DISCLAIMER: The information below is based upon the most recently proposed legislation by Congress known as the COVID Relief Bill. This bill has not yet been signed or approved by the Office of the President as of the date of this post. As such, the below post has been written under the pretense that this bill would be approved; however, this should not be misconstrued as absolute fact or implication of the writer’s opinion on whether said legislation will be approved now or in the future.
- If you got and used that PPP loan….it is now officially income tax free – Congratulations! (this was a huge mess in the original COVID relief bill. Thank your congress people for fixing this!)
- If you received an EIDL advance – this is now tax free as well!
- If you are paying employees to stay home because of COVID (quarantine, family member care, etc) the tax credits for that are extended to 3/31/21
- If you are self-employed, there are credits to claim on your 2020 tax return (based on either 2020 or 2019 net self-employment income). Make sure you tell us about your situation at tax time!
- Random fun: “3 Martini Lunches” are back – business meals are 100% deductible in 2021 & 2022
Here’s the Big Stuff
- MORE PPP (Paycheck Protection Program) – $284B of (mostly) first come first serve money. We’ll have updates when the application process is expected to open.
- New Rules for PPP:
- Eligible expenses are expanded to include software, costs related to remote employees, sanitation and personal protective equipment, payments to certain suppliers, and more.
- Eligible employers have 300 employees or less
- Business must be able to show a 25% or more reduction in quarterly gross receipts by comparing any completed 2020 quarter to the corresponding 2019 quarter (i.e. Q2 2020 as compared to Q2 2019) (special rules apply to businesses that were not in business for all of 2019 – still must have been in business on 2/15/20)
- Amount of loan is equal 2.5/12 multiplied by your eligible payroll costs (payroll has a specific definition that includes more than just cash wages!) for 2019 or the 12 months leading up to the date of the loan application. Maximum loan is $2 million. (Seasonal employers again have special rules)
- Hospitality industry: Hotels, bars and restaurants- you get a bonus “month”. Your formula is 3.5/12 times the payroll costs.
- Farmers that file a Schedule F – You get to count GROSS income (sales) before expenses up to $100k, giving you a potential maximum loan of $20,833 if you have no employees. We’ll share more details as we learn the process for this.
- If you received an EIDL advance AND a PPP, previously you would have been required to repay PPP in the amount of the EIDL. That’s out – no repayment anymore!
- Speaking of EIDL advances – more will be available to those that haven’t yet received them and are located in low income communities
- Theaters, museums, and other live venues may be eligible for grants of 45% of gross 2019 revenues. (specific requirements apply – ask us for details)
Employee Retention Credit
- For those that took the employee retention credit (or want to!) this program is being expanded into & for quarters 1 and 2 of 2021
- The credit is increased to 70% of employee wages
- The maximum per employee amount is now $10,000 per QUARTER
- A 20% quarter over quarter 2020 vs 2019 reduction in receipts will qualify the employer for this credit
- The ERC and PPP are no longer mutually exclusive (previously it was a one or the other choice) however ERC payroll is not eligible for PPP forgiveness
More Assistance to our Derecho Victims
- There’s an employee retention credit of 40% of wages paid while your business was inoperable due to the disaster, up to $6,000 wage maximum per employee (no double dipping with other provisions listed in this publication)
There’s a million other things in this beast of a bill….it’s only 5593 pages long (gulp). We’ve tried to cover what we think matters most to our clients in this short synopsis. But if you have questions on the above, or any other provision that we didn’t discuss, reach out to us! And, as always, make sure to subscribe to our blog! As we learn more details & timelines for these measures, we’ll share accordingly!