As the year comes to a close (thank goodness), we begin 2021 with a new relief effort from Congress for individuals and small businesses. This effort by Congress is currently reflected in the Coronavirus Relief Bill passed in December. However, both the executive and legislative branches have expressed a desire for modifications to the version signed by the President on December 27, 2020. We expect there is a strong possibility of future changes to the Bill as well as technical guidance from Treasury.
Carter has a team of professionals focused on all the stimulus legislation for 2020. They are available to provide you with the level of assistance that best fits your situation. The team members are available for ad hoc questions and full-service assistance with the completion of your PPP forgiveness applications. This team stays in contact with other CPA professionals, the AICPA and NCACPA, IRS, banking and SBA leadership focused on the various stimulus packages.
This communication is to provide a quick summary of the recently passed Coronavirus Relief Bill, which extends and modifies numerous provisions of the original CARES Act passed in March.
This is not a comprehensive summary of the bill. Briefly here are some select highlights:
Stimulus Payments to Individuals
The bill authorizes direct payments of up to $600 per individual and qualifying child. The credit phases out starting at $75,000 of modified adjusted gross ($112,500 for heads of household and $150,000 for married taxpayers filing jointly) at a rate of $5 per $100 of additional income. The IRS has indicated they are beginning the distribution of these payments immediately.
Extensions of unemployment benefits under the pandemic emergency unemployment compensation benefits portion of the CARES Act through March 14, 2021.
Round 2 of Payroll Protection Program loans are available to those borrowers who meet the following qualifications:
- Businesses with fewer than 300 employees,
- At least a 25% drop in gross receipts in a 2020 quarter compared to the same quarter in 2019.
PPP2 loans are limited to $2 million, and businesses can now take the Employee Retention Credit in addition to PPP2 funding. Covered expenses have been expanded to include worker protection expenditures and certain “essential” operating costs in addition to the previously allowable wage related and operating expenses such as rent and utilities. Also, the multiplier used to determine the loan amount has been increased for certain industries hardest hit by the pandemic–generally restaurants and hospitality businesses.
PPP Loan Forgiveness Modifications
Expenses paid for with PPP loan proceeds are now confirmed deductible for federal income tax. Loans less than $150,000 now have a simplified, one-page forgiveness process. EIDL grants no longer reduce the amount of eligible forgiveness on a PPP loan.
SBA Debt Relief Payments & EIDL Loan Program
The EIDL (Economic Injury Disaster Loans) Program is extended through 2021. SBA Debt Relief Payments to continue and are nontaxable.
- Employee Retention Tax Credit – credit percentage increased from 50% to 70% and extended through June 2021.
- Payroll Tax Credits – refundable credits for paid sick and family leave are extended through the end of March 2021.
- Deductions for business meals – temporarily increased from 50% to 100%.
- Charitable deductions for non-itemizing taxpayers – up to $600 for joint returns.
- The bill provides funding for live venues, independent movie theaters, and cultural institutions.
The SBA, IRS, and other governmental agencies will be issuing guidance on this new legislation in the coming weeks. We will update you as we learn more.
Please contact your professional at Carter if you have any questions related to this new law.