COVID-19 Financial Relief for Dentists: Understanding the CARES Act
For a full update on The Cares Act, click here.
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The House of Representatives has passed the CARES Act and has been signed into law by the President.
Yesterday, the Senate passed the $2 trillion stimulus package, the CARES Act.
As the CARES Act enters the House, where it is expected to come to a vote on March 27th, these are the most important details dentists need to know about:
Economic Injury Disaster Loans
These loans are emergency grants that allow practices to receive an advance no more than $10,000 which the SBA will distribute within 3 days. This loan is the most critical, as it is the fastest way to get money into dentists hands to cover employee sick leave, mortgage payments, rent, and other overhead. These EIDLs are being distributed on a first-come, first-serve basis until the $10 billion limit is reached, which is why we want to notify dentists NOW to pay attention to the House vote as this may be wrapped up by this weekend!
You may be eligible for forgiveness on your federal loan for payroll, sick leave, family leave, and other expenses you spent between February 15th and June 6th. This forgiveness also includes debt obligations incurred before February 15th. *Please note these are brand new dates, changed from the original CARES Act bill*
The SBA is paying the principal, interest, and associated fees currently owed on 7(a) loans, 504 loans, and microloans during a 6-month period starting on the next payment due date. If your loan is already on deferment, you are eligible for an additional 6 months of deferred payment by the SBA beginning with your next payment.
Retirement Account Withdrawals
The CARES Act will allow you to withdraw up to $100,000 from your retirement funds (like your 401k) without a tax penalty if you experience adverse financial consequences as a result of:
- You, your spouse, or any other dependent with a SARS-CoV-2 or COVID-19 diagnosis
- Work hours reduced due to the virus
If you are still paying off your federal loans from dental school, you will not be required to make a payment through September 30th. There will be no interest during this time. (If you have private loans instead of federal loans, it is recommended to call your lender for any options and eligibility at this time.)
Social Security Tax Deferment
The CAREs Act allows employers to defer payments of their employer share of the Social Security tax until December 31st. Any deferred payments would be paid over the next two years, with half the amount required by Dec. 31st, 2021, the rest by Dec. 31, 2022.
Federal Tax “Rebates”
The CARES Act provides a one-time federal income tax rebate for dentists and their employees this year. The rebate would be $1200 for individual tax filers, $2400 for joint returns and $500 for each child. The amount of the rebate will be reduced for single-filers making more than 75,000 and joint filers earning in excess of 150,000. *To receive this rebate quickly, it is recommended you e-file your tax return ASAP*
Increased Unemployment Benefits
If you do need to layoff your employees, the CARES Act has increased unemployment compensation benefits by as much as $600 a week. This is a “federal enhancement” paired with your state-funded unemployment insurance for the next four months. To urge your House Representative to pass the CARES Act, contact them through the ADA by clicking here OR by directly contacting your Congressmen.
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Original Post: 3/23/2020
The CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act is currently on the Congress floor, to provide small business interruption (SBI) loans to businesses affected by COVID-19 closures, including dental practices. If passed, these SBI loans would provide funding to businesses with less than 500 employees to keep their doors open and pay for expenses. The maximum loan amount will be four times the average monthly expenses that the business had for the previous year.
Those expenses include:
- Payments on debt obligations
However, this loan maxes out at $10 million if those expenses exceed that limit.
If passed, the eligibility for SBI loans under the CARES Act will expire on December 21, 2020.
These SBI loans can be used for:
- Debt obligations incurred before March 1, 2020
- Payroll support
- Employee salaries
- Mortgage payments
- Rent payments
- Utility payments
These loans will be backed by 100% federal guarantee through December 31, 2020. After that date, the guarantee percentage would return to the standard Section 7(a) guarantee.
Businesses that borrow an SBI loan to pay employee salaries, payroll, mortgage payments, or other debt obligations may not receive an SBA economic injury disaster loan (EIDL) for the same purpose. This bill would also allow authority to make and approve of loans to qualified lenders WITHOUT going through SBA, waiving fees for borrowers and lenders. The CARES Act would also limit consideration for these loans only to whether the borrower was in operation on March 1, 2020 and has employees for whom salaries and payroll taxes were paid.
The most impactful part of the bill allows these loans to be eligible for a complete payment deferment for up to one year. Additionally, this bill provides forgiveness for the total amount the borrower spent on payroll costs between March 1 and June 30, 2020 and any payments made between March 1 and June 30, 2020 on debt obligations incurred prior to March 1, 2020. There are caveats in this forgiveness: the total amount of potential loan forgiveness will be proportionately reduced to any reduction in the borrower’s number of employees. A reduction would also be applied if the borrower reduced employees’ salaries by more than 25%.
Changes to the CARES Act & What You Can Do
The SBI loans provisions are valued at $300 billion and there are indicators that if the amount of SBI loans changes in negotiations in the coming days, it will only be to increase the total funding for this program, as the repercussions of COVID-19 closures are becoming more widespread.
There are many questions in the air right now:
How will this practically work?
Will there be delays in approvals?
What obstacles will stand in the way to delay assistance?
If the bill is passed, how long will the implementation regulations take?
There are many off-shoot propositions to this bill as well, including funding provided for practices that do keep their entire staff at full pay, and relieving current SBA loan payments.
You can urge your members of Congress to pass the CARES Act by reaching out through the ADA by clicking here OR by directly contacting your Senators and your Congressmen. Relief for small businesses and dentists is bi-partisan issues, so urge all of your members of Congress via e-mail and calls today.