PPP Round 2 & Employee Retention Credit
Well Happy New Year to all as we kick off 2021 with our first publication of the year! We have a fair amount of content to cover with the passage of the Consolidated Appropriations Act (CAA) at the end of December. Today we will touch on the second round of Paycheck Protection Program (PPP) loans as well as the Employee Retention Credit (ERC).
PPP Round Two
The CAA allows certain small businesses that received an original PPP loan and experienced a 25% decline in gross receipts to receive a second PPP loan of up to $2 million.
In order to qualify, the borrower must:
- Have received and original PPP Loan
- Employ no more than 300 employees per location
- Have used or will use the full amount of the original PPP loan
- Demonstrate at least a 25% reduction in gross receipts in the first, second, third or fourth quarter of 2020 relative to the same quarter in 2019
The loan can be up to 2.5 times the average monthly payroll costs of the one year prior to the loan or in the calendar year 2019. The 2.5 factor increases to 3.5 times the average monthly payroll for borrowers in the hospitality industry. Also, eligible entities that borrow $150,000 or less may submit a certification prior to the loan forgiveness application, attesting that they meet the applicable revenue loss requirement. Loans may be forgiven for payroll costs of up to 60% and nonpayroll costs (rent, mortgage interest, utilities) of 40%. Forgiveness of the loans is not includible in income, and expenses paid with loan proceeds are deductible.
Employee Retention Credit
The employee retention tax credit is a refundable tax credit designed to encourage employers to keep employees on their payroll. As many of you know, the ERC was not available to taxpayers who received a PPP loan as part of the CARES Act. That is not the case with the CAA. The ERC is now available for taxpayers (EVEN RETROACTIVELY BACK TO MARCH 2020!!) even if they receive PPP loans. Click here for more details.
Updates and Reminders
1099-MISC/1099-NEC – Just a reminder that the new 1099-NEC is due by February 1, 2021, whether it is paper filed or electronically filed. The 1099-MISC is due March 1, 2021 if paper filed, or March 31, 2021 if electronically filed.
Fourth Quarter Estimated Payments – For taxpayers making estimated payments, many fourth quarter payments are due January 15th. State payments may vary, so be sure to check your records.
The CARES Act and Consolidated Appropriations Act include many changes that will impact your business and your taxes for the upcoming year. Your Bertz, Hess & Co. tax and business advisor will be happy to discuss any of these topics.