Virginia’s Return to Earn Grant Program

Renner Business News; July 29, 2021—Paige Mason, CPA

On May 31, 2021, Governor Ralph Northam invested $3 million in the newly launched Return to Earn program for Virginia workers and small businesses. The program matches up to $500 paid to a new employee, up to 25 new employees, for childcare, transportation or other barriers to re-employment.

Many Virginians who lost their jobs as a result of the COVID-19 pandemic still face barriers in returning to work, such as access to affordable child care and transportation.

“These bonuses will serve as an incentive for unemployed workers to get back into the workforce while also helping employers fill vacant jobs,” Northam said on June 11.

So how exactly does it work?

Let’s say a business hires a new employee and pays him or her $500 for transportation costs. The business could then receive a $500 grant through the Return to Earn program to match the funds spent for the transportation costs and further help the new employee.

An eligible business must have fewer than 100 employees. The office or facility must be located in Virginia, and the business must be incorporated in Virginia. The new employee must be a W-2 employee hired on or after May 31, 2021, and earning at least $15 per hour. Tipped employees can qualify if the base rate plus tips is at least $15 per hour, and full- or part-time employees are eligible.

Qualifying small childcare businesses are eligible for a reimbursement of childcare, transportation or other re-employment barriers, up to $500, per new hire. The grant funds do not need to be paid to the employee, rather the business can use the funds to offset the expenses. A qualifying small childcare business is a sole proprietorship, partnership or corporation with services delivered in a home or a childcare center that is licensed or legally exempt from licensing.

To apply for funding, contact your local workforce development board at virginiacareerworks.com. Funds will be matched upon confirmation of the business paying the new employee, either as a lump sum or in installments. The employee must attest that he or she is not currently employed in another W-2 position, but he or she does not need to verify how the funds were used.

©2021 Renner and Company, CPA, P.C. All Rights Reserved.

 

 

 

 

Child Tax Credit and Other Changes Affect Families with Children

Renner Business News; July 15, 2021—Justyna Zuchmanska, CPA

Recent changes in the American Rescue Plan Act of 2021 affect families with children. The tax changes increase the child tax credit, the child and dependent care credit and dependent care flexible spending account limits (DCAP). These are temporary changes and apply only for 2021.

Credit Increased for Certain Taxpayers

This credit is available to individuals with qualifying children under age 18 at the end of 2021 with a valid Social Security number.

  • The amount of the 2021 child tax credit increased for certain taxpayers from $2,000 to $3,000 (for children ages 6-17) and to $3,600 (for children age 5 and under).
  • Taxpayer income also determines the credit amount, which begins to be limited above certain thresholds depending on tax filing status. You may qualify for full credit if your modified Adjusted Gross Income is less than $75,000 for single filers, $150,000 for married filing jointly filers and $112,500 for head of household filers.
  • If your income is higher than the threshold, the credit begins to phase out and eventually gets reduced to the 2020 amount (usually $2,000 per qualifying child).
  • The credit is fully refundable (you can receive it if you do not owe taxes to IRS).
  • The IRS began issuing advance credit monthly payments July 15, 2021.
  • The monthly advance payments range from $166 to $300 per child.
  • You can check your eligibility, update your information and/or opt out using the IRS portal. If you qualify based on 2019/20 filed tax returns, you’ll receive a letter from the IRS with your benefit amount.
  • The advance payments will affect your 2021 tax return. If you receive advance payments, then you can only claim a partial credit on your tax return — which might cause you to owe more tax. Please check your 2021 withholding.

Dependent Care Credit Value Raised to $4,000

This credit is available to individuals with earned income who paid for qualifying child care (children under age 13) or dependent care expenses in 2021.

  • Previously, the credit was $3,000 for a single child, $6,000 for two or more children and became limited for income over $15,000.
  • For 2021, the credit increased to $4,000 (or maximum of 50% of $8,000 childcare expenses) for a single child and $8,000 (50% of 16,000) for two or more children; the income phase-out threshold increased to $125,000; and the credit is refundable.
  • Certain types of care, such as overnight camps or private kindergarten, do not qualify as expenses pertaining to this credit.
  • The pretax dependent care benefits you receive as an employee (see below) offset the dependent care expenses used to calculate the credit.
  • For additional information about child and dependent care credit, IRS publication 503 provides all the detailed definitions and expenses allowed.

Employees Can Contribute $10,500 Pretax to Dependent Care FSA

  • For 2021, the pretax amount that employees may contribute to a dependent care FSA temporarily increased from $5,000 to $10,500.
  • Plan participants can carry over unused amounts from 2020 and 2021 plan years.
  • A taxpayer is not entitled to a deduction or credit for the amounts excluded under a dependent care assistance program, including the Child and Dependent Care Tax Credit.
  • If you would like to make changes to your Dependent Care Flexible Spending account, please contact your employer or HR representative.

Taxpayers need to meet multiple criteria in order to qualify for Child Tax Credit or Child and Dependent Care Tax Credit (not all are listed above).

