LAST UPDATED: May 6, 2020
A Guide to the CARES Act
Prepared by the Office of Senator Scott D. Wiener (D-San Francisco)
Individuals - Program Basics
Individuals are eligible to receive unemployment benefits and cash payments to aid with financial difficulties. It also expands unemployment benefits to non-traditional recipients, including independent contractors and gig workers, through Pandemic Unemployment Assistance (PUA).
The exact amount you can receive through unemployment depends on your state and your previous earnings. If you are a traditional employer who has had your hours reduced or lost your job, you should apply for unemployment through the California EDD.
In addition to state benefits, an additional $600 will be added to every unemployment compensation check issued between March 29th and July 25th, using federal funds.
The CARES Act also extends eligibility for unemployment by 13 weeks. If you have exhausted unemployment compensation available through California EDD, you can still receive an additional 13 weeks of federally-funded unemployment, which will also be processed through the state EDD. Expanded eligibility will be in effect through the end of the year.
For most people, the process to receive an extension has not yet been created. Check back on the EDD's home COVID-19 page here for the most updated information.
Anyone who made less than $75,000 will receive $1,200, married couples receive $2,400, and under-17 children receive $500. Those making more may also receive a partial payment. The money is not taxable.
Most people will receive their money automatically, based on tax returns. Rebates sent via direct deposit will take a few weeks. Rebates sent via checks may take several months.
Pandemic Unemployment Assistance (PUA)
PUA will allow independent contractors and gig workers to receive unemployment, including the $600 in additional money that the federal government will be adding to UI checks through the summer. The program launched on April 28th, and you can now apply online through EDD UI website.
How can I get my $1,200 payment?
Most people do not need to take active steps to claim their money. If you filed a tax return for 2018 or 2019, the IRS will send your money automatically to the direct deposit or address provided on the latest tax return.
If you have not filed a tax return for 2018 or 2019, you can do so now to claim your check. A partnership between the IRS and TurboTax allows folks who do not usually need to file - generally those making less than $15,000 - to apply a simple return for free with the express purpose of claiming the check. Find the tool here.
A system has also been set-up to attach your direct deposit to an existing tax return, if you did not originally include it. If you need to change the address on your 2018 tax return, the only way to do so is to submit your 2019 tax return. The IRS has created a web portal to help your track your payment. It launched on April 15th. However, many constituents are finding errors in the portal or having difficulties using it.
If you are a Social Security recipient who received an SSA-1099 form in 2018 or 2019, you will automatically be enrolled. However, Most SSI recipients will need to file a tax return to receive a payment, if you didn’t already file a tax return for 2018 or 2019.
I’m a gig worker. How do I apply for PUA?
Small Businesses - Program Basics
Small businesses and nonprofits (fewer than 500 workers), sole proprietorships, independent contractors, and freelancers can apply for new federal aid. In some cases, larger companies in particular industries are also eligible.
There are two main programs, both being run out of the Small Business Administration (SBA): The Payment Protection Program (PPP) and Economic Injury Disaster Loan (EIDL). In most instances, you can apply to get help from both.
PPP offers a loan of up to $10 million to help pay for eight weeks of payroll costs, as well as some additional expenses like rent and utility payments. It is designed to help you retain workers or hire back employees that have been laid off. The loan can be forgiven if money is used for that purpose. Collateral is not required.
You can apply for PPP via a third-party lender. Visit this site to find an eligible local lender. In general, you will have an easier time applying to a lender where you already have a banking relationship.
PLEASE NOTE: On April 16th, the SBA ran out of PPP money. Congress then replenished the funds for PPP. However, many reports suggest that all of those funds were already spoken for by people who had previously applied before April 16th but had not yet received funds. Some money may still be available, and we encourage you to contact your lender to find out more.
EIDL offers low-interest loans to cover business expenses. You can get a quicker advance on the loan, and a portion of those loans do not have to be paid back. You can apply directly via the SBA.
Like PPP, funds are running low for EIDL, and applicants are encouraged to apply quickly. Some applicants are reporting that the SBA has told them that disbursements will be capped at $15,000 each. The loans cannot be used to refinance previous loans, but can be used to pay for nearly anything else.
You can apply for EIDL through the online loan application.
How does PPP loan forgiveness work?
Loans will be fully forgiven if (1) less than 25% of the money is used for non-payroll costs and (2) companies maintain their full-time staffing and wages for eight weeks after loan disbursement.
