There's been a lot in the news lately about large companies securing large federal grants to soften the financial blow of the CORONA shutdown — to the exclusion of smaller businesses. And even with new legislation that could provide additional funding, small companies could still be left out.
Here are four ways that companies can garner some financial relief in these challenging financial times:
1. Delay of employer FICA contributions
While most of the attention has been focused on the forgivable loans that are part of the CARES Act, the good news is that — if you dig deeper — the legislation also provides a postponement (not forgiveness) of the employer portion of FICA payments. These are available for payroll taxes due beginning on March 27 through year's end. Payments can be deferred with half due on December 31, 2021, and the remaining half on December 31, 2022.
2. Employee retention credits
This is fully refundable tax credit available for employers equal to 50 percent of qualified wages paid to employees. The retention credit applies to qualified wages paid after March 12, 2020, though the balance of this calendar year.
There is a cap to the amount of the credit, and the credit is only available to companies that either:
- Fully or partially suspended operation during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
- Experienced a significant decline in gross receipts during the calendar quarter.
3. Carrying back Net Operating Losses (NOL)
Another often missed provision of the CARES Act is the ability for companies to carry back net operating losses from 2018 or 2019 to prior years (going back 5 years) and obtain refunds of previously paid taxes. The 2017 tax reform eliminated the ability to carry back NOLs, but the CARES Act has resurrected them.
4. Families First Coronavirus Response Act (FFCRA)
Employers with fewer than 500 employees may qualify for tax credits under the FFCRA, which was enacted on March 18. The legislation has two main sections: the Emergency Paid Sick Leave Act (EPSLA), and the Emergency Family and Medical Leave Expansion Act (FMLA Expansion).
An eligible employer may claim a fully refundable tax credit equal to 100 percent of the qualified family leave wages (and allocable qualified health plan expenses and the eligible employer's share of Medicare tax on the qualified family leave wages) it pays.
Each company's situation is different, so we strongly suggest you speak with your tax adviser to see how these provisions might apply to you.
Jason Sharp, CPA, is tax partner at Briggs & Veselka, Houston's largest locally owned CPA firm. He can be contacted a firstname.lastname@example.org.