Recent legislation and administrative action have resulted in quite a few tax changes and new incentive programs that are assisting businesses recover as re-openings are occuring. The Consolidated Appropriations Act (CAA) and American Rescue Plan Act (ARPA) expanded and updated many of the incentive programs provided by the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES) Act. CAA and ARPA also added new programs. Here is a brief recap of some of the major items included in these recent actions.
Paycheck Protection Program
The Paycheck Protection Program (PPP) has been expanded and updated many times over the past year. Loans are still available to eligible borrowers through the current program deadline of May 31, 2021 or until funding is fully exhausted.
Employee Retention Credits
Many employers are finding that they can utilize the payroll tax credits provided by the Employee Retention Credit. For 2020, an employer who experienced a government shutdown or significant decline in gross receipts for a calendar quarter (at least 50%) can amend their payroll returns to take advantage of the credit, up to 5,000 per employee for the year. For 2021, an eligible employer who had a 20% reduction in gross receipts can take a credit of up to $7,000 per employee on their quarterly filing. The credit has now been extended through the end of 2021.
Emergency Sick Leave
Under the FFCRA, employers with less than 500 employees were required to provide paid leave to certain individuals impacted by COVID-19. Under the FFCRA, this leave requirement went through December 31, 2020. Further, employers were able to claim a credit against payroll taxes to mitigate the cost of this leave. Under the CAA, employers are not required to offer leave beyond December 31, 2020, however, under the CAA, eligible employers that do continue to offer this leave can continue to receive the payroll tax credit through March 31, 2021. The ARPA now allows employers to claim a credit for an additional 80 hours per employee, including time for vaccination.
If a taxpayer’s modified adjusted gross income (AGI) is less than $150,000, the ARPA, excludes from income up to $10,200 of unemployment compensation paid in 2020, which means you don’t have to pay tax on unemployment compensation of up to $10,200. If you are married, each spouse receiving unemployment compensation doesn’t have to pay tax on unemployment compensation of up to $10,200. Amounts over $10,200 for each individual are still taxable. If your modified AGI is $150,000 or more, you can’t exclude any unemployment compensation. The $150,000 threshold applies to all filing statuses. Couples filing under the status “married filing joint” may benefit by changing to “married filing separately” to qualify for the exclusion. For taxpayers who filed their returns prior to the forms being amended, the IRS will automatically calculate their additional refund and send it to them.
As part of the CAA, a temporary 100 percent deduction of business meals is in place for 2021 and 2022. This provision is limited to food and beverages provided by a restaurant. Documentation of the business purpose including the person(s) and nature of the business purpose is essential.
Restaurant Revitalization Fund
Restaurants and bars with fewer than 20 locations and not publicly traded will be eligible to apply for a grant under the Restaurant Revitalization Fund, administered by the SBA. Each restaurant will calculate their lost revenue and apply for a grant for that amount, less any PPP funds received. Applications are expected to begin around the beginning of May.
These programs are offering much needed assistance to businesses as they recover. You should consult your CPA or an HTB advisor would be happy to discuss these programs with you.