Securing Your Finances During COVID-19
The priority is to keep your business open, and that requires having sufficient funds in place. Take advantage of applicable loan options, business credits, and other financial programs that can help you at this critical juncture of the coronavirus pandemic.
PPP and Loan Forgiveness
A Paycheck Protection Program (PPP) loan can help you keep employees on payroll, bring back those you furloughed, and cover certain overhead costs. PPP loans may be forgiven if funds are used on eligible covered costs.
Employee Retention Credit
A refundable Federal tax credit against employer payroll taxes for businesses that complied with government order to partially or fully suspend operations, or recognized significant reduction in gross receipts but retained their employees.
Eligible employers can:
Take a refundable credit of 50% of qualified wages/health plan expenses up to $10,000 per employee against applicable employment taxes.
Update: Originally, if you took a PPP loan in the first round, you were not eligible for this tax credit against 50% of the wages paid to employees during the pandemic. This is no longer the case under the law and recipients of a PPP loan from the inception of the program who meet certain conditions can claim this credit on wages that were not forgiven payroll expenses.
Among other changes are:
- An increase in credit amount to 70% on qualified wages paid in 2021
- A safe harbor allowing employers to use prior quarter receipts as a comparison
- An increase on the employee wage limit — $10,000 for the first two quarters of 2021 as compared to $10,000 annually in 2020
The deadline to claim the employee retention tax credit is extended to June 30, 2021.
The law also reverses IRS guidance to allow a tax deduction on PPP forgivable expenses and makes it effective as of the enactment of the CARES Act on March 27, 2020.
Payroll Tax Deferral Period
Employers can defer payment of applicable employer payroll taxes (employer portion of Social Security) incurred from March 27, 2020 – Dec. 31, 2020.
How deferred repayments are split and paid
- 50% due Dec. 31, 2021
- 50% due Dec. 31, 2022
Deferring payment of employer payroll taxes
Employers can now defer or continue to defer payment of the employer share of Social Security taxes even after PPP loans are forgiven.
State Unemployment Insurance Tax Credit
Some states have enacted legislation that provides employers with a SUI tax credit if they paid their first-quarter SUI contributions on or before a specific date. The credit amount equals the amount of first-quarter 2020 contributions paid by the employer and is applicable to second-quarter 2020 SUI contributions.
Other Funding Options
You and your accountant might determine there are better courses of action to obtain financing based on your business and industry needs.
Small businesses that don’t qualify for traditional small business financing may find other opportunities through SBA loan programs.
Main Street Lending Program
Established by the Federal Reserve to support lending to businesses that were in sound financial condition before the onset of COVID-19.
Business lines of credit
Monthly payments and interest are determined based on how much of the open line of credit you use.
Depending on the amount financed, loans can be either short-term or long-term, and can generally be secured from any lender.
Get the ultimate peace of mind for your business — payroll funding services to help you pay employees during and after the pandemic.
We provide you the flexibility to extend the collection of payroll funds from your bank account by up to seven days without interruption of services or insufficient fund charges.
Business Credit Service
Paychex sends payment history to credit bureaus with the goal of building your business credit file and improving your ability to secure attractive financing terms.