Emergency Coronavirus Relief Act of 2020
This year has undoubtedly brought many challenges, but once again, we are given an opportunity to adapt and make the most out of what 2020 has to offer. The COVID Relief Act has officially passed. Here are some of the key details that may affect you:
Additional PPP Loans – If you are eligible and experienced a drop in revenues of 25% or greater in any one quarter in 2020 as compared to that quarter for 2019, you are eligible for additional PPP funding. This next round of PPP funding will go through the banks just like the first round. Qualifications on the spending of 60% payroll are still in place, with up to 24 weeks to spend the funds just as before. Specific dates on when loans will be available have not yet been released, but we suggest contacting your banker.
PPP eligible expenses are now deductible – This is a BIG change for the better! This Act corrects the department of revenue ruling earlier this year that disallowed the deduction of PPP related expenses. This now applies for both the previous PPP loans and any new loans to be issued in 2021.
Simplified Application for Forgiveness for PPP loans up to $150,000 – It looks like this long-awaited revision has arrived. If you have not applied for forgiveness yet, wait a bit longer until the new forms are issued to make the process a bit easier.
Employee Retention Tax Credit – If you are eligible, this Act expands the Credit maximum up to $14,000 and allows for participation in this credit even if you took out a PPP loan. (Previous versions did not allow for participation in both Employee Retention Tax Credits and PPP loans.) This Act allows for the Employee Retention Credit to be applied retroactively on your 2020 tax return if 2020 gross receipts are 80% or less of 2019 receipts. It also allows for credits in 2021; however, it appears those credits may be hard to qualify for unless your business is currently collecting less than your 2019 pace. We expect the IRS to issue more guidance soon on how to apply for the credit.
New EIDL Grants for businesses in low-income communities – We don’t have a lot of detail on this yet, but we expect to hear more soon.
Business Meals now 100% Deductible – If you own a business, the Act allows for a 100% deduction on meals starting 2021 through 2022.
Changes to Flexible Spending Accounts – If you or your spouse has access to Flexible Spending or Dependent Care accounts, you can now roll balances from 2020 into 2021 without the risk of losing your funds. You can also roll balances from 2021 into 2022. If you typically use these accounts but did not make elections to contribute for 2021 due to concerns that you could not use the funds, contact your HR department and ask if you can add funds for 2021 since they can now be rolled into 2022 with no penalty.
For more details on the above, we found this article to be helpful:
Tax Provisions In Covid-19 Relief Bill
As we look toward 2021 and close out 2020, we are reminded of one of our biggest lessons from 2020: Stay flexible. Plans change. The most successful people are those who adapt.
We hope that we have been an invaluable partner to you in 2020, and we look forward to providing you with information, guidance, and flexibility in 2021.
Happy New Year!