The new stimulus bill was signed into law by President Donald Trump on December 27, 2020. In many ways this satisfied our Christmas wish list for the Paycheck Protection Program (PPP) loans. This bill is a great benefit to small businesses. A brief summary of some applicable portions of the bill are as follows.
This is very high level so please do not rely on this solely for any submissions.
- Expenses related to a forgiven PPP loan are now tax deductible. The income is not taxed, so this means no tax effect of receiving the PPP and having it forgiven.
- If your original PPP loan was under $150,000, there is now a very streamlined forgiveness form.
- The Economic Injury Disaster Loans (EIDL) Grant, if received, no longer reduces the PPP forgiveness amount. Those that have already applied for forgiveness should be adjusted by their bank. There is also a new funding for EIDL grants up to $10,000 subject to several requirements – the main one being a 30% decrease in sales in an 8 week period after March 20, 2020 compared to the same period in 2019. We will have more information as the SBA updates their application.
- You may be able to take a second draw from the Paycheck Protection Program if you meet certain requirements. The main requirement is that you had a 25% revenue decrease in any quarter of 2020 when compared to the same quarter in 2019. The second draw is calculated the same as PPP1, unless you would like to recalculate using 2020 payroll costs. One exception to this is that restaurants and hotels will get 3.5 months of payroll instead of the 2.5 from before. We do not expect this to be up and running at the banks until after the new year, and you will need to get details from your bank on how to apply. There is a very good chance that the bank you did your previous PPP loan with may be able to expedite. For now the best thing to get ready is a quarterly sales listing from 2020 and 2019 to show the reduction in sales. If your 2020 payroll was substantially higher than 2019 you will need to submit payroll records, however your W-3 won’t be ready until after year end so a few things need to come together over the coming weeks to be able to apply.
- Employee Retention Credit – This was originally not available with a PPP loan, however that exclusion is now removed and subject to many caveats depending on your size and industry you may be able to get a payroll tax credit for retained employees. The two main requirements in 2020 are either 1- a quarter with a 50% drop in sales OR required to shut down by government order. The rules for 2021 are less strict and the credit is higher. We are reviewing the requirements for this and will be helping to determine who is eligible for this retroactively and moving forward in the coming weeks.
As this was just signed, most of the forms and such to take advantage of the updated programs are being created and coordinated with the SBA and banks over the following weeks.
For now, please enjoy your holidays with your family and we look forward to talking with you in 2021!