Wow, does it ever feel good to have turned the page on 2020. This first “working week” is when I finally began to feel the newness of it all.
Yes, it’s “just a date” on a Gregorian calendar, but …
2021 holds great promise for our South West Ca business clients. With the potential of easing lockdowns in our future (assuming that the vaccine and other developments will enable a further re-opening of society), and with the extensions of the PPP and other very nice provisions in the CAA, here at San Diego Tax Center, we are champing at the bit to help our San Diego SMB clients build something great in 2021.
And by “great”, I mean financially secure. That is our wheelhouse. There’s plenty more that I write about and discuss with our clients, but ensuring that your San Diego business never has to worry about disaster striking (again) is a key motivator for us.
If you need to reach us, we’re here: https://taxcentersandiego.com/lb-consultation.php
Now … I’d like to take today’s Note to go over some of the SMB provisions of the clunkily-named “Coronavirus Response and Relief Supplemental Appropriations Act of 2021”, also known as the “Consolidated Appropriations Act” or CAA for short (the CAA is the entire bill … the clunky name is for the part that directly applies to this conversation).
I shared some of this last week, but I know that the holidays might have gotten them lost in the shuffle. Plus, there’s more to say…
Provisions of the Second Coronavirus Relief Bill That Affect San Diego Small Businesses
“What would you attempt to do if you knew you could not fail?” -Robert Schuller
The passage of this relief bill brought some changes that we had been hoping to see for months (notably the deductibility of PPP-related expenses), but there is much more to this relief bill than merely that, and the $600 stimulus payments that get all of the press.
So I thought I’d delve a little deeper than I did last week on the high points of this CAA bill.
(And now that year-end is mostly behind us, if you need to talk through any of this, we’re right here, and have more availability):
As I mentioned, San Diego businesses are now allowed to deduct expenses associated with their forgiven PPP loans — this is amazing news.
Further, the new law provides $284.45 billion to reopen and strengthen PPP for first and second time borrowers and reauthorizes the program through March 31, 2021. However, the requirement in order to receive a second PPP is that the small business has less than 300 employees and can demonstrate a revenue reduction of 25 percent.
Oh and simplified forgiveness applications for loans under $150K. Every lender will handle slightly differently, but what the bill indicates is that the borrower signs and submits a one-page certification that requires the borrower to list the loan amount, the number of employees retained, and the estimated total amount of the loan spent on payroll costs. That’s it!
The bill also expands the list of eligible expenses to include covered operations (software, cloud computing and other human resources and accounting needs), PPE, covered supplier costs and damage costs due to public disturbances.
Oh, and I had missed this last one before, but this is also a very nice bonus: the bill repeals the CARES Act provision that requires borrowers to deduct their EIDL Advance from their PPP loan forgiveness amount.
Also very nice.
If you have already applied for forgiveness under previous provisions, you will want to contact your lender to find out how you can take advantage of these new provisions. Be patient, though … they will certainly be slammed.
The new law provides $25 billion to restart and extend the EIDL Advance Grant for small businesses in low income communities, AND it creates a process for existing EIDL Advance grantees that received less than $10,000 to reapply for the difference between what they received and the maximum EIDL Advance Grant of $10,000. Here is where you can do that.
Employee Retention Credit For The Win
Beginning on January 1, 2021 (and through June 30, 2021), the new relief bill:
- Increases the payroll tax credit rate from 50 percent to 70 percent of qualified wages. Very nice.
- Also it expands eligibility for the credit by reducing the required year-over-year gross receipts decline from 50% to 20% and provides a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility. This might not seem significant, but believe me, for the right business, this is VERY good news.
- Increases the limit on per-employee creditable wages from $10,000 for the year to $10,000 for each quarter. Much more generous.
- Increases the 100-employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees.
Here’s the best part: employers who receive Paycheck Protection Program (PPP) loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds. Previously, you had to choose one program or the other … now, as long as you qualify for both (see above for those newly-expanded qualifications), you can use both.
- Go take some clients out for meals! Because there’s now 100% deduction for business meal food and beverage expenses (provided by a restaurant) that are paid or incurred in 2021 and 2022. Last year, this was only 50% … now it’s full.
- Contractors who were temporarily unable to work due to facility closures and other restrictions will be able to receive reimbursement for paid leave from federal agencies. This is great news.
It remains to be seen what inflation will result from all of these measures … or exactly how all of this will be paid for by Uncle Sam, but that’s not my lane.
My lane is helping you and your business THRIVE in 2021. We’re here for you…
San Diego Tax Center
Feel free to share this article with a San Diego area (or beyond!) business associate or client you know who could benefit from our assistance. While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for families and business owners.