On December 27, 2020 the Stimulus Round 2 (Consolidated Appropriations Act of 2021) was signed into law by the president. This bill is over 5,500 pages long. This isn’t an exhaustive list, but rather some major areas that affect you as small business owners.
Here are 7 areas that affect business owners in 2020 and 2021.
1. PPP Loan Forgiveness Tax Changes
This is a big advantage for many businesses that got a PPP loan forgiven. Prior to this law the PPP expenses used for forgiveness were not tax deductible and as a result the PPP loan was taxable.
This new law changed that and the PPP expenses you used to get it forgiven are now tax deductible. This means that the PPP loan when forgiven is NOT taxable..
There are no dollar limits on this, so if you got a PPP loan of any amount, it is not taxable to you upon forgiveness.
2. Simplified PPP Forgiveness for Loans under $150,000
Earlier this year the SBA provided a 1 page forgiveness form for loans that were under $50,000 making it easier to apply for forgiveness. This has now been changed to $150,000. This is for any and all PPP loans.
So if you got a PPP loan for less than $150,000 and have not already applied for forgiveness, there is a new one page forgiveness form coming. Here is what the 1 page form will be asking for::
# of Employees Retained
Estimated Loan Amount Spent on Payroll Costs
Total Loan Amount
Attest to Accurate Certification and Compliance with PPP loan requirements
Keep Records up to 4 Years
This should make it much easier to apply for forgiveness if you haven’t already. Many banks are a bit behind so you may have to wait for your bank to update their system for this new form.
3. EIDL Grants and Loans Sec 278
Many of you also got an EIDL grant (generally about $1,000 per employee up to $10,000)
This grant was to be paid back IF you received a PPP loan when you applied for forgiveness. This has been changed and the EIDL grant does NOT have to be repaid and it is totally tax free..
What if you already got PPP forgiveness and paid back the EIDL grant via the forgiveness application?
If you already filed for forgiveness and paid back the EIDL, you may be able to get this money back. We can’t say for sure but typically there will be some type of reconciliation form and if that happens then you may see that money again. At this point we have no idea when and how that will be handled. We will keep you updated on this.
EIDL Loan from SBA
The SBA also offered an EIDL loan not to be confused with the above grant.
EIDL loan applications will now be accepted until Dec 31, 2021 contingent upon the availability of funds.
This is for working capital. It’s a 30 year loan with a 3.75% interest rate and an automatic deferment of the first year of payments.
4. PPP 2.0 Loan
These loans are reopened for new or 2nd time PPP borrowers.
This biggest requirement to qualify for this new PPP loan is you have to of had a reduction of more than 25% in revenue in one quarter in 2020 compared to 2019.
Quarter 2 2019 $300,000
Quarter 2 2020 $200,000
Greater than 25% drop in revenue in Quarter 2.
Some other requirements:
- Under 300 employees
- Calculated the same way as the first PPP loan---2.5 times average monthly payroll in the last 12 months.
If you qualify we would recommend you contact your bank and see how quickly they will be up and running on this and what documents they will require from you to show proof of the comparable quarter loss.
5. Payroll Tax Credit for Employers
This payroll tax credit is extended to 3-31-21 and is optional after 12-31-2020. So you can choose whether you want to provide this to an employee.
The idea with this credit is if someone can’t work due to being in quarantine and you continue to pay them then you would be entitled to a credit.
So if you have an employee that is out due to having Covid and you still pay them, then you can get this credit until 3-31-21.
Quarantine due to Covid for themselves
- Max of $511 per day of pay or $5,110
- Up to 80 Hours of Pay
Seeking Covid Diagnosis or Caring for someone that is under Quarantine or School / Daycare closure
2/3rds of pay
Up to 80 hours
Up to $200 per day or $2,000 Max
Many of you use Gusto for your payroll and they make it super easy to enter and track this.
6. Business Meals
Business meals historically have always been 50% tax deductible. Business males are now 100% deductible for 2021 and 2022.
The goal is to jumpstart restaurants with this additional benefit. This starts in Jan 2021, so any money you spent for business meals in 2020 are still 50% deductible for business meals. .
7. Health and Human Services Grant
Some of you received a HHS grant in 2020. It is not clear if the tax consequences have changed on this. Prior to this new law these are taxable to you. We will keep you updated as to whether the tax consequences have changed with this bill.