COVID-19 Small Business Resource Center

Coronavirus Aid, Relief, and Economic Security (CARES) Act

Updated: July 1, 2020

The Coronavirus Aid, Relief, and Economic Security Act (H.R. 748, "CARES Act") was signed into law on March 27, 2020. The CARES Act is the third stimulus bill aimed at providing relief to employers and individuals affected by COVID-19. Below is a high-level summary of the provisions related to small business assistance, tax, retirement, paid leave, unemployment insurance, and direct payment to individuals. Small businesses should work with an experienced financial advisor to carefully assess available assistance programs to determine the interplay and best option for their specific circumstances.

Paycheck Protection Program (Sections 1102 & 1106)

Updated: July 1, 2020

Businesses and nonprofit organizations with 500 or fewer employees, as well as sole proprietors, independent contractors and self-employed individuals, may be eligible for a loan program available from February 15, 2020 to June 30, 2020. This program, called the Paycheck Protection Program, provides federally guaranteed loans, in amounts determined by a formula, with a maximum loan amount of $10,000,000. Loan proceeds can be used for payroll, mortgage interest or rent, health-care benefits payments, utility payments, and certain other costs, and are forgivable in an amount equal to the sum of such costs incurred or payments made during the 24 weeks after loan disbursement, if employers meet certain requirements, including maintaining employment and wage levels.

Note: For eligibility, restrictions, and other details about the PPP visit the Small Business Loans section of our Resource Center here.

Expanded SBA Express Loans (Section 1102)

Businesses and nonprofit organizations with fewer than 500 employees, sole proprietorships and independent contractors that have suffered economic injury due to COVID-19 may also be eligible for a loan under the existing SBA "Express" Loans program. The SBA Express Loans program helps small businesses obtain loans in a faster and easier way (usually within 36 hours). These loans provide businesses with revolving lines of credit for working capital purposes.

The CARES Act expands the allowable uses for loans under this program to permit payroll support, including paid sick leave, supply chain disruptions, employee salaries, mortgage payments and other debt obligations, to provide immediate access to funds for affected small businesses. The CARES Act increases the maximum loan amount for SBA Express loans from $350,000 to $1,000,000, until December 31, 2020. The CARES Act also reduces the cost of participation in the program by providing fee waivers, an automatic deferment of payments for up to one year, and no prepayment penalties.

Note: For more details, visit the Small Business Loans section of our Resource Center here.

Small Business Debt Relief Programs

For small businesses with current non-disaster SBA loans, under the CARES Act, the SBA will cover all loan payments on these loans, including principal, interest and fees, for six months. This relief will also be available to new borrowers who take out loans within six months of March 27, 2020. PPP Loans are not eligible for this debt-relief program.

The loans eligible for this relief include those guaranteed by the SBA, such as the SBA Business Loan Program (including the Community Advantage Pilot Program, but excluding PPP Loans) or Title V of the Small Business Investment Act. Loans made by an intermediary to a small business using loans or grants received under the SBA’s Microloan Program are also eligible.

Note: For more details, visit the Small Business Loans section of our Resource Center here.

Employee Retention Credit for Employers Subject to Closure Due to COVID-19 (Section 2301)

Updated: May 27, 2020

Private-sector employers may be eligible for a refundable tax credit against federal employment taxes equal to 50 percent of "qualified wages" paid by employers to employees during the COVID-19 crisis. The tax credit applies to qualified wages paid after March 12, 2020, and before January 1, 2021.

Eligible Employers:

For the purposes of the Employee Retention Credit, eligible employers are those that carry on a trade or business during calendar year 2020, including a tax-exempt organization, that either:

  • Fully or partially suspends operation during any calendar quarter in 2020 due to orders from an appropriate government authority limiting commerce, travel, or group meetings (for commercial, social, religious, or other purposes) due to COVID-19; or
  • Experiences a "significant decline in gross receipts" during the calendar quarter.

Significant Decline in Gross Receipts:

A significant decline in gross receipts begins with the first quarter in which an employer's gross receipts for a calendar quarter in 2020 are less than 50 percent of its gross receipts for the same calendar quarter in 2019. The significant decline in gross receipts ends with the first calendar quarter that follows the first calendar quarter for which the employer's 2020 gross receipts for the quarter are greater than 80 percent of its gross receipts for the same calendar quarter during 2019.


