Consolidated Appropriations Act 2021 – What businesses should know
On December 27th, the $900 billion relief bill, the Consolidated Appropriations Act 2021, was signed into law. The 5,000+ pages cover many different areas, including updates to existing relief programs and additional funding for businesses. Below is a brief overview of the topics business owners should be aware of.
- Paycheck Protection Program (PPP) forgiveness will not be taxed. When the IRS issued guidance in November stating expenses paid for with forgiven PPP funds would not be forgiven, many business owners braced for large tax bills in 2021. The new bill has finally superseded the previous ruling, stating that all expenses are deductible regardless of loan forgiveness.
- Simplified forgiveness for PPP loans $150k and below. Further simplification of the forgiveness process will be coming soon (within 24 days of the bill’s enactment). The new SBA form will allow borrowers to just sign and certify full forgiveness was achieved. No additional documentation will be provided to the bank or SBA; however, records proving full forgiveness should be kept for 6 years in case the SBA audits the eligibility.
- Second round of PPP coming. Another round of PPP loans will be available for qualified first-time borrowers and certain businesses who received funding from the first round. These businesses must show them:
- Have fewer than 300 employees.
- Have used or will use the full amount of their first PPP loan.
- Have a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
- Expansion of the Employee Retention Credit. This credit was part of the original CARES Act; however, the expansion allows many additional businesses to be eligible. Most importantly, employers who received PPP funds are now also eligible for the credit. For wages between January 1, 2021, through June 30, 2021, employers can claim a credit of 70% on employee wages paid (up to $10,000 per quarter). This can mean credits up to $14,000 per employee! To qualify, the employer must have less than 500 employees and will need to show a decrease in gross receipts of 20% vs the same quarter in 2019.
If you want more information on the most recent COVID relief or need help with tax planning and preparation, contact our tax professionals at The Innovative CPA Group at 203-489-0612. Or contact us online.