Tag Archives: Coronavirus Aid Relief and Economic Security Act

For the Self-Employed the CARES Act Could Provide Too Much Liquidity: Simultaneous PPP and Unemployment Payments

Self-employed individuals may find themselves in a difficult situation because they have simultaneously received Paycheck Protection Program (“PPP”) loan and Unemployment benefits under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The CARES Act was enacted this past March with a primary goal of combating COVID-19-related shutdowns and layoffs. It made state unemployment insurance (plus an additional $600 per week through July 31, 2020) (“Unemployment”) available to self-employed individuals, among others, and offers that same group a forgivable PPP loan for their suffering businesses. Faced with the menu of liquidity and uncertainty within the CARES Act, many self-employed individuals immediately applied for both Unemployment and a PPP loan. The question they now face is whether receiving both benefits at the same time is permissible.

The Tension Between The PPP and Unemployment Benefits

While there is no explicit authority in the CARES Act prohibiting the simultaneous receipt of both PPP loan and Unemployment monies, keeping both is risky at best and could potentially be viewed as fraudulent at worst. This is because the receipt of one goes against the purpose and spirit of the other. Looking first at the PPP, its very goal is to allow businesses to keep their employee or employees on the payroll. In other words, the applicant needs the money to keep its business going and pay salaries and wages. It logically follows that a self-employed individual who receives a PPP loan is therefore considered fully employed, at least until the funds run dry.

On the other hand, an individual is only eligible for Unemployment benefits with respect to the CARES Act, where they become totally or partially unemployed (or furloughed) due to COVID-related reasons. These monies serve only as a bridge across gaps in employment. A recipient is therefore very arguably ineligible for Unemployment benefits where compensated work is made possible by PPP funds. This is to be distinguished from a situation where a self-employed individual received necessary Unemployment while waiting for PPP loan approval and disbursement or following the depletion of the PPP loan if it came first.  

Potential Consequences

Continuing to take Unemployment while benefiting from a PPP loan could potentially be, or appear to be, a fraudulent situation. The Department of Labor (“DOL”) has made clear that all states, including Florida, are to exercise due diligence to detect fraud and assess the accuracy of payments to eligible claimants. The Small Business Administration (“SBA”) is also prosecuting PPP loan fraud under federal civil and criminal statutes and has been vocal about the consequences of failing to return unnecessary PPP funds. Most individuals who have simultaneously received or are currently receiving monies from both programs are well-intentioned and unknowing recipients, but this may not save them from an accusation of wrongdoing and/or having to go through state or federal administrative proceedings.

Finally, even assuming one could carefully segregate their PPP funds for their business from their Unemployment, using only the Unemployment monies to pay themselves a salary and the PPP to pay all other eligible business expenses, the risk of losing eligibility for full or substantial loan forgiveness remains. At least 60 percent (previously 75 percent) of the PPP loan must be spent on payroll expenses (i.e., wages) to qualify for full loan forgiveness. When comparing the size of most PPP loans to Unemployment payment amounts, the importance of avoiding this risk becomes obvious. It also remains unclear whether such segregation of simultaneous benefits is possible.

Based on the foregoing, self-employed individuals who have received both PPP and Unemployment benefits to review their payouts for any overlap of funds and check with their legal/financial advisors on the best course of action in the event of any overlap.

IRS Guidance Regarding Tax Credits for Paid Leaves; the Families First Coronavirus Response Act; and the Coronavirus Aid, Relief, and Economic Security Act

The IRS has provided some guidance regarding the process for employers to obtain the tax credits provided for in the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act. The FFCRA tax credits are to reimburse small and midsize employers for amounts paid to employees that qualify for and use the new paid sick and/or paid family leave provisions of the FFCRA. The guidance for these credits, which is presented as Basic Frequently Asked Questions (“FAQ”), provides details on how employers start claiming the credits, what documentation the employer must retain to substantiate eligibility, and how to determine the amount of the tax credits for qualified leave wages. The FAQ also briefly addresses the interplay between the FFCRA tax credits and the CARES tax credit. View the FAQ.

Similar guidance is available for the CARES Act’s Employee Retention Credit. This credit is 50% of up to $10,000 in wages paid by an eligible employer whose business has suffered financially due to COVID-19 and is available to all eligible employers regardless of size. Employers who have taken a small business loan under the Act’s Paycheck Protection Program are not, however, entitled to this credit. More information and an FAQ is available from the IRS.

Government employers are not entitled to either the FFCRA tax credits or the CARES tax credit.

Williams Parker has launched a multidisciplinary task force of lawyers across the firm to advise on issues arising from COVID-19 and to provide guidance for affected clients. This team is closely monitoring legal developments and guidance from federal, state, and local government and public health officials. For the latest updates, please visit our website.

Corporate and tax attorney Christina J. Strasser contributed to this post. 

Unemployment Provisions in the Coronavirus Aid, Relief, and Economic Security Act

As businesses in Florida make decisions on how to move forward during the COVID-19 public health emergency, many businesses are weighing the effects of a layoff or furlough on their employees’ ability to secure unemployment benefits. The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act—which was signed into law the afternoon of March 27, 2020—includes provisions that address these issues. These provisions are referred to as the Relief for Workers Affected by Coronavirus Act.

Before addressing how the CARES Act may temporarily affect unemployment, it is important to understand what steps the State of Florida has already taken. At this stage, Florida has temporary made individuals who have a COVID-19-related unemployment situation eligible for reemployment assistance (the name Florida gives to unemployment benefits). Specifically, under current Florida guidance, the following persons are currently eligible for COVID-19 unemployment benefits:

  • People ordered to quarantine by a medical professional
  • Those laid off or sent home without pay for an extended period by their employer due to COVID-19
  • Those caring for an immediate family member with the virus.

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