 2.5× your average monthly payroll costs. You cannot borrow more than $10 million. 

Interest Rate

The interest rate will not exceed 4%.

Repayment & Forgiveness

You will be forgiven the full amount for any qualifying payments you make during the first 8 weeks of your loan. Qualifying payments include those listed under the Use section above. However, for the loan to qualify for forgiveness, at least 75% of the loan amount must be used for payroll costs. This means that you can’t use more than 25% of the loan amount for rent, utilities, and other qualifying, non-payroll expenses.

If you have employees who earn more than $100,000/year, any payroll expenses for these individuals in excess of $100,000 (prorated) will not be eligible for full forgiveness. The amount you can have forgiven for qualifying expenses is capped at $8,333.33/month per employee.

Your loan will be forgiven only if you continue to pay your employees during the pandemic. If you lay off employees or your wage rates drop by more than 25%, the amount of loan forgiveness you receive will be reduced accordingly. 

If you laid off workers due to COVID-19 before February 15, 2020, you’re eligible for loan forgiveness if you rehire these employees.

Application Process

Small businesses and sole proprietors can apply for a PPP loan starting on April 3, 2020. Independent contractors and self-employed individuals can apply starting on April 10, 2020.

The official application can be found here.

Check with your SBA 7(a) lender, bank, or credit union to make sure they’re participating in the program. Please visit the SBA’s website for a full list of participating lenders and see the Department of the Treasury’s Fact Sheet for additional information. 

Economic Injury Disaster Loans (EIDLs) for Small Businesses

The Small Business Administration provides Economic Injury Disaster Loans (EIDLs) through private lenders for small businesses affected by COVID-19. The CARES Act increases EIDL eligibility and provides an additional $10 billion in funding for these loans. 

Here’s what you need to know about EIDLs and how to apply:

Purpose

EIDLs provide relief for small businesses, agriculture cooperatives, and private nonprofits affected by declared disasters. EIDLs give these organizations the funds they need to sustain themselves until the disaster passes.

Eligibility

You’re eligible for a low-interest EIDL if your small business suffers substantial economic injury due to COVID-19. Qualifying organizations in all U.S. states, Washington D.C., and territories are currently eligible to apply. 

Under the CARES Act, sole proprietors and independent contractors are now eligible to apply for EIDLs. Tribal businesses, cooperatives, and ESOPs with less than 500 employees can also apply. All nonprofits, including 501(c)(6)s, are eligible as well. 

Previously, you could apply for an EIDL only if you didn’t have another credit source. Under the CARES Act, you can apply for an EIDL even if you can obtain loan funds from another source. 

Use

You can use an EIDL for payroll, fixed debts, accounts payable, and other bills that you’re unable to pay due to COVID-19.

Amount

If your organization qualifies, you can receive an EIDL of up to $2 million. The exact amount depends on your organization’s financial needs.

Interest Rate

For small businesses, the interest rate for a COVID-19 EIDL is 3.75%.

For nonprofits, the interest rate is 2.75%.

Repayment 

Repayment terms vary from organization to organization. The maximum repayment term is 30 years. Your term will depend on your ability to repay the loan.

Application Process

You can apply for an EIDL by mail or online here. You’ll need the following information, along with some other data not listed here, when you apply:

  • Employer identification number
  • Date of establishment
  • Number of years under current management
  • Birthday, Social Security Number, phone number, and ownership percentage for each business owner
  • Personal financial statements for each owner
  • A schedule of liabilities that lists any debts
  • A list of the economic losses your organization is experiencing due to COVID-19

Check your state’s website for the latest news and updates. You can also email disastercustomerservice@sba.gov or call the SBA at 1-800-659-2955 for assistance.

Approval

Under the CARES Act, the SBA may approve your EIDL based solely on your credit score – not your repayment ability. You don’t need to provide a tax return, either.

EIDLs less than $200,000 can now be approved without a personal guarantee.

Emergency Grant Cash Advance

Within the EIDL program, the CARES Act also provides emergency grant cash advances of up to $10,000. This grant will be fully forgiven if it’s used for paid leave, payroll, mortgage, lease, or other expenses you cannot meet due to revenue loss from COVID-19.

Qualifying organizations in all U.S. states, Washington D.C., and territories are currently eligible to apply. 

You will receive your cash advance within 3 days of submitting a successful application.

EIDL & Paycheck Protection Program Loans

If your organization qualifies for both loan types, you can receive a loan from the Paycheck Protection Program and an EIDL. However, you cannot use both funds for the same expenses. Be sure to check with your financial advisor for specifics.

Additional Aid

Some states and private lenders are offering additional aid for small businesses affected by COVID-19. For a list of funds available, click here

Employee Retention Payroll Tax Credit

Your organization may be entitled to a payroll tax credit under the CARES Act. This credit aims to keep workers employed during the pandemic. The credit refunds 50% of qualifying payroll expenses (up to $10,000 per employee) made from March 13, 2020 to December 31, 2020.

Your organization is eligible for a payroll tax credit if:

  • Your operations were fully or partially suspended due to COVID-19
  • Your gross revenue decreased by 50% or more when compared to the same quarter last year

Payroll Tax Delay

Businesses and self-employed individuals can also delay payroll tax payments. The employer portion of Social Security taxes owed for 2020 can now be deferred over a two year period. 

You must pay 50% of the tax by the end of 2021. The remaining 50% must be paid by the end of 2022. Please note that you cannot defer these taxes if you receive a Paycheck Protection Program loan and that loan is forgiven.

Other Delayed Tax Deadlines

The CARES Act extends other tax deadlines, giving you more time to file your taxes without incurring penalties or interest. The three major deadline changes include:

  • Federal Income Tax returns now due July 15, 2020 (previously April 15, 2020).
  • S-Corporation returns now due September 15, 2020 (previously March 16, 2020).
  • C-Corporation Income Tax returns now due October 15, 2020 (previously July 15, 2020).

Changes to FMLA & Emergency Paid Sick Leave under the FFCRA

The CARES Act makes some changes and clarifications to the previously passed Families First Coronavirus Response Act (FFCRA). 

Now, employees that were laid off after March 1, 2020 and then rehired will be eligible for the emergency paid sick leave and extended FMLA leave described in the FFCRA.

For more information about the FFCRA, please visit our previous blog post.

Additional Provisions

The Act also includes other provisions that may not be directly applicable to you, your employees, or your organization. They include:

  • Hospitals & Healthcare Supplies – Hospitals will receive over $100 billion to treat patients and obtain the supplies they need to combat the pandemic (ventilators, gloves, masks, etc.).
  • Coronavirus Testing – Patients will not need to pay for COVID-19 testing and vaccine costs.
  • Retirement Savings Access – Americans can withdraw up to $100,000 from their retirement savings to pay for COVID-19-related expenses. The normal 10% early withdrawal penalty will not apply to these transactions.
  • Student Loan Suspension – Individuals with student loans can suspend their payments without penalty until September 30, 2020.
  • State, Local, & Tribal Governments – These entities will receive a combined total of $150 billion for disaster relief, transit programs, and other services.

A fourth stimulus bill is already in the works, but the CARES Act is an important step forward. At Sentric, we’re doing everything we can to accommodate these changes and stay abreast of the latest developments.

We’re living in uncertain times, but we’re in them together. From all of us at Sentric, we’re wishing you continued health and safety. Below, we’ve listed some additional resources you may find helpful:

The CARES Act in its entirety

A list of support and funds available for small businesses, by state

Coronavirus (COVID-19) Small Business Guidance Loan Resource

The U.S. Chamber of Commerce’s Coronavirus Response Toolkit for Businesses