The COVID-19 pandemic has brought about many changes for businesses which include the Paycheck Protection Program loan (PPP) and the Emergency Economic Injury Disaster Loan Program (EIDL).  We have also seen the Families First Coronavirus Response Act (FFCRA) tax credits with the Employee Paid Sick Leave Act (EPSL) and the Emergency Family and Medical Leave Expansion Act (Expanded FMLA), as well as, the CARES Act Employee Retention Credit.  All of these benefits are a relief to business owners as they deal with the struggles of the Coronavirus with their employees, and their business profits.  This relief is good but can also be overwhelming and confusing.

Be aware that you cannot combine some of the options in order to get a greater benefit.  There are options to cover the many expenses but you are also limited so that you do not double dip.

  • Businesses planning on the PPP loan forgiveness under the CARES Act cannot include as eligible “payroll costs” the qualified leave wages paid under the FFCRA tax credit program for the EPSL and the Expanded FMLA employee leave programs. The employer will be receiving the FFCRA tax credits on theses wages so they cannot use these wages in computing the PPP loan to be forgiven.
  • The CARES Act Employee Retention Credit allows employers to get a refundable tax credit against the employer’s 6.2 % portion of the social security payroll tax for 50% of the “qualified wages” up to $10,000 paid to each employee but, this credit is not available if the employer receives the PPP loan or the EIDL loan.
  • The CARES Act allows for a deferral of the employer’s portion of the social security payroll taxes that are due through 12/31/20 to be deferred to 2021 and 2022 but, this deferral cannot be used by an employer that obtains a PPP Loan and the loan is forgiven under the CARES Act loan forgiveness provision. On the other hand, if a business receives an EIDL loan and does not receive loan forgiveness, they are able to defer payroll taxes under the CARES Act payroll tax deferral program.

The COVID-19 changes can help businesses get through these difficult times but employers need to make sure they don’t overlap the benefits and run into problems further down the road.

Employers need to carefully review their April, 2020 payroll to make sure the payroll Retention Credit and payroll tax deferrals are allowable depending on which SBA loan that they obtain.