Part II of the federal legislative response to the coronavirus pandemic became a reality Friday afternoon, and NJBIA’s Ray Cantor spent the weekend dissecting the bill’s key provisions for business owners. Here are some highlights that provide at least partial answers to some of the most frequent questions NJBIA has been fielding over the last two weeks.
NJBIA is still trying to ascertain how the money will be distributed and when businesses and individuals will be able to apply for the new programs.
Small Business Paycheck Protection Loans
The Coronavirus Aid, Relief and Economic Security (CARES) Act changes the Small Business Administration’s (SBA) Chapter 7 small business loan program and boosts spending for it by $349 billion. To be eligible, businesses must have fewer than 500 employees nationwide, with special eligibility for restaurants and those in the hospitality industry that have multiple locations each with under 500 employees.
The maximum loan amount was increased to $10 million and can now be used to meet payroll (including both paid leave and employee salaries), pay insurance premiums and cover mortgage, rent and/or utility payments and debt incurred between Feb 15 and June 30. Wages paid to those making more than $100,000 are not covered.
Interest is 4% over 10 years. Personal guarantees and other requirements are waived as are SBA regulations on entity affiliations for business concerns, nonprofits, and veterans’ organizations.
The loans may ultimately be forgiven if the employer maintains employment for eight weeks beginning with the date of the loan. Forgiveness will be tax free and could be reduced proportionately by how much a business reduces its workforce or if it reduces salaries by 25% or more.
Unemployment Benefits Expanded
Independent contractors, the self-employed, and those with limited work histories can temporarily collect unemployment benefits. Typically, such entities are ineligible for unemployment.
For all employees, eligibility has been expanded to include reasons related to COVID-19. The program will provide an additional $600 per week in benefits for up to four months, and an additional 13 weeks of benefits could be available if state benefits run out before the end of the year.
Those telecommuting with pay or receiving paid sick leave or other paid benefit are not eligible to collect.
Tax Credits for Closed Businesses
Any business that continues to pay its employees after it was forced to suspend operations due to COVID-19 could be eligible for a refundable tax credit against its share (6.2%) of Social Security payroll tax equal to 50% of the first $10,000 in wages per employee. This includes the value of health plan benefits.
The provision applies to businesses that were ordered to fully or partially close in any quarter in 2020 due to COVID-19. If the business was open, it could still be eligible if it experiences a 50% decrease in gross receipts in any quarter.
Tax Changes
The CARES Act temporarily repeals the taxable income limitation on net operating losses. Losses from 2018, 2019, and 2020 will be permitted to be carried back for five years. Losses carried to 2019 and 2020 can offset 100% of taxable income (rather than 80%).
Owners of 401(k) plans can take distributions in 2020 without the 10% prior distribution penalty for distributions up to $100,000 due to diagnosis of coronavirus of self or spouse, or if they suffered financial loss from quarantine, furlough, layoff, reduced hours, or being unable to work due to closures.
Cash contributions for individuals to charities may be deducted “above the line” even if a person does not itemize and takes the standard deduction. Different limits apply to corporate contributions.
How do you apply for it? Can a small business of 2 people apply? We are a small business of 2 people (printing, signs, lettering for local gov’t and businesses), we have been open but not very busy due to COVID 19. Are we eligible?
Hi Karin,
My name is Akshar and I own a Tax/accounting firm here in NJ. I’ve been working with clients regarding this. You should be able to qualify for the PPP loan that was created in the stimulus bill Congress just passed. The application submission process actually begins April 3rd but forms and a general idea of the documents needed to apply have been circulating from Lenders/govt. I’ve been working with my clients in helping them qualify and prepare even the application if they need help with it. Feel free to reach out via email.
Aksharpateltax@gmail.com
Hi Akshar, if I can ask. Can you apply for BOTH the CARES act loan and NJ Unemployment benefits? I’m a sole LLC., and of course business is almost non-existent right now. Thanks..!
Gerry
Hi I am a landlord with a few properties in nj in a corporation and many are going to have hard time to pay rents for next couple of months or so . in meantime i still have repairs, utilities, and property taxes and water and so on , would i qualify for a small law rate loan of $50.000 payable back in 3-5 years ? please get back to me with what i would need to go forward. Thank you so much .
my phone 732 547 7694 poriolo@aol.com
Currently, my intermittent job (like a Temp job) is continuing salary (naturally I’ve lost OT). I’m very thankful. BUT, I rely on my & my spouses SE income, which has ceased for now. As an Independent Contractor, but still receiving W-2 income, can I apply for U.I.?
Commenting on my own question – I just re-read & noticed the following par.:
Those telecommuting with pay or receiving paid sick leave or other paid benefit are not eligible to collect.
…Does this omit me, to supplement my lost SE?
How do you apply for the small business paycheck protection loan?