Please do not hesitate to contact us with questions regarding Child Tax Credit or Child and Dependent Care Tax Credit.

©2021 Renner and Company, CPA, P.C. All Rights Reserved.

New Virginia Filing for Unitary Businesses Due July 1

Renner Business News; June 14, 2021—Mary Ann Dougherty, CPA

The Commonwealth of Virginia has a new, one-time filing requirement for corporations, including nonprofits, operating in Virginia. The report’s purpose is informational, but the penalty for not filing timely is significant.

What is a Unitary Business?

Virginia defines a “Unitary Business” as a single economic enterprise made up either of separate parts of a single business entity—or a commonly controlled group of business entities—that are sufficiently interdependent, integrated and interrelated through their activities, so as to provide a synergy and mutual benefit that produces a sharing or exchange of value among them and a significant flow of value to the separate parts. § 3-5.23 A.2.

Who is Exempt from this Requirement?

  • In-state, unitary businesses operating through one entity for tax purposes and operating only in Virginia are not required to file.
  • S-Corporations are not considered Unitary Businesses and are not required to file.
  • Certain insurance and banking entities need not file.

If You’re not Required to File…

  • If your business received a letter from the Virginia Tax about this new reporting requirement, and you are not required to file a report, you will need to go online at https://www.business.tax.virginia.gov/unitary/#/ubg/ and complete a questionnaire. This will help to avoid any future notices for non-filing.

If You’re Not Exempt…

  • The penalty for not filing a report when required is $10,000.
  • The report will show the amount of tax as if the corporation filed as a combined group compared to the amount of tax on separate returns as currently filed.
  • Partnerships held directly or indirectly, if they meet the definition above, will be included in the calculation.
  • The unitary business group should appoint one corporation for the purpose of filing the unitary combined report. Any member of the group can be selected if they have nexus to Virginia.
  • Certain foreign incorporated entities are excluded from the calculations.
  • Nonprofits or related nonprofit groups with only one business return (990-T, 1065 or 1120) do not need to file.
  • Nonprofits or related nonprofit groups with more than one business return must file.
  • Corporations that file tax returns in multiple states will need to file the report.
  • The report is based on the 2019 taxable year.
  • The report is filed on the Virginia Tax website. You will use the same login used for your other Virginia taxes. The website is https://www.webupload.tax.virginia.gov/user/login
  • No tax is due with the report. The information will be used to provide the General Assembly a report on the revenue impact of combined corporate income tax reporting.

To Find More Resources

Virginia Tax has more details online, including a Unitary Report Template.

Virginia Tax also has more detailed instructions in its Unitary Combined Report Reference Guide.

The above information is general in nature and intended to promote awareness of the new requirement. There are more details. Consult your tax advisor for assistance with your specific facts and circumstances. Contact us if you would like help with this filing requirement.

©2021 Renner and Company, CPA, P.C. All Rights Reserved.

UPDATE:  Virginia Follows IRS Due Date Move to May 17

Renner Individual News; March 22, 2021—Joan M. Renner, CPA, CGMA

Virginia has moved the deadline for filing 2020 individual tax returns to May 17, aligning the Virginia due date with the new due date for federal returns. Last week, the IRS gave individual taxpayers until May 17 to file their 2020 federal returns.

While many taxpayers will benefit from this extra time, others will not. How will this change affect your tax filing deadlines?

Additional extension still available

You can still get an extension of time to file your 2020 Virginia individual income tax return until Nov. 1, 2021. No form is required.

Remember that this is an extension of time to file, not an extension of time to pay. Penalties for late payment will begin May 17.

Virginia Tax recommends e-filing

According to Virginia Tax, filing electronically is the fastest, easiest and most efficient way to file your return.

No change for Virginia estimated payments

Like the IRS, Virginia is NOT giving a break to individual taxpayers who need to pay 2021 estimated tax payments. First quarter 2021 estimated tax payments are still due May 1.

Here’s a recap of current filing deadlines

  • If you file Federal estimated payments, April 15 is still your due date for the first quarter 2021 estimated tax payment.
  • D.C. is still due April 15. The District of Columbia has not moved its individual filing deadline. 2020 D.C. individual returns and 2021 first quarter estimated payments are still due April 15.
  • If you file Virginia estimated payments, keep an eye on May 1. 2021 first quarter estimated payments are still due May 1.
  • Federal 2020 individual returns are now due May 17.
  • Virginia 2020 individual returns are now due May 17.
  • Maryland taxpayers get a break. 2020 Maryland individual returns and the first two 2021 quarterly estimated payments are due July 15, 2021.

What this means for you

In short, if you pay federal or Virginia estimated tax payments or file a D.C. return, you are NOT off the hook until May 17.

We’re here to help

As tax season continues, tax filing deadlines may continue to move. The Renner and Company team will monitor changes and keep you informed. We’ll continue to work to help you meet your filing deadlines for April 15, May 1, May 17 and beyond.

