Key Changes to the Employee Retention Credit

On December 27, 2020, President Trump signed the Consolidated Appropriations Act, 2021 (CAA) into law. A recent article from JD Supra outlines two key provisions included in the act that make changes to the employee retention credit.

Established by the CARES Act, the employee retention credit was designed to incentivize employers to maintain their staff in the midst of the coronavirus pandemic. For the period from March 13, 2020, to December 31, 2020, eligible employers could claim a 50% retention credit for qualified wages, capping out at $5,000 per employee.

The CAA both extends and expands the employee retention credit, including making retroactive changes to it for 2020. It does so via two provisions:

Section 206 – This provision makes retroactive changes back to March 13, 2020, when the ERC was established. First, recipients of loans through the Paycheck Protection Program (PPP) are now eligible for the ERC. Previously, PPP participants were barred from claiming the ERC. Employers should note that they may not claim the ERC on wages paid with forgiven PPP loan funds.

Secondly, Section 206 offers clarification regarding “qualified health plan expenses” and the ERC. It explains that these expenses are, indeed, eligible for the ERC, even when they are attributable to a furloughed employee who is not receiving any other compensation at the time.

The third change—another clarification—is in regard to the “gross receipts” test for tax-exempt organizations. In determining their eligibility for the ERC, tax-exempt organizations must account for all gross receipts, not just those from unrelated trade or business activities.

Finally, Section 206 offers employers a means for catching up on unclaimed ERC for 2020. Employers should claim the additional ERC on their fourth quarter Form 941, which is due by January 31, 2021. Further guidance in this area is expected this month.

Section 207 – This second provision includes an extension of the ERC for the period from January 1, 2021 to June 30, 2021. Additionally, it expands the ERC in the following ways:

  • Increases the credit from 50% to 70%, for the portion of 2021 that the ERC covers.
  • Adjusts the per-employee cap on the ERC to $7,000 per quarter.
  • Decreases the eligibility threshold from a 50% decline in gross receipts to a 20% decline.
  • Expands eligibility for the ERC from employers with up to 100 employees to employers with up to 500 employees.
  • Eliminates the qualified wages cap for employee pay increases.
  • Eliminates the option to receive advance payment of the ERC via IRS Form 7200 and/or IRS Form 941 for employers with more than 500 employees.
  • Expands the availability of advance payments of the ERC for employers with 500 or fewer employees.
  • Creates a process for repaying advance payments of the ERC, in the event of excess payments.
  • Makes some governmental employers eligible for the ERC in 2021.
  • Maintains the non-eligibility of the ERC for wages accounted for under IRC Section 45S and expands the non-eligibility to also cover wages accounted for under IRC Section 41, IRC Section 45A, IRC Section 45P, IRC Section 51, and IRC Section 1396.
  • Requires the U.S. Small Business Administration and the IRS to coordinate in a public awareness campaign targeting employers eligible for the ERC.

For further details, click here to read the article in full at JD Supra.

Congress Enacts Additional Stimulus Legislation

On December 22, 2020, Congress passed the Consolidated Appropriations Act, 2021 (CAA2021), which includes $892 billion in coronavirus stimulus spending. This long-awaited and highly contested piece of legislation ties coronavirus relief funding into a $1.4 trillion resolution for funding the federal government through September of next year. The nearly $900 billion in stimulus funds comprises a variety of measures, including a renewal of enhanced unemployment benefits, an extension of the Paycheck Protection Program, and another round of individual stimulus payments. Read on for a breakdown of the various COVID-19 stimulus measures included in CAA2021.

 

BUSINESS MEASURES

 

Paycheck Protection Program Extension (PPP2)

Portion of the stimulus package: $284 billion

CAA2021 provides an additional round of funding for the PPP and expands eligibility to include nonprofits (Sec. 501(c)(6)), local newspapers, TV stations, and radio stations. Additionally, it ensures the tax deductibility of business expenses paid with loan funds that are forgiven, a measure that has been widely called for by loan recipients and the American Institute of Certified Public Accountants (AICPA). For further details on PPP2, click here to read a helpful summary from the Journal of Accountancy.

 

Support for Entertainment Venues

Portion of the stimulus package: $15 billion

Funds for struggling live venues, independent movie theaters, and cultural institutions.

 

Support for Business in Low-income Communities

Portion of the stimulus package: $12 billion

Funds earmarked for businesses in low-income and minority communities.

