You may have seen in the news that the President has signed into law new stimulus bill legislation. This provides a number of important changes to previously issued COVID-19 relief programs. We are committed to helping you stay in the know about these important updates. They will likely impact your teams, businesses and the workplace. Therefore, here are 5 new COVID-19 updates to help you in this ever changing world we are living in.
5 New COVID-19 Updates
1. New PPP Loans
The Paycheck Protection Program has reopened with over $284B in funds available for brand new loans. For new borrowers and borrowers who have already received a loan (and not yet applied for forgiveness), this can mean a couple things. The law expands eligible non-payroll costs to include certain covered options, expenditures, property damage costs, supplier costs, and worker protection expenditures. Non-payroll costs remain limited to less than 40% of the loan amount. Additionally, for all borrowers who have not yet applied for forgiveness, the safe harbor deadline to restore wage and employment levels is extended from December 31, 2020 to September 30, 2021.
2. Second Draw PPP Loans
If you have a business that has previously received a PPP loan that meets special requirements, second PPP loans may now be available to you! These special requirements could include:
- Second-time borrowers must have 300 or fewer employees. If your organization has related entities or if you are in certain industries, the rules of the program may limit participation in some instances. You can always refer to the Small Business Administration’s PPP website for more information.
- In order to be eligible for a second PPP loan, your business will need to demonstrate a reduction in revenue of at least 25% between related quarters in 2020 and 2019. Special rules will likely apply to businesses that were not in operation for all or part of 2019.
- The maximum amount for second draw PPP loans is $2 million.
- Borrowers must have fully spent the loan proceeds from their first PPP loan before their second PPP loan is disbursed.
Remember, PPP loans are designed to be 100% forgivable as long as the proceeds are spent in accordance with program rules. You can access all the information you might need, HERE.
3. Extension Of Paid Leave Credits Under The FFCRA
The FFCRA required employers with fewer than 500 employees to provide mandatory paid sick and paid family leave for certain reasons related to COVID-19. It provided a corresponding tax credit for any amounts paid to employees for the required paid leave. The COVID-related Tax Relief Act of 2020 (CTRA) extends the tax credit portion of the FFCRA for employers that voluntarily offer paid sick or paid family leave through March 31, 2021. However, the mandatory leave portion will terminate as expected on December 31, 2020.
4. Extension of Employee Retention Tax Credit (ERTC)
The CARES Act allows eligible employers to claim a federal tax credit with respect to qualified wages paid between March 13 and December 31, 2020. The Taxpayer Certainty and Disaster Tax Relief Act of 2020 (the “Act”) extends the ERTC to cover wages paid through June 30, 2021. Additionally, as of January 1, the Act increases the credit rate from 50% to 70% of qualified wages. It also increases the per employee wage cap from $10,000 in the aggregate to $10,000 per calendar quarter. It decreases the required decline in gross receipts from 50% to 20%. And, it also increases the threshold for treatment as a large employer from 100 employees to 500 employees. Retroactive to March 13, the Act provides that employers who receive PPP loans may still be eligible for the ERTC to the extent qualified wages are not paid using forgiven PPP loan proceeds. It also clarifies that group health plan expenses may be considered qualified wages even if no other wages are paid to the applicable employee.
5. Extension of Repayment Period for Deferred Employee Social Security Taxes
The current guidance issued by the IRS (IRS Notice 2020-65) required that any deferred employee portion of Social Security tax withholding between September 1 and December 31, 2020, must be ratably withheld and paid from wages and compensation paid to employees between January 1 and April 30, 2021. Otherwise, penalties and interest would begin to accrue on May 1, 2021. The CTRA extends the repayment deadline from April 30, 2021, to December 31, 2021, and the date for penalty and interest to begin accruing from May 1, 2021, to January 1, 2022.
For more information about the 5 new COVID-19 updates that we listed above, you can also click here.
Therefore, there are many different details that pertains to these topics and it is our desire that you are in the know! Make sure you have signed up for our weekly newsletter that releases every Wednesday, where it is our goal to keep you informed, empowered and on the best track possible as a business owner. Sign up below and never miss an issue. GeneralCents Accounting has your back! Fill out the form below and let’s journey together.