Calendar Qtr

Gross Receipts 2019

Gross Receipts 2020

% of 2019 Qtr

Retention Credit Eligible in 2020
















An employer's gross receipts were $100,000, $190,000, and $230,000 in the first, second, and third calendar quarters of 2020. Its gross receipts were $210,000, $230,000, and $250,000 in the first, second, and third calendar quarters of 2019. Thus, the employer's 2020 first, second, and third quarter gross receipts were approximately 48%, 83%, and 92% of its 2019 first, second, and third quarter gross receipts, respectively. Accordingly, the employer had a significant decline in gross receipts commencing on the first day of the first calendar quarter of 2020 (the calendar quarter in which gross receipts were less than 50% of the same quarter in 2019) and ending on the first day of the third calendar quarter of 2020 (the quarter following the quarter for which the gross receipts were more than 80% of the same quarter in 2019). Thus, the employer is entitled to a retention credit with respect to the first and second calendar quarters.

Qualified Wages:

Qualified wages are wages and compensation paid by an eligible employer to employees after March 12, 2020, and before January 1, 2021. Qualified wages include the eligible employer's qualified health plan expenses. The definition of qualified wages also depends, in part, on the average number of full-time employees employed by the eligible employer during 2019.

  • If the eligible employer averaged more than 100 full-time employees (as defined under the Affordable Care Act Section 4980H) in 2019, qualified wages are the wages paid to an employee for time that the employee is not providing services due to either: (1) a full or partial suspension of operations by government order due to COVID-19; or (2) a significant decline in gross receipts. For these employers, qualified wages taken into account for an employee may not exceed what the employee would have been paid for working an equivalent duration during the 30 days immediately preceding the period of economic hardship.
  • If the eligible employer averaged 100 or fewer full-time employees in 2019, qualified wages are the wages paid to any employee during any period of economic hardship described above.

Maximum Credit:

The credit equals 50 percent of the qualified wages (including qualified health plan expenses) that an eligible employer pays in a calendar quarter. The maximum amount of qualified wages taken into account with respect to each employee for all calendar quarters is $10,000, so the employer's maximum credit for qualified wages paid to any employee is $5,000.

Example 1: The eligible employer pays $10,000 in qualified wages to Employee A in Q2 2020. The Employee Retention Credit available to the eligible employer for the qualified wages paid to Employee A is $5,000.

Example 2: The eligible employer pays Employee B $8,000 in qualified wages in Q2 2020 and $8,000 in qualified wages in Q3 2020. The credit available to the eligible employer for the qualified wages paid to Employee B is equal to $4,000 in Q2 and $1,000 in Q3 due to the overall limit of $10,000 on qualified wages per employee for all calendar quarters.


  • Employers that obtain PPP loans (CARES Act Section 1102, summarized above) are not eligible for the Employee Retention Credit. Conversely, employers that receive this credit are not eligible for PPP loans.
  • Credit is reduced by any Paid Family and Medical Leave Credit under IRC § 45S.
  • Excludes paid sick leave or paid family leave wages paid under the FFCRA, however, this credit may apply to wages paid to the same employee once they return to work.
  • Excludes wages paid for which the employer receives a Work Opportunity Tax Credit (WOTC).

RUN Powered by ADP® Clients:

Two new earnings are now available in RUN to support the Employee Retention Credit. These new earnings can be used to record qualified wages and related company-paid qualified health plan expenses and will only apply to wages paid between March 13, 2020 and December 31, 2020. Learn more.

Deferral of Employer Social Security Taxes (Section 2302)

Updated: June 9, 2020

Employers may defer payment of the employer share of the Social Security tax, beginning after the effective date of the CARES Act through December 31, 2020. Deferred tax amounts would be paid over two years, in equal amounts due on December 31, 2021 and December 31, 2022.


The tax credits addressed elsewhere generally apply to employer Social Security taxes, potentially reducing or even eliminating such taxes for the balance of 2020. As a deferral, these taxes will become collectible by the IRS starting in December 2021. Employers should keep careful track of amounts accrued and be prepared to pay the amounts when due.

Note that the government recently passed the Payroll Protection Program Flexibility Act which, among other things, permits companies that received a Payroll Protection Program loan to continue deferring Social Security taxes through December 31, 2020.

