A primer on the CARES Act and how it can help small businesses

Brian A. Trzcinski

By Brian A. Trzcinski, CEPA
MassMutual specialist in business market development.
Posted on Mar 31, 2020

A $2 trillion stimulus package was signed into law on March 27, 2020 to provide financial relief and help stabilize the economy. The original package included a $350 billion employee retention fund for small businesses, with an additional $381 billion of funding added on April 24, 2020. The Coronavirus Aid, Relief and Economic Security Act (CARES Act) is designed to aid small businesses with less than 500 employees in keeping their employees on the payroll during this crisis.

“In a matter of ten days, we went from one of the fastest-growing periods of our business's history to completely going to zero revenue,” said Chris Juliani, owner of Boston Chair Massage. “We are confident we will bounce back, but when and how fast is uncertain. Right now the focus is to keep our organization afloat and try to find resources to help our team of massage therapists.”

Here’s how the CARES Act can potentially help your small business and your employees:

  1. Tax credits and deferrals: The federal tax filing and payment deadline has already been extended to July 15, 2020. In addition to that measure, the CARES Act gives businesses, including those that have been ordered to close, a 50 percent refundable payroll-tax credit on up to $10,000 of individual employee wages as long as they keep workers employed through the crisis. Additionally, payroll taxes due from March 27 through December 31, 2020 can be deferred with 50 percent due by December 31, 2021 and 50 percent due by December 31, 2022.
  2. Access to capital: The SBA oversees the Paycheck Protection Program (PPP), which provides to businesses loans that can be forgiven if certain requirements are met. A business’s eligible loan amount is the lesser of $10 million or 2.5 times its average monthly payroll from the prior year. The loans will carry an interest rate of up to 4 percent. The loans will be forgiven equal to eight weeks’ worth of funds for approved purposes, including payroll expenses, mortgage, rent, and utilities, and if the business maintains its full-time workforce through June 30, 2020. In addition, the Economic Injury Disaster Loan (EIDL) program is available for those businesses needing assistance due to COVID-19, including Agricultural enterprises with less than 500 employees. Through the CARES Act, businesses applying for EIDL can request an immediate emergency grant of $1,000 per employee, up to $10,000. This grant need not be repaid even if the EIDL is declined. Businesses can apply for the both the PPP and EIDL, however, the funds must be used for different expenditures.
  3. Unemployment benefits: The CARES Act makes eligible far more workers than usual for unemployment benefits, including those that are self-employed, independent contractors, and gig economy workers. Those who are unemployed, partially unemployed, or cannot work for a wide variety of coronavirus-related reasons would be more likely to receive benefits. Under the Pandemic Unemployment Assistance (PUA) program, eligible workers would get an extra $600 per week for weeks of unemployment between March 29 and July 31, 2020 on top of what their state benefit provides.
  4. Use of retirement funds: The CARES Act waives the 10 percent early withdrawal penalty for distributions up to $100,000 for coronavirus-related purposes, retroactive to January 1, 2020. Withdrawals are still taxed, but taxes are spread over three years, or a business owner can use the three-year period to repay without it counting toward the annual contribution limits. In addition, the 401(k) loans limit is increased from $50,000 to $100,000.

This marks the largest emergency aid package in US history and shows how stabilizing the economy begins with sustaining the small business community in our country.

“There are many government loan products coming out at the time,” said Juliani. “Keeping an eye on the programs and making the best decision as to which will best help your specific business is important. That’s what I’m working on at the moment.”

For more information, visit the SBA website .

The information provided is not written or intended as specific tax or legal advice. MassMutual, its subsidiaries, employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of MassMutual.