​In COVID Tax Tip 2021-123, the IRS clarifies some of the confusion surrounding the powerful but complex Employee Retention Credit.

The IRS is addressing changes made by the American Rescue Plan Act of 2021 that apply to the third and fourth quarters of 2021.

These changes include:

• Making the credit available to eligible employers that pay qualified wages after June 30, 2021, and before Jan. 1, 2022.
• Expanding the definition of "eligible employer" to include recovery startup businesses.
• Modifying the definition of "qualified wages for severely financially distressed employers."
• Providing that the employee retention credit does not apply to qualified wages considered as payroll costs in connection with a shuttered venue grant or a restaurant revitalization grant.

For business managers who had questions and needed authoritative answers, the IRS is answering various questions about the credit for tax years 2020 and 2021, including:

• The definition of a full-time employee and whether that definition includes full-time equivalents.
• The treatment of tips as qualified wages, and the interaction with the credit for the portion of employer Social Security taxes paid with respect to employee cash tips.
• The timing of the qualified wages deduction disallowance and whether taxpayers who already filed an income tax return must amend that return after claiming the credit on an adjusted employment tax return.
• Whether wages paid to majority owners and their spouses may be treated as qualified wages.

​
Reporting clarifications

Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their employment tax returns, generally, Form 941 Employer's Quarterly Federal Tax Return, for the applicable period. If a reduction in the employer's employment tax deposits is not sufficient to cover the credit, certain employers may receive an advance payment from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

This is just a summary of a series of detailed and technical provisions. The IRS has provided all the details in Notice 2021-49. Managers should consult with a qualified tax professional to make sure they get all the benefits they're entitled to without inadvertently violating the provisions.

According to December survey data collected by the Bureau of Labor Statistics,

​Roughly 26.8 million Americans are either unemployed, experiencing reduced pay and work hours or have left the labor market entirely.

• Of the 26.8 million:
  • 10.7 million are officially unemployed,
  • 7.5 million are experiencing cuts to pay and hours,
  • 4.9 million have dropped out of the labor force and
  • 3.7 million are currently misclassified as employed when they’re either unemployed or absent from the labor force.

https://ramlcpa.link/3d56d | ​Journal of Accountancy

While not law just yet, it is expected to be signed by the president as soon as today.

While we know many key details, there are some key details we don't know, especially regarding the PPP Loan Program. The most pressing in my mind are bank participation and when applications will be accepted as some time will be needed to restart the program.
 
Additional details will be forthcoming and the below summary will probably be updated over the coming days for additional details and clarifications.

Below, I summarize the key provisions in the bill:​

 $325 billion in aid for small businesses struggling after nine months of pandemic-induced economic hardships.  
    Allocations           

• $284 billion to the U.S. Small Business Association (SBA) for first and second PPP forgivable small business loans and 
• $20 billion to provide Economic Injury Disaster Loan (EIDL) Grants to businesses in low-income communities. 
• $15 billion in dedicated funding  for shuttered live venues, independent movie theaters, and cultural institutions 
• $12 billion will be set aside to help business in low-income and minority communities.   

$120 billion to provide workers receiving unemployment benefits a       

• $300 per week supplement from Dec. 26 until March 14, 2021.       
• This bill also extends the Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others in nontraditional employment, and the Pandemic Emergency  Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits. 

Other Provisions           
               
 $25 billion in emergency rental aid and an extension of the national eviction moratorium through Jan. 31, 2021.  
               
 $45 billion in transportation funding, including          

• $16 billion for airlines,          
• $14 billion for transit systems,          
• $10 billion for state highways,         
• $2 billion each for airports and intercity buses, and        
• $1 billion for Amtrak.          

               
$82 billion in funding for colleges and schools, including support for HVAC repair and replacement to mitigate virus transmission, and  
  
$10 billion in child care assistance.          
                           
$22 billion for health-related expenses incurred by state, local, Tribal, and territorial governments.   
               
$13 billion for emergency food assistance, including a 15% increase for six months in Supplemental Nutrition Assistance Program benefits. 
  
$7 billion for broadband expansion.          
               
  The bill also extends the           

• Employee retention tax credit and several expiring tax provisions

​
​   and temporarily allows a             

PPP Round one (1) recipients (PPP1) may apply for another loan of up to $2 million, provided they:             

•  Have 300 or fewer employees.         
•  Have used or will use the full amount of their first PPP loan.       
•  Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
•      

First-time PPP borrowers will also permitted from the following groups:      

• Businesses with 500 or fewer employees that are eligible for other SBA 7(a) loans.    
• Sole proprietors, independent contractors, and eligible self-employed individuals.    
• Not-for-profits, including churches.         
• Accommodation and food services operations (those with North American Industry Classification System (NAICS) codes starting with 72) with fewer than 300 employees per physical location.  

PPP loan terms           
               
As with PPP Round 1 (PPP1), the costs eligible for loan forgiveness in PPP Round 2 (PPP2) include payroll, rent, covered mortgage interest, and utilities. 
 
PPP2 also makes (adds) the following potentially forgivable:       

• Covered worker protection and facility modification expenditures, including personal protective equipment, to comply with COVID-19 federal health and safety guidelines.  
• Expenditures to suppliers that are essential at the time of purchase to the recipient’s current operations.  
• Covered operating costs such as software and cloud computing services and accounting needs.   

               
To be eligible for full loan forgiveness, PPP borrowers will have to spend no less than 60% of the funds on payroll over a covered period of either eight (8) or twenty-four (24) weeks — the same parameters PPP1 had when it stopped accepting applications in August.
       
