• Amy Stark

What the CARES Act Does for Businesses and Employees

Updated: Apr 1

In March Congress passed the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). These bills are intended to provide relief for small businesses and individuals. Congress designed many of the provisions to free up cash so businesses can keep their workforce employed while the weathering the impact of COVID-19.


This overview is not intended to be a detailed analysis of the entire bill. More information is being released by the Department of Labor, Department of Treasury, and Internal Revenue Service every day. We will continue to update here as more guidance is released.


FOR SMALL EMPLOYERS Paycheck Protection Program

A federal loan program can help small businesses get a Paycheck Protection Program loan (“PPP Loan”) from their bank and use it to pay payroll, health care benefits, rent, interest on an existing mortgage, utilities, and interest on debts incurred before February 15, 2020. In addition, if the business meets certain requirements, a portion of the loan can be forgiven with no tax consequences. The Small Business Administration is updating this site with information about the PPP for employees and small business owners. The Independent Community Bankers Association (ICBA) is also updating resources on its website at icba.org. Information for borrowers is available from the Treasury Department here.

Employee Retention Tax Credit The law provides a refundable tax credit against the employer’s social security taxes for a business opting against a PPP Loan (or is too large to apply for a PPP loan), which has had to shut down or experienced a significant decline in revenue due to COVID-19. The Employee Retention Tax Credit (ERTC) is equal to 50% of the first $10,000 of wages paid to an employees between March 13, 2020 and December 31, 2020, up to a maximum credit of $5,000 per employee. For employers with 100 or fewer employees, employee wages and payments made for health care coverage (with some limitations) can be included in the credit calculation. For employers with more than 100 employees, only wages paid to employees not performing any services (whether in person or remotely) to the company due to the virus can be included in the calculation. The IRS has information posted about this tax credit on their website. Payroll Tax Payment Deferred Small businesses that did not have part or all of a PPP Loan forgiven can defer payment of the employer’s share of payroll taxes on wages paid for the period ending December 31, 2020. Payment of the deferred amounts is staged over two years -- 50% is due December 31, 2021 and the balance is due on December 31, 2022. People who are self-employed will also have the opportunity to take advantage of this deferral.

FOR INDIVIDUALS Rebate Checks Under the CARES Act, most Americans will receive tax free rebate checks of at least $1,200. In most cases these payments will be made automatically through direct deposit. Changes to Retirement Account Requirements

Participants in certain retirement plans, IRA owners, and their beneficiaries will be required to take required minimum distributions in 2020. For participants (or their spouses or dependents) who suffer financial consequences directly because of COVID-19 can take a penalty-free distribution from retirement funds of up to $100,000 from their retirement plans. This distribution would be exempt from the 10% early withdrawal penalty and can be repaid over 3 years or if not repaid, can be taken into income over a 3-year period. These participants can also elect to take a plan loan up to $100,000 or their vested account balance in the plan, whichever is less. The CARES Act also postpones for one year repayment for these loans that is due after the Act’s enactment and before December 31, 2020.


The IRS still needs to provide guidance on how individuals can access retirement accounts. It is also not clear how fast the major brokerage house and major retirement plan platforms are going to be able to implement this new provision.

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