As most of you are aware, 2020 has posed some very interesting and complicated business decision requirements, this has not changed for 2021. On December 27, 2020 the Consolidation Appropriations Act 2021 passed as the fourth major relief legislation enacted in response to the coronavirus pandemic. We would like to take this opportunity to present briefly some of the issues that will most certainly, need to be considered by you as business owner and/or manager. It is important to consider all options, as they apply to your individual situation rather than discussed generically.
• Payroll Protection Plan
o This has changed considerably with the bill that was signed into law on 12/27/20.
• Many new items of cost, can now be covered, than were eligible with the original. Additionally, where expenses related to the PPP, could not be used as other support funding, this has been substantially modified. To this degree, it leaves open availing yourself of the Employee Retention Credit, which will offset payroll tax payments.
• There is now the option that may be available for a second PPP loan for
those that applied in 2020. For those that did not apply in 2020, there is the option to apply for not just one, but two loans, if applied for prior to 3/31/2021. There are some conditions that must be satisfied.
• The expenses applicable to the PPP loan has now expanded to a broader
expense categories, than was originally stipulated. Items such as covered supplier cost, covered operations expenditure, and covered worker protection expenses, are some of those items.
o Income and/or expenses that are covered by the first PPP loans were originally not going to be shown on the tax returns. In this manner, forgiven loan amounts would not have been considered to be taxable income. Thus the expenses paid from those funds would not have been deductible on 2020 tax returns. That has been revised. Thus expenses paid by non-taxable income (as result of the loan forgiveness) will now be deductible on the tax returns.
o Accommodation and Food Services businesses
• Calculation of allowable payroll expenses is revised and increased over the prior version.
o Loan may be available to self-employed persons, without a payroll.
• Employee Retention Credit
o Originally, this credit could not be claimed if you secured the PPP loan.
However, since COVID lasted longer than expected, and beyond some of the PPP loans, there were uncovered payroll expenses, that might be eligible for this credit. The credit is against payroll tax deposits, and can be either refundable, or a credit to be carried forward to future 941 payroll deposits.
o This credit has been extended past the 12/31/20 original expiration date until 6/30/20. The credit amount has increased from 50% to 70%, and what was an annual limitation, per employee, has been reduced from yearly limit to quarterly limit. Thus more than doubling the potential credit.
o Some of the other limitations have been modified, so that amending the 941 payroll deposit report, is an option.
• Paid Sick and Family Leave Credits
o This Credit has been expanded through the end of March 2021.
o Available as a payroll tax credit against the 941 payroll tax deposits, plus partial forgiveness of the employer's portions of payroll taxes.
o Provided a provision for self-employed individuals to use wages from 2019 versus 2020, which might provide a bigger credit.
o The credit is for wages paid while the employee is sick from the COVID virus.
o The Credit is also available for employees that were out because of family members having the COVID virus.
• Postponement of certain Deferred Payroll Taxes
o Certain repayment provisions were expanded to 12/31/21
o Any delayed payments will not be subject to penalties and interest until after the 12/31/21 date.
• SBA grants
o There are new grants that have been instituted that apply to organizations, not previously covered under the PPP loans. Details are still being formulated, but the timing of the application is quite near.
As some of these issues are time sensitive, and some require knowledge of payroll tax amendments, we suggest you contact us at your earliest convenience to discuss the situations as it relates to you specifically.