More Small Business Relief From the Consolidated Appropriations Act, 2021

Small businesses in the U.S. could take advantage of new legislation with PPP updates and Employee Retention Credits in 2021

Joplin, MO, Feb. 25, 2021 (GLOBE NEWSWIRE) -- The government has taken notice that many small businesses are still requiring support to stay afloat due to COVID-19. In response, The Consolidated Appropriations Act, 2021 (CAA). The CAA has laid out additional funding for businesses struggling with COVID and amends previous legislation and regulatory guidance.

The new PPP updates and Employee Retention Credits found in the legislation can make a huge difference for small businesses and below, we provide some guidance on eligibility, restrictions and more.       

PPP Updates and Extended Application Window

The CAA re-opened applications for initial PPP loans, which can be submitted now through March 31, 2021 and more organizations are eligible now.                

The CAA expands PPP eligibility to include 501(c)(6) organizations (trade associations, chambers of commerce, etc.).   

Important Things to Note:           

  • These organizations may not participate if more than 15% of their receipts are from lobbying activities.                   
  • Organizations must have 300 or fewer employees.               
  • The CAA also extends eligibility to housing cooperatives, newspapers, broadcasters, and radio stations.                                        

The CAA allows certain “hardest-hit” small businesses to apply for a second PPP loan.

The maximum loan amount would be $2 million. Businesses that qualify for this loan need to have 300 or fewer employees, must have used (or will use) full amount of first PPP loan and show at least a 25% decline in revenue in any quarter in 2020 as compared to the same quarter in 2019
The loan is based on 2.5 months of average payroll (3.5 months for hotels and restaurants) and businesses can expect the same forgiveness rules as under the first PPP loans.

What About Additional Funding Requests?                  

The CAA allows borrowers to submit a supplemental funding request if they feel they are entitled to additional funds based on the changes in the law.               

Borrowers cannot submit supplemental requests if their PPP loan has already been forgiven as of the date of enactment.                   

Also, borrowers that returned some or all of their original PPP loans or borrowed less than the maximum amount may re-apply (or submit a modification request, depending on the circumstance).                                       

Important Note on Tax Expenses: The CAA makes it clear that the loan forgiveness is not taxable and the expenses you use the money for are deductible.                           

Employee Retention Credits                                

The employee retention credit applies more broadly as a result of changes made by the CAA. Most of the changes are effective as of January 1, 2021 and impact the first two quarters of 2021.

What You Need to Know About Employee Retention Credits and PPP Loans

CARES Act: Companies that received a PPP loan were ineligible to claim the employee retention credit.               

CAA: This provision of the CARES Act is repealed. A company that receives (or received) a PPP loan is no longer prohibited from claiming the employee retention credit. Companies that received a PPP loan in 2020 and paid qualified wages in excess of the forgiven PPP loan amount in 2020 (and was otherwise eligible to claim the credit) can claim the credit retroactively.                    

*The IRS has not yet issued guidance on how those retroactive claims will be handled.

Companies can use previous quarter performance to determine eligibility.                   

CARES Act: Businesses with operations that were either fully or partially suspended by a COVID-19 government order (only during the time the order was in effect) or gross receipts were less than 50% of gross receipts for the same quarter in 2019.        

Companies with more than 100 employees could only claim the credit on employees that were not performing services. Companies with 100 or fewer employees could claim the credit on all employees being paid.                

CAA: Beginning January 1, 2021, the credit is available to businesses with operations that were either fully or partially suspended by a COVID-19 government order (only during the time the order was in effect) or gross receipts are less than 80% of gross receipts for the same quarter in 2019. 

The threshold increases to 500 employees. When calculating the 500-employee threshold, the employees of all affiliated companies sharing more than 50% common ownership must be aggregated.                               

How Employer Advantage Can Help Manage Employee Retention Credits   

Once Employee Retention Credits are activated for a client, Employer Advantage will calculate the credit with each payroll and a credit on the payroll invoice will be applied for that same pay period, up to the amount of the 941 tax liability for that payroll.                   

About Employer Advantage

Trusted for more than 30 years, Employer Advantage frees employers from the administrative and compliance burdens of having employees so they can focus on their business success. From energetic entrepreneurs to large corporations, Employer Advantage creates a tailored and strategic approach to fit individual business needs and company culture. Employers can partner with Employer Advantage as their PEO, opt into small business outsourced HR services, or choose anything in between.

Employer Advantage gives clients access to a dedicated team of experts with more than 450+ years of combined experience in payroll, employment taxes, benefits, risk management, workplace safety, HR management, workers’ compensation, OSHA, DOT and more. They complement their people with a powerful HR tech platform that streamlines the entire employee lifecycle. This comprehensive approach enhances profitability, provides peace of mind, and gives employers the freedom to grow.

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