 

Economic Injury Disaster Loan Grants

Portion of the stimulus package: $20 billion

Additional funds to be administered through the Economic Injury Disaster Loan (EIDL) program that are dedicated to businesses in low-income communities.

Support for Child Care Centers

Portion of the stimulus package: $10 billion

Aid money to help child care centers safely reopen and to support families with child care costs. The money is to be administered via the Child Care Development Block Grant.

 

Aid to Transportation Sector

Portion of the stimulus package: $45 billion

A variety of transportation-related assistance that includes $16 billion for airlines (for paying the salaries of workers and contractors), $14 billion for mass transit agencies, $10 billion for highways, and $1 billion for Amtrak.

INDIVIDUAL MEASURES

 

Unemployment Benefits

Portion of the stimulus package: $120 billion

An extension of federal unemployment supplemental benefits through March 14, 2021, at a rate of $300 per week.  Additionally, it legislates an extension of two pandemic unemployment programs set to expire at the end of December, the Pandemic Unemployment Assistance program, which has been expanded to provide aid to self-employed, temporary, and gig workers, and the Pandemic Emergency Unemployment Compensation Program, which provides an additional 13 weeks of benefits beyond the typical 26 weeks that states provide to jobless workers.

 

Extension of Eviction Moratorium & Rental Assistance

Portion of the stimulus package: $25 billion

A temporary extension of the federal eviction moratorium through January 31, 2021, and $25 billion in emergency rental assistance.

 

Economic Impact Payments

Portion of the stimulus package: $166 billion

Direct payments of $600 for qualifying adults and their child dependents. Individuals earning up to $75,000 annually (or married couples making up to $150,000) qualify for the full payment; individuals earning between $75,000 and $99,000 qualify for a reduced payment; individuals earning more than $99,000 do not qualify.

 

Food Aid

Portion of the stimulus package: $13 billion

Additional funding for the Supplemental Nutrition Assistance Program and a benefits increase of 15% to last for six months.

 

ADDITIONAL MEASURES

 

Support for Education Institutions

Portion of the stimulus package: $82 billion

This money is designated to help schools and universities reopen. The funds are earmarked as follows: $54 billion for public K-12 schools, $23 billion for colleges and universities, $4 billion for the Governors Emergency Education Relief Fund, $2.75 billion for private K-12 education, and nearly $1 billion for Native American schools.

 

Funding for Vaccine Distribution and Coronavirus Testing

Portion of the stimulus package: $68 billion

CAA2021 includes money for both supporting the distribution of coronavirus vaccinations and for helping to pay for costs associated with COVID-19 testing. $30 billion is directed for the procurement of vaccines and treatments, the funding of distribution for states, and the creation of a strategic stockpile. $22 billion is earmarked for testing, tracing, and mitigation. Of the remaining funds, $9 billion will go to healthcare providers and $4.5 billion is earmarked for mental health.

 

Increased Broadband Access

Portion of the stimulus package: $7 billion

Funding for broadband initiatives to support better connectivity and infrastructure. $3.2 billion is earmarked for the Emergency Broadband Benefit, which provides low-income families and individuals laid off or furloughed due to the pandemic with a monthly stipend of $50 to pay for internet services. $1.9 billion is dedicated to financing “rip and replace” projects—the removal and replacement of Huawei and ZTE networking equipment. $1 billion will go to Tribal broadband programs and $300 billion is dedicated to rural broadband deployment.

 

Farm Aid

Portion of the stimulus package: $13 billion

Funding for farmers and ranchers.

 

Postal Service

Portion of the stimulus package: $10 billion

CAA2021 includes the forgiveness of a $10 billion loan made to the United States Postal Service earlier this year.

 

WHAT’S NOT INCLUDED

 

A number of provisions that were initially included in proposed coronavirus stimulus legislation were, ultimately, left out of the bill. These include protection for businesses against litigation regarding COVID-19 exposure, financial aid to state and local governments, and an extension of federal student loan forbearance.

Local Accounting Firm Celebrates 40 Years in the Community

Carmel, IN – The local full-service accounting and consulting firm of Slattery & Holman, P.C. is pleased to announce the celebration of 40 years of service.

“Forty years is an exceptional accomplishment for our firm,” said Dennis Slattery, CPA, co-founder and former managing partner of Slattery & Holman, P.C. “Our long-term success is a direct result of the value we place on client relationships, as well as our dedicated staff, who strive to provide the highest quality service each and every day.”