Tax Exclusion for Employer Student Loan Repayment Benefits (Section 2206)

Employers are permitted to provide a student loan repayment benefit to employees, contributing up to $5,250 annually toward an employee's student loans. Such payments would be excluded from the employee's income. The $5,250 cap applies to both the new student loan repayment benefit and educational assistance under Section 127 of the Internal Revenue Code (IRC). The provision applies to any student loan payments made by an employer on behalf of an employee after date of enactment and before January 1, 2021.

Retirement Provisions — Defined Contribution Plan Changes

Distributions (Section 2202):

A new distribution option is available from retirement plans or IRAs to "impacted" individuals of up to $100,000 not subject to the 10 percent early-withdrawal penalty from January 1, 2020 and through the end of the 2020 calendar year.

  • The distribution may be taxed over three years instead of 100 percent in 2020.
  • The standard 20 percent federal tax withholding is not required.
  • These distributions can also be repaid at any time during the three years after they took the distributions.

Loans (Section 2202):

For anyone who is diagnosed with SARS or COVID-19, has a spouse or dependent test positive, or who experiences adverse financial consequences because of SARS or COVID-19, an increased loan amount from $50,000 to $100,000 is available for the 180-day period beginning on the date of enactment of the CARES Act.

Required Minimum Distributions are not required for 403(b), 401(k), and IRAs for calendar year 2020.

Paid Leave and Department of Labor Filing Provisions

Paid Leave for Rehired Employees (Section 3605):

Under the FFCRA, employees who have been employed by the employer for at least 30 calendar days are eligible for PHEL/expanded FMLA. The CARES Act amends the law to extend paid leave to employees who (1) were laid off after March 1, 2020; (2) had worked for the employer for at least 30 of the last 60 days; and (3) were rehired by the employer.

Advance Refunding of Payroll Credit Required for Paid Sick Leave (Section 3606):

The FFCRA allows an employer to claim a refundable tax credit for paid leave granted under the expanded FMLA requirement. The CARES Act expands those provisions by: (1) providing for an advance of the payroll tax credit; (2) requiring the Secretary of the Treasury to prescribe regulations necessary to permit the advancement of the credit; and (3) requiring the Secretary of Treasury to waive penalties associated with the failure to deposit certain payroll taxes.

Unemployment Insurance Provisions

Pandemic Unemployment Assistance (Section 2102):

Certain individuals who are not eligible for benefits under other state or federal laws (such as self-employed workers, part-time workers and those with limited work histories) who are unable to work as a result of COVID-19 are eligible for temporary unemployment benefits assistance during their period of unemployment ending on or before December 31, 2020. Benefits are limited to 39 weeks. The provision allows for a partnership between the federal government and states for purposes of paying out benefits.

Emergency Increase in Unemployment Compensation Benefits (Section 2104):

This section provides for a federal-state partnership to make payments of regular compensation to individuals in amounts determined under state law plus $600. States will be fully reimbursed by the federal government for the extra payments.

Temporary Full Federal Funding of the First Week of Compensable Regular Unemployment for States With No Waiting Week (Section 2105):

States that do not impose a waiting week for unemployment benefits will be fully reimbursed by the federal government.

Pandemic Emergency Unemployment Compensation (Section 2107):

States may enter into a partnership with the federal government for an additional 13 weeks of federally funded unemployment compensation to individuals who have exhausted all rights to unemployment benefits under state and federal law for that benefit year (excluding benefits that ended before July 1, 2019) and are not otherwise receiving unemployment compensation under any state, federal, or Canadian law. Individuals must be able to, and be actively seeking, work.

2020 Recovery Rebates for Individuals (Section 6428)

The CARE Act provides for direct financial assistance to Americans in the form of a one-time direct payment in the amount of $1,200 for individuals earning $75,000 or less, $2,400 for individuals filing a joint return earning $150,000 or less, $1,200 for heads of household earning $112,500 or less, and $500 per child. The amount of the payment is reduced by 5 percent for earnings over those dollar amounts and would go away at $99,000 for individuals and $198,000 for married people. Treasury Secretary Steven Mnuchin stated that the administration expects to begin direct payments to individuals within three weeks of the CARE Act being signed into law.