State governments across the U.S. have taken swift action to enforce "social distancing" in a desperate effort to slow the spread of COVID-19 (coronavirus). While many businesses are reeling from the effects of reduced sales and forced closures, small businesses are being hit the hardest.
If you are self-employed or own a small business, here are some resources to help you stay afloat.
Find more information about government assistance in our resource guides for U.S. businesses.
COVID-19 Stimulus Bill:
On the 27th of March, 2020, President Trump signed a massive Coronavirus relief bill that will provide relief to American workers and business owners affected by COVID-19 (coronavirus).
For individuals who rely on a small business for income, the CARES Act provides support through:
- Individual cash payments.
- Financial assistance through forgivable loans.
- Business tax credits.
- Expanded unemployment benefits for contract workers and self-employed individuals.
- Payroll tax delays.
- Tax filing and payment extension.
Coronavirus Direct Deposits:
If you are a U.S. small business owner, independent contractor, or self-employed individual, financial relief may be coming your way in the form of a one-time cash payment from the federal government.
As part of the CARES Act, U.S. citizens who earned less than $99,000 in 2019 will receive a payment of up to $1,200.
- If you made less than $75,000 in 2019 you qualify for the full $1200 amount.
- For every child in the household, you receive an additional $500.
- If you made more than $75,000, your payment will be reduced by $5 for every $100 of income above $75,000.
- If you made more than $95,000 you will not receive an individual payment.
Forgivable Loans Through The Paycheck Protection Program:
If you own a small business and you are struggling to pay salaries, rent, or utilities, you may be able to find relief through the Paycheck Protection Program. The program forms part of the CARES Act and offers eligible business owners forgivable loans if they maintain the same number of employees on their payroll.
Unemployment Benefits for Independent Contractors and Self-Employed Individuals:
Prior to the passing of the CARES Act, independent contractors and self-employed individuals in the U.S. have not been eligible for unemployment benefits. This has since changed with the inclusion of the Pandemic Unemployment Assistance (PUA) program into the CARES Act.
For the first time, independent contractors, gig workers, freelancers, and self-employed individuals can apply for unemployment insurance benefits. Benefits will be based on your previous income and vary depending on your location and state benefit guidelines. This will include:
- $600 a week in supplemental benefits for a period of four months.
- Additional benefits for 13 weeks for those who are still unemployed after state benefits have run out.
Tax Filing and Payment Extension:
To offset the effects of the Coronavirus on small business owners and self-employed individuals, the federal government has extended the deadline for federal income tax returns to July 15th, 2020. The 90-day extension is also the new deadline for tax payments including self-employment or federal income tax owing for 2019 tax returns.
If you need more time to file your return, you can apply for an extension until the 15th of October. You will still have to pay any amount owed by July 15th, 2020, or risk incurring interest and late penalties.
Relaxed Rules for Net Operating Losses:
Prior to the Tax Cuts and Jobs Act of 2017, small business owners were able to use a Net Operating Loss (NOL) to reduce their taxable income in another tax year. This allowed employers to amend their tax returns for previous years or apply for an NOL on future tax returns.
The Tax Cuts and Jobs Act ended the option to carry over NOLs and also limited the amount of taxable income that could be offset by a Net Operating Loss.
In response to the Coronavirus pandemic, the CARES Act has loosened some of these limitations, allowing small business owners and self-employed individuals the option of carrying back NOLs from 2018 to 2020 back five years. The CARES Act has also removed the limit on carryovers from 2018 and 2019 tax returns.
Social Security Tax Deferral:
As part of the CARES Act, small business owners now have the opportunity to defer their employer portion of payroll taxes. If you have not received a small business loan under the Payment Protection Act, you are entitled to defer the 6.2% tax that is used to fund Social Security.
If you choose to defer Social Security tax, the first 50% of the amount must be paid before December 31st, 2021. The remainder of the deferred amount will be due by the 21st of December 2022. This will allow you to free up cash flow to keep your small business afloat.
It is important to remember that you will still need to collect your worker's share of Social Security and Medicare taxes as per normal.
Tax Credits For Federally-Mandated COVID-19 Leave Payments:
On the 18th of March 2020, the Families First Coronavirus Response Act was signed into law, mandating that small business owners provide eligible employees with up to 80 hours of paid sick and family leave. While businesses with fewer than 50 employees are exempt from providing certain leave benefits, the act has serious financial implications.
In order to offset the costs of mandated paid time off, small business owners will receive a payroll tax credit equal to 100% of leave benefits given out. Self-employed individuals will receive a tax credit equal to the leave amount.
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Small Business Assistance From the Private Sector:
In addition to government aid, small business owners can turn to the private sector for financial assistance.
Amazon has started a neighborhood small business relief fund for Seattle-based businesses with fewer than 50 employees or less than $7 million in revenue.
Google is offering advertising credits for small and medium businesses who advertise with them or one of their partners since the beginning of 2019.
Uber Eats is offering independent restaurants in the U.S. waived delivery fees and same-day payouts.
GoFundMe is providing micro-grants for eligible independently owned small businesses.
Kiva is offering small business owners zero-interest loans of up to $15,000.
The Freelancers Union has established a Coronavirus relief fund that is offering up to $1000 per freelance household to cover lost income and essential expenses.
Yelp is offering waived advertising fees and free products and services for local restaurants and nightlife businesses on Yelp.
Grubhub is providing independent restaurants in the U.S. with temporarily deferred delivery fees.
What resources are available for U.S. small business owners affected by COVID-19?
- Tax credits for federally mandated sick leave.
- Relaxed rules for net operating losses.
- Unemployment benefits for independent contractors and self-employed individuals.
- Federal income tax filing and payment extension.
- Social Security tax deferral.
- Financial assistance from the private sector.
Who benefits from the Paycheck Protection Plan?
The Paycheck Protection Plan forms part of the CARES Act and is designed to help small businesses in the U.S. avoid layoffs by providing them with forgivable loans to cover payroll, utilities, and rental costs.
How have the unemployment benefits been extended?
For the first time independent contractors, freelancers, gig workers, and self-employed individuals are eligible for unemployment insurance benefits.
What is a forgiven loan?
A forgiven loan is a COVID-19 government-approved loan for small businesses in which a portion of the loan amount does not need to be paid back if used for specific purposes such as salaries, utilities, and rent.
When are federal income taxes due?
The tax filing and payment deadline has been moved to the 15th of July 2020.
Do small business owners still have to pay Social Security payroll tax?
Yes, while small business owners have the option of deferring the employer Social Security tax, the deferred amount must be paid back in two installments before the 31st of December 2021 and the 31st of December 2022.
Which private companies are offering financial assistance for small businesses?
- Uber Eats.