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CARES Act For Businesses: Payroll Tax & Net Operating Losses Loosened

by Michelle Smalenberger / March 31, 2020

CARES Act For Businesses: Payroll Tax & Net Operating

Payroll Tax Payment Deferral

Background:  The “CARES Act” which was recently signed into law allows employers as well as those self-employed the ability to defer payroll tax or self-employment tax payments.  

Amount & Timing  The payroll tax payments which are eligible for deferral begin on the date the “CARES Act” was signed into law which was March 27, 2020 and includes any payment incurred through December 31, 2020.

Benefits: The amount of payroll taxes deferred, become due on the following repayment schedule:

  • The first half (50%) is due by 12/31/2021
  • The second half (remaining 50%) is due by 12/31/2022

How do I qualify?  The ability to defer payment will exist for all employers with the exception of those you have already benefited from the Small Business Administration debt forgiveness program.  Otherwise, the election to defer can be made, as needed. While the schedules highlighted above determine the latest that repayments can be delayed, if desired, these balances can be paid back sooner.

Net Operating Losses Loosened

Background:  Net Operating Losses (NOLs) are the result of deductions exceeding taxable income.  In the past, these losses were allowed to be carried back up to two years and forward up to twenty.  The “Tax Cut & Jobs Act” changed those rules to allow losses to only be treated as an indefinite carry forward.  The recently signed into law “CARES Act” changes the rules again now allowing corporations to use losses to offset income and prior year’s tax liabilities.   

Timing & Benefits: NOLs from 2018, 2019 or 2020 can now be carried back up to five years and can be used to offset up to 100% (an increase from 80%) of taxable income.  

How do I qualify?  Corporations would need to have Net Operating Losses (NOLs) and have taxable income in the past five years in which these losses can be applied against.


Interested in the other areas of the CARES Act? We are breaking down these details by section in the following resource. You can click to the particular section you’re interested in directly below if you’d like to read the specifics of those first.  We do encourage you to look through all of the sections that could potentially impact you since this is a very generous bill aimed at keeping our country’s economy strong during and after this pandemic.

Financial Design Studio CARES Act Summary

Like any benefit that becomes available to you it is critical to see if it makes sense to use the provisions allowed.  While a benefit might make your temporary financial situation better, it might not be beneficial in the long term. However, those who need these provisions were created for are likely in immediate need to use the benefits until employment returns to normal.


Recovery Rebates

Coronavirus-Related Retirement Distributions 

Enhanced loans from employer retirement plans

Required Minimum Distributions waived for 2020 

Qualified Charitable Contributions – NEW Above the line deduction 

AGI Limit for Cash Charitable Contributions Limit Temporary Repealed

Student Loan Borrower Relief

Miscellaneous Healthcare Benefits

Unemployment Benefits

Mortgage Forbearance Request


Business Owners:

Paycheck Protection Program & Forgivable Loans

Employee Retention Credit

Payroll Tax Payment Deferral 

Net Operating Losses Loosened

Wondering how this affects your future finances? Schedule a call with Financial Design Studio, financial advisors in Deer Park, to discuss your portfolio today.

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Michelle Smalenberger

I have a passion for helping others develop a path to financial success! Through different lenses on your financial picture, I want to help create solutions with you that are thoughtful of today and the future. I have seen in my life the power of having a financial plan while making slight changes of direction from time to time. I believe you can experience freedom from anxiety and even excitement when you know your finances are on track.