This is part 1 of a three-part series to help beauty businesses navigate the CARES act and its benefits for the beauty industry including unemployment, individual stimulus checks, the Payroll Protection Program and Economic Injury Disaster Loans.
Note: These programs are very new. Some details seem to change slightly day-to-day as the programs are implemented. I will be keeping this series up-to-date as new information becomes available.
- Part 2 covers the Paycheck Protection Program with "Loan Forgiveness"
- Part 3 covers the Economic Injury Disaster Loans with grants up to $10,000
Earlier today, the U.S. Government enacted a $2 trillion Coronavirus relief package to help individuals, small business owners, employees, and even independent contractors. The bill has officially been passed and signed.
Federal "Unemployment" paychecks of $600/week
Unemployment will not just be for full-time employees, according to the bill. Part-time employees and independent contractors operating under 1099 agreements like freelancers, booth renters, and "gig workers" and will be eligible to receive federal aid.
The bill provides weekly payments of $600 from the federal government for a four-month period until July 31. This aid on top of the $1,200 individual payments and on top of any state-provided unemployment.
The New York Times has written a breakdown of details including eligibility and application.
Federal Grants & Loans
$349 billion dollars go to the U.S. Small Business Administration (SBA) for two different loan and grant programs, each with unique benefits.
I go into detail on both programs in parts 2 and 3 of this blog series.
- Part 2: Payroll Protection Program with "loan forgiveness"
- Part 3: Economic Injury Disaster Loans with grant up to $10,000 grant
Employee Tax Credits
Under the agreement, businesses that retain employees and cover 50 percent of their paychecks will be eligible for a tax credit.
To qualify, your business must have been fully or partially suspended as a result of government orders relating to COVID-19 OR or who have suffered a significant decline in gross receipts, can receive tax credits equal to 50% of the first $10,000 of wages paid to each employee that has been idled.
To the extent the credit in any quarter exceeds the employer’s portion of the FICA taxes for all of the employer’s employees in the quarter, the excess is treated as an overpayment that will be refunded. Businesses with fewer than 100 employees can claim credit for all employees, whether idled or not.
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Direct payments of $1,200 to individuals
Single Americans with an adjusted gross income (AGI) of less than $75,000 will receive a check or direct deposit of $1,200 plus $500 for each child under age 17. Married couples with a combined AGI of less than $150k will get $2,400.
For individuals with AGI between $75-99k or married couples with AGI between $150-198k the amounts slightly differ. Individuals making over $99k or married couples making over $198k will not qualify in the current bill.
You are automatically set up to receive payment based on your previous tax returns if you filed for 2018 or 2019. Additionally, if the Internal Revenue Service already has your bank account information, they will automatically transfer the money to you via direct deposit. If not, you will receive your check to the mailing address on your tax return.
If you haven't filed taxes for 2018 or 2019 yet you're encouraged to file at least for 2018 immediately to take advantage of this stimulus payment.
Deferred Payroll Tax
Companies are able to defer payment of the 6.2 percent Social Security payroll tax. The employer’s portion of FICA taxes for the period from enactment up to January 1, 2021 will not be due until December 31, 2021, when half of the deferred amount is due, and December 31, 2022, when the other half is due.
Student loan payments suspended
The bill proposes that student loan payments be suspended without penalty through September 30. According to CNN last week, The Department of Education has already been planning to allow student loan borrowers to suspend payments without penalty and accruing interest for at least 60 days.
If you have questions
Salon owners are discussing the CARES act, unemployment, tax credits, and loan forgiveness here on our Facebook Group. Join the discussion and ask questions.
Other ways the government may help
Healthcare legislation in response to COVID-19
An economic stimulus package is certainly a good start. However, the root problems of an underprepared healthcare system have not yet been addressed with legislation. Many are pushing to introduce legislation that would increase resources for preparing for and responding to potential future pandemics as well as improved access to healthcare for lower-income and immunocompromised individuals.
Improve "Business Interruption" Insurance
Many salons carry business interruption insurance that covers lost wages due to fires or natural disasters like hurricanes, tornadoes, and floods. Unfortunately, the language that most insurance companies use to define their coverage does not include language for pandemics or epidemics.
Small businesses are rallying for new legislation requiring insurance companies to consider epidemics or pandemics as valid interruptions to business. This type of legislation would increase coverage and is likely to increase insurance costs.
If you currently hold business interruption insurance, some have recommended that you file a claim now even if you expect it to get denied. In the case that lawmakers create legislation that retroactively requires insurance companies to accept claims for COVID-19, you will have filed a case in a timely manner, making it more likely for your business to receive an insurance payout.
While this bill may not be perfect and may not affect every individual in the way they need it, it will be a significant help in bringing the economy as a whole back around.
Due to the speed at which this story is developing I'll be working to keep this page up to date with everything relevant to salon owners, stylists, cosmetologists, and booth renters. Message me with any additions or corrections you may have.