Slattery & Holman, P.C. is comprised of a diverse group of seasoned accounting professionals and has strong roots in the local community. Since opening their doors in 1980, the firm has provided a variety of assurance, consulting and tax services to help clients improve their overall financial success.

“At Slattery & Holman, we recognize that without our clients’ support, we would not have cause to celebrate our many years of service,” said Slattery. “With this in mind, we would like to extend our most sincere gratitude to our clients for their confidence in our firm.”

Established in 1980, Slattery & Holman, P.C. offers full-service accounting and consulting services to businesses and individuals throughout Indiana and nationwide. The firm serves clients in a variety of industries, with a particular focus on construction contractors, manufacturers and distributors, long-term care facilities, and medical, dental and veterinary practices. The Slattery & Holman, P.C. trusted advisors provide personal attention to each and every client, helping them to identify and reach both their short- and long-term financial goals. For more information, visit slatterycpa.com.

 

Beware of COVID-Related Text Scams

On Wednesday, November 4, the Internal Revenue Service (IRS) released a warning about a new text scam involving a $1,200 Economic Impact Payment. The goal of this scam is to gain bank account information from taxpayers.

The text message includes a message such as “You have received a direct deposit of $1,200 from COVID-19 TREAS FUND. Further action is required to accept this payment into your account. Continue here to accept this payment …” followed by a phishing web address.

If you suspect that you may have received a fraudulent communication from somebody imitating the IRS, please reach out to phishing@irs.gov. You can also report suspected scams at irs.gov.

For more details, click here to read the IRS release in full.

Top 5 Business Tax Deductions

For small businesses, an effective tax strategy can make a world of difference. Due to a lack of knowledge about business deductions—or sometimes a lack of creativity on the part of some CPAs—many business owners miss out on big opportunities. To learn about five of the top business deductions and determine if you are taking full advantage of the tax opportunities at your fingertips, please fill out the form below to receive the complete article.

SBA and Treasury Release New PPP Waiver

On October 8, the U.S. Small Business Administration (SBA) and the Treasury announced the release of a simplified forgiveness process for Paycheck Protection Program (PPP) participants that received loans of $50,000 or less.

The agencies published a new interim final rule offering guidance for recipients of PPP loans equal to or less than $50,000 (“eligible borrowers”). Details of the rule include:

  • Eligible borrowers are exempt from reductions in forgiveness based on reductions in full-time-equivalent (FTE) employees and reductions in employee salaries or wages.
  • SBA Form 3508S is now available for eligible borrowers. Click here to view the instructions for the form.
  • PPP borrowers should note that if a borrower and his or her affiliates received loans totaling $2 million or more, individual borrowers who received less than $50,000 lose their eligibility for the simplified forgiveness process.

The new interim final rule also includes additional guidance for PPP lenders. Details include the following:

  • Upon submission of Form 3508S by a borrower, the lender must confirm receipt of the borrower certifications and any supplementary documentation (e.g., verification of payroll and nonpayroll costs).
  • The borrower is responsible for accurately calculating their PPP loan forgiveness amount; lenders may rely upon the borrowers’ calculations.
  • In the event that a lender receives documentation of eligible costs that exceed a borrower’s total PPP loan amount, the forgiveness amount may not exceed the total principal amount of the PPP loan.

For further details, click here to read the interim final rule in its entirety or click here for a detailed article from the Journal of Accountancy.

SBA Clarifies Due Date of PPP Forgiveness Applications

On October 13, the U.S. Small Business Administration (SBA) released clarifying guidance regarding the due date of forgiveness applications for loans issued via the Paycheck Protection Program (PPP). A recent article from the Journal of Accountancy offers an overview of the controversy surrounding the issue.

Many borrowers were surprised to find that the PPP loan forgiveness application forms listed “10/31/2020” as an expiration date. This elicited fears that any applications for PPP loan forgiveness were due by the end of October 2020.

The SBA updated its PPP forgiveness FAQ page to clarify that loan forgiveness applications for the PPP are not due by the expiration date listed on the forms. Rather, as previously announced, a loan recipient’s forgiveness application is due any time prior to the maturity date of their loan.

The expiration date listed on the loan forgiveness applications forms was included in order for the forms to comply with the requirements of the Paperwork Reduction Act. “The date represents the temporary expiration date for approved use of the forms, the SBA said, adding that once a new expiration date is approved, it will be posted on the forms,” clarifies the author.

For further details, click here to read the article in full at the Journal of Accountancy.