H&S Companies Review of the CARES Act
Quick Summary of the Cares act that affect business. There are 2 main benefits of which you can choose one, not both. SEE ATTACHED (ALSO housed in Member Information Center (MIC) under the Resources tab - COVID19)
1. Employee Retention Tax Credit. Essentially, if you are shut down, partially shut down in any given quarter. Any wages paid in that given quarter, you will obtain a tax credit of 50% on the first $10,000 of each employee, max is $10,000 wages for the year on each employee (or $5,000 credit per employee). This will be great if the stay home order ends by the end of April and you all can get back to work no later than May 1st. All wages, per employee, paid in the 2nd quarter would then qualify for the tax credit. This program you do not have to obtain any application. So if you do not obtain a loan in the next section, you should qualify for this if you have been affected and pay wages.
2. Paycheck Protection Program. This program you will have to apply for through the bank or SBA. You will be obtaining a loan that will be easy to get if you are affected by COVID-19. The max borrowing is ups 2.5 time average monthly payroll. The loan can be used to pay payroll, rent, utilities, and interest on mortgage.
a. Loan Forgiveness. To obtain the loan forgiveness, we will have to work on documentation (which we can deal with at a later point). However, you may obtain loan forgiveness up to the amount you pay for those allowed items following 8 weeks after loan origination. Keep in mind there is a limitation clause in there. Main item is the employee count. It takes your average full time employee count during that 8 weeks period, divided by the average employees form last year. For example, if you employee 20 employees last year, then you only have 5 during that covered 8 week period. 25% of that loan is forgiven. Loan payments are deferred and the balance of the loan not forgiven or paid by 12/31/2020 will become a loan with an interest rate of up to 4%.
We are currently working on a template to help quickly calculate the potential tax credit vs the loan forgiveness. Keep in mind that you have to be an effected business due to Covid-19. Business like grocery stores would not qualify, as they are not affected. Some other benefits due to the bill are in this newsletter.