Partial forgiveness is still available for other companies who do not meet these criteria. If your loan is only partially forgiven, you will have two years to pay off the balance, at a 1 percent interest rate. No payments are due for the first six months.
If you use EIDL money to cover payroll, you can try to refinance that loan through the PPP and may be eligible for forgiveness.
Can I use PPP if I already laid off my workers?
You can still have your loan forgiven if you hire them back.
Generally, Feb. 15, 2020 is the date used for calculating pre-pandemic payroll, unless your business is seasonal. As long as workers laid off after Feb. 15 are rehired before disbursement, the layoffs don’t affect forgiveness eligibility. Some lenders are saying that applications can choose a date between now and June 30 for their loan to be disbursed, in order to give them time to rehire workers.
How do self-employed people and independent contractors apply for PPP loans?
You can claim your “wage, commission, income, net earnings from self-employment or similar compensation,” up to $100,000. You may need to work with a financial advisor or accountant to confirm how this applies to your specific situation.
Employers cannot use PPP to cover their independent contractors. Contractors should apply for their own loans.
When can I apply for PPP?
The program technically started taking applications from small businesses on April 3. However, not all lenders were prepared to start disbursement on that timeline and some lenders say they are still waiting for additional guidance from the Treasury department.
On April 10, applications are scheduled to open for business owners who are sole proprietors, such as freelancers and independent contractors.
The current deadline for applications is June 30, 2020.
Why am I not able to apply for PPP through [particular bank]?
Some banks have said they will only work with existing customers, so your best bet is working with a lender where you have an existing relationship. The New York Times is reporting that Kabbage, an online lender, NorthOne, a digital bank, and Ready Capital, are willing to work with new customers. PayPal and QuickBooks also may be processing PPP loans.
Wells Fargo customers have also encountered some difficulties. Wells Fargo had an asset lending cap of $10 billion implemented after previous scandals, before the COVID virus. They reached that cap very quickly once PPP was opened and stopped taking new applications. However, that cap has now been lifted, and Wells Fargo has said they will now continue taking PPP applications.
There may be limits on what funds independent contractors can receive if they do not have a business account with their bank.
How does EIDL repayment work?
Part of an EIDL loan is forgivable. Businesses can request up to $10,000 be given as a grant, which the government is calling a “loan advance.”
That $10,000 grant is supposedly available to all qualified applicants, whether or not they are ultimately approved for a loan. However, the SBA has indicated that the amount available to any individual business may be partially determined by the pre-disaster size of the business.
No payment is due on the rest of the loan for the first year. It can be repaid on a term of up to 30 years with an interest rate of 3.75 percent for small businesses and 2.75 percent for nonprofits.
In terms of collateral, the SBA will not require a personal guarantee - which would allow them to repossess personal assets - as long as the loan is less than $200,000. Business assets can be used to secure loans up to $500,000.
What is the EIDL timeline?
The SBA is supposed to disburse the loan advances within three days. However, reports are that that timeline is not being met. Before the COVID crisis, it usually took around two weeks for the SBA to make a decision on a disaster loan, and another week for money to be disbursed.
These loans existed before the COVID crisis and the program will presumably continue indefinitely. However, the “loan advance” aspect of the program is currently scheduled to end on Dec. 30.
What other federal programs or resources exist?
- Small business debt relief program - small businesses can apply for debt relief for loans, including 7(a) loans not made under PPP, 504 loans, and microloans. Disaster loans are not eligible. SBA will cover all loan payments for existing SBA borrowers, including principal, interest, and fees, for six months. This relief will also be available to new borrowers who take out an SBA loan within six months after March 27, 2020.
- Employer retention credit - The CARES Act provides a refundable payroll tax credit for 50% of wages paid by employers during the COVID-19 crisis. The credit is available to employers whose operations were fully or partially suspended due to a COVID-19-related shut-down order, or whose gross receipts declined by more than 50% compared with the same quarter in the prior year.
- Payroll tax delay - The stimulus package allows employers and self-employed individuals to defer payment of the employer share of the Social Security tax on employee wages. The provision allows for half of the amount to be paid by December 31, 2021, and the other half by December 31, 2022. Other tax modifications include a) modifications of limitation on losses for non-corporate taxpayers, b) modification of limitation on business interest, and c) modification for net operating losses.
Links to More Information
For the most updated guidance from the SBA, go here.
Other useful guidance on federal/CARES Act resources:
To visit our general guide for small business resources, click here.