Summary of Economic Aid to Hard Hit Small Business, Nonprofits, and Venues Act 12.21.2020
Signed by President Trump 12.28.2020
This is a brief summary and interpretation of the most recent covid releif bill. We are waiting for some further guidance expected from the SBA by 1/1/2021. If you have questions about our specific circumstance. please contact our office.
Additional Round of Economic Impact Payments (EIP)
$600 per individual and eligible family member
$1,200 for married filing joint returns
$600 per dependent child under 17 years old
The credit phases out starting at $75,000 of modified adjusted gross income for single filers, $112,500 for head of household filers, and $150,000 for married filing joint filers
Advance payment amounts are going to be based on 2019 tax returns.
Payments are expected to start going to direct deposit starting 12/31/2020 and paper checks are expected to be mailed by 1/15/2021.
If the credit determined on the taxpayer’s 2020 income reported on their tax return exceeds the amount of the advance payment, the taxpayer will receive the difference as a refundable tax credit however if the taxpayer receives an advance payment that is higher than their allowed credit, they do not need to repay the amount.
Paycheck Protection Program Loans
Change to the First Round of PPP: The bill defines that businesses are now allowed to deduct the expenses the first round of forgiven PPP loans were used for.
Loans under 150k will have a simple forgiveness calculation and application. More guidance on how that process is currently outstanding and we will update as we get clarification from the SBA.
Second Round of PPP loans will be available for borrowers in the new year through March of 2021 until funding runs out. Eligible Applicants include:
Businesses with under 300 employees
Can show that the business experienced a 25% reduction in gross receipts in any quarter in 2020 as compared to the corresponding quarter in 2019.
The amount will be 2.5 months of the 2019 payroll or of the 12 months before the loan application.
Businesses will have 24 weeks to spend the approved amount of the second round of PPP loan. Due to the length of time, it is expected that most forgiveness applications will be fulfilled with all payroll expenses however other applicable expenses for the PPP funds were added to this bill. Additional expenses allowed for PPP funds to be forgivable include health insurance related expenses, personal protection equipment expenses, software, cloud, accounting fees etc. More clarification on these additional forgivable expenses is expected to come from the SBA in the near future.
The calculation for self-employed individuals applying for PPP loans is the same as the first round; however, they also need to show that they have had a 25% economic impact due to the pandemic.
Same as with the first round amendment, loans under 150k will have a simple forgiveness application.
In this second round of application, we continue to encourage clients who apply for PPP funds to keep the funds separate and keep important records up to date and on file for the forgiveness.
Family First Coronavirus Response (FFCRA) sick time credits were extended to March, 31 2021
Federal Unemployment Benefits were approved for an additional $300 per week for all workers receiving unemployment benefits from December 26, 2020 – March 14, 2021. A separate calculation is available for self-employed individuals and provides for an addition $100 per week benefit.
Economic Injury Disaster Loan Advance Program was also extended to March 31, 2021
The EIDL Advance Grant was extended for small businesses in low-income communities. We are awaiting further guidance on those communities.
Those who received less than the $10,000 credit can reapply for difference between what they received and the maximum EIDL Advance grant of $10,000
The additional grant will not be applied against the PPP funding. This bill repealed that prior decision in the first round of EIDL aid.
Employee Retention Credit was also extended to March 31, 2021
Business meals provided by a restaurant will be 100% deductible for 2021 and 2022 (as opposed to the 50% allowed in 2020)
Extends the non-itemizer charitable deduction for 2021 and increase the maximum amount to be deducted for $600 for married filers
Flexibility for taxpayers to roll unused amounts in their health and dependent care flexible spending arrangements from 2020 to 2021 and from 2021 to 2022. Employees are also permitted to make 2021 mid-year change in contribution amounts
Extension on Federal Student Loan payments until April 1, 2021 (this includes both principal and interest payments).
Families struggling to pay rent or with past due rent will be able to apply for assistance with rent and utility bills.