What the CARES Act Means for Independent Workers and Small Businesses
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PARTICIPATING IN TODAY’S WEBINAR
The information provided here does not constitute legal, tax or financial advice.
It does not take into account your particular circumstances, objectives, legal
and financial situation or needs. Before acting on any information, you should
consider the appropriateness of the information for your situation in consultation
with a professional advisor of your choosing. This is a rapidly changing area of
the law and will be subject to change and interpretation.
At MBO Partners, our mission is to make it easier for
enterprise organizations and top independent
professionals to work together.
For more than 20 years, we’ve been leading the
charge to keep the independent economy moving
forward, building a unique, dual-sided ecosystem
comprising many of the world’s most prominent
companies and in-demand professionals.
MBO has always been committed to advancing the
next way of working, and we are far from done.
We’ll continue to drive change on the ground,
delivering innovative solutions that enable both
organizations and talent to thrive in a constantly
Over the past year, independent workers generated roughly $1.28 trillion of revenue for the U.S. economy, equal to about
6.2 percent of U.S. GDP (2018), or the entire economic output of Spain.
Coronavirus Aid, Relief, and Economic Security Act
A $2 trillion relief package for US citizens and
businesses affected by the COVID-19
pandemic and resulting economic impact of
mandatory closures, social distancing orders,
supply chain disruptions, unemployment and
reduced consumer demand.
Key CARES Act Benefits
For Your Independent
• Deferring employer side of SS tax
• Refunds for NOLs carried back
• Cash grants for immediate assistance
• Payroll loans with potential forgiveness
For You as an Individual
• Expanded Unemployment assistance
• Direct cash to your bank account
• Retirement account withdrawals
• Tax day extended to July 15
Self-employment taxes or employer side
Social Security payment deferred
• Employers and self-employed individuals may defer payment of
the employer share of the Social Security tax.
• Employers are generally responsible for paying a 6.2 percent
Social Security tax on employee wages, matching what the
• Self-employed workers pay both sides as they are their
own employer and can defer 50% attributable to SS tax.
• Repayment is required over two years, half by December 31,
2021 and the other half by December 31, 2022.
SECTION 2302. DELAY OF PAYMENT OF EMPLOYER PAYROLL TAXES
Corporations may defer the employer
side of Social Security.
Sole Proprietors and pass-through
entities may defer half of self-
Net Operations Loss (carrybacks) for income
tax refunds and tax reductions
• The provision relaxes the limitations on a company’s use of losses.
• Net operating losses (NOL) are no longer subject to a taxable
income limitation and can now be carried back to reduce income in
a prior tax year.
• The provision provides that an NOL arising in a tax year beginning
in 2018, 2019, or 2020 can be carried back five years.
• Please check with your tax professional to see if this can help you.
SECTION 2303 AND 2304. MODIFICATIONS FOR NET OPERATING LOSSES
Allows businesses, including
pass-through entities and sole
proprietors, to utilize losses and
amend prior year returns for
additional cash flow.
Low Interest loans and immediate grants
• Expands eligibility for Economic Injury Disaster Loans (EIDL) for any
individual operating as a sole proprietor or an independent contractor
during the covered period (January 31, 2020 to December 31, 2020).
• Administered directly by the SBA for payroll related as well as other
• Loans based solely on an applicant’s credit score
• SBA must verify that the entity is an eligible applicant for an EIDL
loan. This approval shall take the form of a certification under penalty
of perjury by the applicant that they are eligible.
SECTION 1110. EMERGENCY EIDL GRANTS
$10,000 available via emergency
grant which the SBA must distribute
within 3 days.
The applicant does not have to
Low interest payroll and overhead loans –
• Government guaranteed loan, administered by lenders (banks) -
available for independents.
• Borrowers must sign a certification of necessity to obtain
• Proceeds must be used for payroll and overhead-related costs
• The loan amount is calculated at 2.5 times the company’s
average monthly payroll costs.
• Loan forgiveness is equal to the amount spent by the borrower
during an 8-week period after the origination date of the loan.
• Amounts forgiven will be reduced proportionally if payroll is
reduced during this period
• EIDL grants must be deducted from total amounts forgiven
SECTION 1102; 1106. PAYCHECK PROTECTION PROGRAM LOANS AT 4 PERCENT INTEREST
Can take a potentially forgivable
loan for 8 weeks of qualified
payroll and overhead.
What happens if you
are among the millions
of Americans not able
to work and are in
need of unemployment
Expanded unemployment benefits now
• Pandemic Unemployment Assistance adds self-employed and gig
workers who were previously unable to claim unemployment benefits.
• Claim unemployment immediately without a waiting period, subject
to state provisions.
• Emergency increase in unemployment compensation benefits,
providing an additional $600 per week payment for up to four months.
Paid on top of the standard state unemployment program.
• Funding for short-term compensation and partial work reduction.
This is for people who have had their work reduced; they are entitled to
receive a pro-rated unemployment benefit.
SECTIONS 3603. 2102.2104.2105.2107.2108. ADMINISTERED BY EACH STATE
$600 per week in additional
unemployment benefits in addition
to state compensation
To apply, go to your state’s
website for unemployment.
Finally, here are some
benefits that are available to
all individuals and effective
Direct cash to your bank account
• All individuals with an adjusted gross income (AGI) of $75,000 or
less ($112,500 for head of household filers, and $150,000 for
married filing jointly) will receive recovery checks of $1,200.
Increase by $500 for every child under 17 years of age.
• These amounts phase out on a pro-rata based as follows:
• $99,000 for individuals, $146,000 for head of household
filers, and $198,000 for joint filers
• There appears to be no phase out of the $500 per child
• Based on AGI of 2019 tax returns if filed, and if that tax return
was not filed, on the 2018 return
• If you have both W-2 income and pass through income, it all
ends up on the AGI line of the 1040 return
SECTION 2201. 2020 RECOVERY REBATES FOR INDIVIDUALS
$1,200 per individual and $500 per
child, subject to phase-outs
Relaxed rules on early withdrawal of
retirement account funds
• Withdraw up to $100,000 from qualified retirement accounts, like
IRAs and 401(k)s without penalty if you, a spouse or a dependent are
diagnosed with COVID-19, or if you experience adverse financial
consequences as a result of the pandemic.
• Subject to tax over three years or must be paid back to the
account within three years without regard to that year’s cap on
• Or, take a loan up to $100,000 (increased the standard $50,000) with
repayment as far out as 6 years. Also, existing employer required loan
repayments have been suspended for up to 1 year
SECTION 2202. SPECIAL RULES FOR USE OF RETIREMENT FUNDS
Take up to $100,000 from qualified
retirement accounts as a
withdrawal or loan, depending on
Federal income tax filings deadline extended
three months to July 15
• Tax deadlines for individuals and pass-through
entities like Sole Proprietorships have been
bumped back to July 15 from April 15. This
includes payment of quarterly taxes for the first
quarter. At present, second-quarter taxes are still
due on June 15.
• If you do elect to pay your taxes on time, refunds
are being expedited.