In December, Congress passed a large economic stimulus package that President Trump signed into law on December 27, 2020. This package contains several tax and business provisions aimed at stimulating the economy as we navigate the pandemic. As much of this information is pertinent to our clients, we’ve broken down some of the key points below.
- PPP is no longer “taxable.” This means that business owners are now receiving the best of both worlds: the forgiven loan is not taxable and the expenses paid with the loan are deductible.
- A second draw on the PPP will be available to businesses who experienced a greater than 25% decrease in gross receipts in any calendar quarter in 2020 compared to the same quarter in 2019 or for 2020 compared to 2019.
- The original PPP reopens for eligible taxpayers who did not receive a loan.
- The Employee Retention Tax Credit is now available for small businesses who did receive a PPP loan in 2020. To qualify, you must have experienced a 50% reduction in gross receipts in a calendar quarter in 2020 compared to the same quarter in 2019 or have been shut down or partially shut down by a government in 2020.
- The Employee Retention Tax Credit will be available to small businesses in 2021 who experience a 20% drop in gross receipts compared to the same quarter in 2019.
- PPP forgiveness for loans under $150,000 has been greatly simplified. We are currently waiting for the updated forms from the SBA that your bank should provide to you. If your loan has not been forgiven and you received a loan under this amount, we recommend that you wait until the simplified forgiveness option is available to you.
- Note that unless you did not receive an original PPP loan, these provisions largely depend on a drop in gross receipts. If you feel you may qualify, give us a call and we can discuss these provisions in greater detail. The PPP will be administered through banks once again.
- A new round of economic impact payments have begun and are currently being sent to eligible taxpayers and certain expiring tax benefits have been extended.
- Farmers may increase their first PPP loan or apply for one based on their gross receipts rather than their net income.
Please keep in mind that this information is subject to change and that this should not be taken as accounting advice. If you would like guidance or have other questions, please contact us.