Many Americans are now getting some form of economic assistance from the CARES Act — the federal government’s multi-pronged effort to save jobs and small businesses from devastation by the COVID-19 pandemic. Whether you’re an employee, employer or self-employed sole proprietor, there are new benefits and new rules to follow. Here’s a rundown.

Unemployment Benefits for Employees

  • Additional $600 per week added to the amount an eligible (laid off) worker receives in unemployment compensation. Effective April 5, 2020 through July 31, 2020.
  • Additional 13 weeks of eligibility for unemployment benefits. So if your state’s normal cap is 26 weeks, it’s now extended to 39 weeks. The additional $600/week applies to these extra weeks (up to July 31) as well.
  • Unemployment benefits for self-employed individuals and independent contractors. Normally these types of workers don’t qualify, but now they do if they are fully or partially unemployed or unable to work due to COVID-19. They also qualify for the $600 per week benefit.

How Layoffs Affect Your Payroll Protection Program Loan

If you’ve laid off employees so they can get employment benefits possibly higher than what you can pay, it could affect how much of your PPP loan is forgiven.

That’s because the loan terms state that you must not allow your payroll expenses to decline by more than 25% (by either letting employees go or significantly reducing their pay). What’s more, at least 75% of the loan money you receive must be spent on payroll costs. If you don’t meet those criteria, you won’t get 100% loan forgiveness, meaning you will have to pay part of it back.

You can avoid this problem by hiring back the employees you let go. Do it by June 30, 2020 and there won’t be any penalty. 

How Layoffs Affect Your SBA Economic Injury Disaster Loan

The short answer is that they don’t. The Small Business Administration doesn’t attach any payroll strings to this type of loan, so you can lay off your employees and they can access full unemployment benefits.

How 1099 Workers Affect Your Payroll Protection Program Loan

Businesses can’t include payments made to independent contractors — those whose earnings are reported on IRS Form 1099, not W-2 — in calculating payroll costs. Contractors are considered sole proprietors of their own business and can apply for the PPP themselves.

How Tax Credits Affect Unemployment Benefits

Business owners can take advantage of a variety of payroll, leave and unemployment tax credits to reduce their expenses during the COVID-19 pandemic. This strategy may help you retain some employees, while those that were laid off can get their full unemployment benefits.

  • Self-isolating employees: Can receive up to 80 hours of paid sick leave. The full amount can be deducted from payroll tax.
  • Revenue loss: Employers can receive up to $5,000 per employee per quarter if the business experienced at least 50% decline in sales revenue compared to last year
  • PPL loan: you can’t apply for these tax credits if you also have a PPL loan.

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