On March 27th, President Trump signed the $2.2 trillion stimulus bill dubbed the CARES (Coronavirus Aid, Relief, and Economic Security) Act. Read on for a summary of the major tax relief provisions that impact businesses.
Employee Retention Credit
Employers whose business operations were fully or partially suspended due to government orders or saw a substantial decline is gross receipts may be eligible for a credit against employment taxes equal to 50% of qualified wages (up to $10,000 in wages) for each employee . The credit applies to wages paid after March 12, 2020 and before January 1, 2021.
An eligible business who receives a covered loan under paragraph 7(a) of the Small Business Act (aka Paycheck Protection Program) is not eligible for the employee retention credit.
Payroll Tax Deferral
Payments of the employer portion of FICA taxes due on wages paid from March 27th through the end of the year may be delayed. Half of the amount is due by December 31, 2021. The other half is due by December 31, 2022. This relief also applies to 50% of self-employment taxes.
Payroll tax deferral cannot be combined with loan forgiveness under the Paycheck Protection Program.
Net Operating Losses
Net operating losses arising in 2018, 2019 or 2020 can now be carried back 5 years. The 80% income offset has also been eliminated for net operating losses arising before 2021. Excess business loss limitation rules that impact sole proprietors and passthrough entities have been eliminated as well.
Business Interest Expense Limitation
The limitation is increased to 50% of adjusted taxable income for 2019 and 2020 and taxpayers may elect to use 2019 adjusted taxable income when figuring the limit for 2020.
Qualified Improvement Property
Qualified improvement property is now eligible for 15-year depreciable life and thus 100% bonus depreciation. This technical correction fixes an error in the Tax Cuts and Jobs Act. The change is retroactive to property placed in service after December 31, 2017.
Questions on how these changes can benefit your business? Please give us a call.