PPP borrowers may receive a loan amount of up to 2.5 times their average monthly payroll costs in the year prior to the loan or the calendar year, the same as with PPP1, but the maximum loan amount has been cut from $10 million in the first round to the previously mentioned $2 million maximum. PPP borrowers with NAICS codes starting with 72 (hotels and restaurants) can get up to 3.5 times their average monthly payroll costs, again subject to a $2 million maximum.
 
​
Simplified application and other terms of note              
               
 The new COVID-19 relief bill also:          

• Creates a simplified forgiveness application process for loans of $150,000 or less. Specifically, a borrower shall receive forgiveness if a borrower signs and submits to the lender a certification that is not more than one page in length, includes a description of the number of employees the borrower was able to retain because of the loan, the estimated total amount of the loan spent on payroll costs, and the total loan amount. The SBA must create the simplified application form within 24 days of the bill’s enactment and may not require additional materials unless necessary to substantiate revenue loss requirements or satisfy relevant statutory or regulatory requirements. Borrowers are required to retain relevant records related to employment for four years and other records for three years, as the SBA may review and audit these loans to check for fraud. 

• Repeals the requirement that PPP borrowers deduct the amount of any EIDL advance from their PPP forgiveness amount. 
• Includes set-asides to support first-time and second-time PPP borrowers with 10 or fewer employees, first-time PPP borrowers that have recently been made eligible, and for loans made by community lenders. 

The bill also specifies that business expenses paid with forgiven PPP loans are tax-deductible. This supersedes IRS guidance that such expenses could not be deducted and brings the policy in line with what the AICPA and hundreds of other business associations have argued was Congress’s intent when it created the original PPP as part of the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136 (see the Dec. 3 letter from the AICPA and state societies to congressional leaders). 
               
The COVID-19 relief bill clarifies that “no deduction shall be denied, no tax attribute shall be reduced, and no basis e shall be denied, by reason of the exclusion from gross income provided” by Section 1106 of the CARES Act (which has been redesignated as Section 7A of the Small Business Act). This provision applies to loans under both the original PPP and subsequent PPP loans.

While the #SBA announced that they had stopped accepteding new applications (does not mean you should stop applying) at least for now, that should not deter you. As I've said in previous posts, the #CARESAct (which includes the #PPP & #EIDL programs) is very likely the first in what will be several #stimulus packages.

1) So while the SBA is not currently accepting new applications, it doesn't mean all lenders have stopped accepting applications (hint, hint) so be sure you're in a position to do so at a minimum. We'll be helping clients directly in this regard.

2) While the CARES Act has gotten all the buzz, there are other local programs that exist. In Maryland several jurisications have similar loan & grant programs to do the same or serve a similar purpose. We'll be sending Clients more detailed information with additional states/jurisdications in the coming days.

Here is a quick list of jurisdications with prorams (click the link for additional details)
Anne Arundel County, Baltimore City, Baltimore County, Carroll County, Cecil County, Frederick County, Montgomery County, Prince George’s County .


http://ramlcpa.link/uxi2

#ramlcpa #coronavirus #covid_19 #smallbusiness #business ​

Release Date: 
Wednesday, April 15, 2020
Release Number: 20-32
Contact: Press_Office@sba.gov, (202) 205-7036

​WASHINGTON – Today, U.S. Treasury Secretary Steven T. Mnuchin and U.S. Small Business Administration Administrator Jovita Carranza issued the following statement regarding the Paycheck Protection Program and Economic Injury Disaster Loan Program:

“The #SBA has processed more than 14 years’ worth of loans in less than 14 days.  The Paycheck Protection Program is saving millions of jobs and helping America’s small businesses make it through this challenging time.  The #EIDL program is also providing much-needed relief to people and businesses.
“By law, the SBA will not be able to issue new loan approvals once the programs experience a lapse in appropriations. 

“We urge #Congress to appropriate additional funds for the Paycheck Protection Program—a critical and overwhelmingly bipartisan program—at which point we will once again be able to process loan applications, issue loan numbers, and protect millions more paychecks.
​
“The high demand we have seen underscores the need for hardworking Americans to have access to relief as soon as possible.  We want every eligible small business to participate and get the resources they need.”

In the summer of 2005, President George W. Bush was on vacation.....when he began flipping through an advance reading copy of a new book about the 1918 flu pandemic. He couldn't put it down.
​
When he returned to Washington, he called his top homeland security......and gave her the galley of historian John M. Barry's "The Great Influenza," which told the chilling tale of the mysterious plague that "would kill more people than the outbreak of any other disease in human history."

"You've got to read this," Fran Townsend remembers the president telling her. "He said, 'Look, this happens every 100 years. We need a national #strategy.'"

Thus was born the nation's most comprehensive pandemic plan -- a playbook that included diagrams for a global early warning system, funding to develop new, rapid vaccine technology, and a robust national stockpile of critical supplies, such as face #masks and #ventilators, Townsend said.

#ramlcpa #coronavirus #covid19 #covid_19 #Planning #supplychain

This is the Coronavirus Small Business Guide and Checklist (PPP) by the U.S. Chamber of Commerce.  It does summarize the information, though I will be publishing my own plain English summary shortly.   

Additionally, by Monday a Clients Only section will be available on our home page with tax news, information, resources, and an FAQ section covering such topics as the Coronavirus #Stimulus package, Paycheck Protection Program (PPP), among other topics, that will be updated and added to regularly. 

#CARESAct#PaycheckProtectionProgram#PPP#SmallBusiness #SBA, #SBAloan, #SBALoans, 
​#emergencyloans, #coronavirus, #COVID-19, #covid19, #covid_19