You wrote “Independent contractors, the self-employed, and those with limited work histories can temporarily collect unemployment benefits. Typically, such entities are ineligible for unemployment.” however when I as a small business owner trying to register for NJ Unemployment I get set to a web page that says NJ does not allow anyone who owns more than 5% of a company to collect. I wrote to my NJ congressman and senator who had staff write to me nonsensical answers to my question. It seems NJ is treating the CARES law like they treat the second amendment to our constitution. No shortage of toilet paper in NJ
I got the same roadblock. I do not see any clear way to apply for the unemployment as a self-employeed person.
Same here. I’m self employed and there is no way of getting through the unemployment application.
I’m a contract worker who due to the closure of my state lost my income for 3 weeks. However I’m now been designated essential but my work has been cut in half. I’ve lost quite a bit of money due to this but never been designated discharged. Can I get either a loan or unemployment to make up for the lost wages?
My employer is an individual with an LLC status. I am one of two employees who were laid off and told to collect unemployment due to the employer choosing to close the office. I have already applied for and started receiving unemployment. Now the employer is saying they are going to try and apply for a loan so they can make payroll. Is that an option for them? And how would this affect my benefits?
Our customers are all closed and our supplier in Washington State is also closed, so how do we apply? We are not “unemployed’ because we will go back to work when this is over, but we are taking a huge financial hit. I tried to register on the NJ UE site, but I don’t see any way.
Does the $600.00 extra weekly apply to everyone even if u have been in unemployment before the virus outbreak?
Yes
I am a small franchise owner (DBA under an LLC) I work with fundraising for schools and clubs so with them being closed or cancelled – I can’t work or have my employees work. Our Payroll schedule is 10 months of the year and based on Events scheduled (with summers off) I also just received a large inventory and supply order (received Mid March the Monday following the shutdown as it was already enroute and could not be delayed or cancelled) but now owe invoice. it was for events that were supposed to run between March and June. My employee is trying to collect unemployment, but was wondering if there is a forgiveness loan for my large inventory invoice, my insurance payments, my SBA loan payments, business credit card payment due for purchases prior to shutdown. etc. My bank account is nearly zero.
No help for the sole proprietor….this is unacceptable.
My kid would like to eat and my landlord still wants rent. Hello!!!!!!!!!
I work for a small business in NJ. I was laid off March 20 under Governor Murphy’s mandate to shelter in place.
I applied for unemployment, was approved.
My employer has been granted an SBA loan, I was told as of today I will no longer receive unemployment benefits, I will be given busy work to do at home to accrue my 35 hours per week pay. They also stated they are getting face masks so people can come into office on a ‘staggered’ basis.
Is this legal? The Governor has not lifted shelter in place, and I am not comfortable working in office. If I refuse and they do not find enough ‘busy work’ for me to accrue 35 hours, do I have to take a reduction in pay?
Someone answer, please
I wish someone would have answered this. I’m in same situation in NY, was laid off and am collecting unemployment and staying in home because of the Governor’s mandate. Meanwhile, now that my employer is applying for SBA PPP loan which he would like to have forgiven, he is telling employees to return to work. I thought the PPP loans were for employers whose businesses were closed and they wished to keep their staff so that when reopened, they would be ready to reopen quickly. But because employer wants the loans, I am supposed to now go back to work in the midst of this outbreak regardless o f the health risk? What if I chose to stay on unemployment and tell employer I do not want to return. If he fires me am I still eligible for unemployment? And am I required to return and jeopardize my health just because he got a loan?
nobody knows what is going on and the applications for independent contractors are no where to be found and yes persons that have applied for unemployment haven’t got any money yet
I’m currently starting to receive unemployment due to COVID but my employer is now expected to get the CARES ACT payment protection loan. What happens if he gets the loan and I’m receiving unemployment. Since this paycheck protection is suppose to be retroactive from the time you were off, then am I going to have to pay back the unemployment I am starting to receive? I’m in Michigan.
I’m interested in a SBA forgivable disaster loan up to $10,000
I was just approved for unemployment which I think could potentially be $865 week. But I’m wondering if I apply for the SBA disaster loan once it’s replenished & get approved for lets say $5000….How will this effect my unemployment that just kicked in? Would my weekly unemployment update need to show a forgivable loan as income or do I not have to worry? Same question applies if I apply & get a grant as well.
Question 2: I’ve never been on unemployment before or received a forgivable loan or grant. If I’m getting any of these checks/deposits should I be putting a portion aside for 2021 taxes?
Thanks!
I am an independent contractor, the employer I work for is applying for the SBA/PPP loan. He has asked me if I am going to file for unemployment, or if I will wait and see if he is approved for the loan. It is my understanding that independent contractors are not covered under the SBA loan, but can apply for a loan themselves or for unemployment. Is this correct?
I work for a travel agency in Lax but I work from NJ as an independent contractor. My head office issued the 1099 but since i did not get paid anything f from end of Feb .
and my head office informed me that they cannot get any funds from LAX for me (I have anther employee too working with me) I applied for UI and was denied, I am not sure if I even qualify for 600 .00 under the care act.In the mean time I was trying to apply for the SBA forgivable loan.But I am confused.If I apply and get that ,my monthly payment will be less that 600.00 per week from the loan I get (if I get)Or can I get both the SBA loan and my 600,00 from the care act which is still not confirmed