COVID-19 Relief Bill – What we know so far

Posted by Jonathan A. Patterson, CPA, CVA and Michael D. Kelly, CPA

On Sunday, December 27, President Trump signed into law $900 billion in COVID-19 Relief and $1.4 trillion in government funding. The over 5,500 page bill combines financial relief for individuals, businesses, and nonprofits and includes many new provisions that are important for our clients and friends to be aware of. The full legislative text can be reviewed here: Consolidated Appropriations Act, 2021 or COVID-19 Relief Package. Our team is looking over each section carefully and have provided highlights of significant sections of the bill below:

Stimulus Checks

  • A fresh round of stimulus checks for individuals consisting of $600 per person ($1,200 Joint)
  • An additional $600 for each dependent
  • Stimulus check is based on the 2019 income tax return
  • Those with Adjusted Gross Income (AGI) above $87,000 ($174,000 Joint) will not receive a stimulus check
  • If a taxpayer has lower AGI in 2020, they may be able to claim a credit on their 2020 return if they were not eligible based on 2019 income

Unemployment Benefits

  • Numerous types of unemployment benefits (including special benefits for self-employed workers) have been extended through March or April of 2021

Paycheck Protection Program (PPP) Loans

  • PPP funds are now excluded from income and businesses can claim a full deduction for expenses paid with PPP funds (double benefit)
  • The category of eligible expenses that are considered in the forgiveness calculation has been expanded
  • Additional flexibility has been added to the duration of the covered period
  • The creation of a less complex forgiveness application for borrowers who received less than $150,000 of PPP funding has been mandated

Second Round of PPP Loans

  • Eligible borrowers can now apply for a second PPP loan
  • Maximum loan amount is $2 million
  • Must have less than 300 employees, in general
  • Must demonstrate a drop in revenue (25%) for any 2020 quarter when compared to the same quarter in 2019
  • In general, loans received will be based on average monthly payroll costs multiplied by 2.5
  • Food and accommodation services are eligible for a 3.5 multiplier on average monthly payroll costs
  • Food and accommodation services are eligible for the second round of PPP funding if employee count is less than 500
  • Final SBA rules on the second round of PPP loans will be not be available now and will not be available until 10 days after the President signs the bill

Small Business Loans (7a) Payments

  • The SBA will cover 3 additional months of payments for existing borrowers beginning in February 2021
  • An additional 8 months will be covered for other taxpayers based on the NAICS code shown on the tax return
  • Will be excluded from income

Economic Injury Disaster Loans Advances

  • Will be excluded from income
  • Will not reduce the PPP forgiveness amount

Extension of Employer Paid Sick Leave – (COVID-19 related)

  • Program has been extended to March 31, 2021

Extension of Employee Retention Tax Credit

  • Expanded through July 2021
  • Credit increased from 50% to 70% of the eligible wages for Q1 and Q2 of 2021
  • For Q1 and Q2 of 2021, base amount of eligible wages increased from $10,000 per employee to $10,000 per employee per quarter
  • For Q1 and Q2, a 20% drop in revenue must be demonstrated for any quarter compared to the same quarter in 2019, unless the business did not exist in 2019. If the business did not exist in 2019, then you can use the corresponding quarter from 2020 (bullet updated for clarity on 12.31.2020)
  • Can now be used concurrently with the PPP loan but the same wages cannot be used for both programs

Tax Extenders and Other Miscellaneous Items

  • Personal protective gear and cleaning supplies are eligible expenses for computing the educator expense tax deduction for teachers
  • Business meals provided by a restaurant are 100% deductible in 2021 and 2022
  • AGI limitation for medical expenses is now permanently set at 7.5%
  • Can elect to use 2019 wages in the calculation of Earned Income Tax Credits, which may benefit those taxpayers who are unemployed in 2020
  • Charitable deduction for taxpayers claiming standard deduction has been increased to $600 for joint filers
  • Lifetime learning credit income thresholds have increased

Register for our Belfint Briefing Webinar: Highlights of the COVID-19 Relief Bill on January 26 from 8:30-10:30.

As additional information and clarification is provided by the SBA and Treasury, BLS will prepare more detailed summaries of certain sections. Please don’t hesitate to contact your BLS Team Member directly or at info@belfint.com to see how the COVID-19 Relief Bill affects you or your organization.

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