The New CARES Act Lets You Seek a Payroll Tax Credit of $5,000 Per Employee

4. April 2020 13:52

By: Laurie Wolff, Certified Global Business Professional

Is all well or at least okay with your business? In my last post, I described a payroll grant program that has just become available for businesses under pressure by the current health crisis. 

The Paycheck Protection Program offers small businesses loans that can be forgiven if all employees are kept on payroll for eight weeks and the loan is used for payroll, rent, mortgage interest and utilities. The forgiven amount has to have at least 75 percent related to payroll expenses, but other expenses can be part of the loan package. 

If you qualify as a small business, you can get a government loan that becomes a grant based on maintaining your payroll. Even if times are still good, this will increase your bottom line and allow you to invest in future opportunities. If times are tough, this is a potential life line to hold out until we get through the pandemic induced shut downs.

If taking advantage of a loan turned grant from the SBA isn’t right for you, then consider a couple of other options created in the recent government stimulus package.

For example:

  • You are eligible for a payroll tax credit if you have maintained employment and don’t seek or obtain an SBA loan. The credit is equal to 50 percent of wages and includes qualified health expenses. This is up to $10,000 gross paid out for wages and health benefits per worker, so the credit would be $5,000 per worker.
  • You can claim the credit against quarterly payroll taxes or take advance payment of the tax credit if you need cash now. Please talk to your accountant and claim this tax credit if you are eligible.
  • You also can defer your portion of payroll taxes, which is 6.2 percent of payroll. It won’t in the end save you money, but it will improve your cash flow now. The repayment schedule is stretched out to 2021 and 2022.

I will address this theme in other blogs but I want to hit home with you that the firms that expand, that buy capital and invest in developing new customers and new markets in the down times are best situated to grow and gain market share in the next up cycle. If you are healthy now, please deploy resources so that you can thrive when we get through this pandemic.

Economic expansions do not die of old age, and our underlying economy is strong. We just lived through the longest expansion ever. Our underlying capacity is amazing. We got hit with a shock that for once is not really economic, not about liquidity or the financial system, or anything else that we usually would label as causing a recession.

We have a health crisis which is making all of us make different choices than we usually would make. We will have the worst numbers ever in jobless claims, unemployment and decreased production. It will be a sharp downward move and bad in most measurable ways.

But we are also doing the largest stimulus ever and have the best underlying productivity ever. Jobless claims are so high because the technology is there to immediately make them, and the funds are there to pay them. It will help stabilize spending.

I like to think of the really bad numbers as a really good sign that we are on top of this. Be strong and prosper. (My scify fandom is showing but I want to encourage you that we will get through this.)

I plan to talk with you about exporting when we meet in Atlanta at IWF, but in the meanwhile I’m happy to answer questions and make referrals to resources, whatever will help you move forward with your business.

Reach Laurie Wolff c/o IWFNetworkNews@iwfatlanta.com   

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