With the signing of the new stimulus package there are many key takeaways that you must be aware of:
Payroll Protection Program
There is an additional $284 Billion of funding for the PPP program. Within that line-item there is a specific earmark set aside for businesses with less than 10 employees. The $284 Billion is for both first time borrowers and borrowers seeking a second loan.
Businesses that received an initial PPP, but returned all or a portion of the PPP loan can reapply for an amount for the difference between the returned amount and the maximum. If you are seeking a second PPP loan, you will apply using the same formula of 2.5 times of your monthly payroll expenses, and a hard cap of $2,000,000. For the second PPP loan, a business must be able to demonstrate that its gross receipts have been reduced by at least 25% (essentially a year over year comparison).
The Bill also expands the pool of expenses that a PPP loan can be used to pay. These additional expenses include, operational expenses, property damage costs, supplier costs, worker protection costs (PPE), and payments for insurance benefits. The Bill also simplifies the forgiveness application process for loans under $150,000. The business must maintain payroll records for four years and three years for all other relevant records from the date of the certification, and is subject to audit by the SBA.
Another component of the Bill, is that businesses can deduct expenses that were paid for with PPP proceeds, even if that amount is forgiven. Previously, expenses that qualified for loan forgiveness could not be deducted by the business.
The time period of employee sick leave under the Families First Coronavirus Response Act eligible for a tax credit has been extended to March 31, 2021. Also, payroll tax deferment has been extended to April 20, 2021.
The $300 additional weekly pandemic unemployment assistance has been extended until March 14, 2021 whereby states must establish a method for employers to report employees who refuse to return to work.
The Bill provides for a one-time payment of $600 to people earning $75,000 or less, or married couples earning $150,000. The stimulus payment decreases for people earning above those amounts and phases out completely at $99,000 for individuals and $198,000 for married couples.
Payroll tax repayment
Employers who are deferring their workers' payroll taxes under Trump's executive action from August now have until the end of 2021 to increase their employees' withholding to pay back the taxes owed. Originally, the deferred amount had to be repaid by April 30.
*The above is just a brief summary of the stimulus package portion of the Consolidated Appropriations Act, 2021. We will continue to monitor the implications and implementation of the new funding package and provide further updates as necessary.
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