©2021 Renner and Company, CPA, P.C. All Rights Reserved.

IRS Moves 1040 Due Date to May 17

Renner Individual News; March 19, 2021—Joan M. Renner, CPA, CGMA

Amid the second tax season of the pandemic, the IRS is giving individual taxpayers another month to file their 2020 returns.  While many taxpayers will benefit from this extra time, others will not.  How will this change affect your tax filing deadlines?

More time to file federal returns

The new due date for 2020 1040s is automatically moved to May 17, 2021.

You can still request an extension of time to October 15 by filing an extension request using Form 4868. Extension forms are now due May 17, 2021.

Remember, this is an extension of time to file, not an extension of time to pay. Penalties for late payment will begin May 17.

IRS recommends filing early and electronically

The IRS reminds taxpayers that the sooner they file, the sooner they will receive any refunds due. The IRS also encourages electronic filing with direct deposit to help taxpayers avoid paper processing and mail delays. According to the IRS, taxpayers following this recommendation can expect their refunds to be deposited directly into their bank accounts within 21 days of e-filing.

No change for federal estimated payments

The IRS is NOT giving a break to individual taxpayers who need to pay 2021 estimated tax payments. As of now, the IRS advises that first quarter 2021 estimated tax payments are still due April 15.

State filing deadlines may not be moved

  • D.C. still due April 15. The District of Columbia has not moved its individual filing deadline, either. 2020 D.C. individual returns and 2021 first quarter estimated payments are still due April 15.
  • If you file a Virginia return, May 1 is your due date. Virginia has not moved the deadline for filing individual returns. 2020 Virginia individual returns and 2021 first quarter estimated payments are still due May 1.
  • Maryland taxpayers get a break. 2020 Maryland individual returns and the first two 2021 quarterly estimated payments are due July 15, 2021.

What this means for you

In short, if you pay estimated payments or file a D.C. or Virginia return, you are NOT off the hook until May 17.

We’re here to help

The Renner and Company team will continue to work to help you meet your April 15 and May 1 filing deadlines as well as May 17 and beyond.

©2021 Renner and Company, CPA, P.C. All Rights Reserved.

HIGH FIVE FOR YOUR 2020 BUSINESS TAXES—New Laws Bring Relief

Renner Business News; January 18, 2021–Joan M. Renner, CPA, CGMA

To address devastating losses from the COVID-19 pandemic, new laws will bring businesses some relief on their 2020 federal tax returns. The CARES Act has loosened limits on deducting 2020 business interest and net operating losses, and the Consolidated Appropriations Act of 2021 (CAA) has clarified favorable tax treatment for PPP forgiveness.

Here’s a rundown of five high points you may see on your 2020 tax return.

  1. Your PPP will not be taxed. The CARES Act created forgivable loans to small employers under the Paycheck Protection Program (PPP) to pay payroll and other specific costs. Section 1106(i) of the CARES Act provides that any PPP loan forgiveness shall be excluded from gross income.
  2. Expenses paid by PPP will be deductible. Initially, the IRS announced that no deduction would be allowed for otherwise deductible expenses to the extent they were used to obtain PPP forgiveness. Disallowing these deductions could leave a business owing a boatload of tax with no cash left to pay it.
    Fortunately, the CAA clarified Congress’ intent that expenses qualifying for PPP forgiveness are deductible. The CAA says “no deduction shall be denied or reduced, no tax attribute shall be reduced, and no basis increase shall be denied by reason of the exclusion from gross income” of a PPP loan effective for taxable years ending after March 27, 2020.
  3. NOLs can be carried back for a refund. A Net Operating Loss (NOL) arises when business deductions for the year are more than business income for the year. NOLs arising in 2020 can be carried back five years and used to offset prior year income to get a refund of taxes previously paid. Previously, NOLs arising after 2017 could only be carried forward. The CARES Act opens up not only 2020 losses, but also 2019 and 2018 losses, for this five-year carryback, providing much-needed cash to businesses that paid taxes in previous years.
    The CARES Act also allows more loss to be applied to each year. Previously, not only were NOLs arising in 2018, 2019 and 2020 limited to being carried forward, when you did get to apply them in a future year, you could only offset up to 80% of taxable income. The CARES Act removed the 80% limit on the amount of income that can be offset by an NOL for 2018, 2019 and 2020. Now, the NOL deduction for 2018, 2019 and 2020 can offset up to 100% of income. The 80% limit comes back in 2021.
  4. NOLs created in 2020 can be carried forward. Previously, unused Net Operating Losses expired if not used to offset future income within 20 years. The CARES Act eliminated the 20-year expiration for NOL carryovers. Now, unused losses can be carried forward indefinitely, until they can be used to offset future income.
  5. More business interest can be deducted. Previously, a business’ deduction for business interest was generally limited to 30% of adjusted taxable income plus business interest income plus floor plan interest. Any business interest expense above that was not deductible on the current year return, but could be carried forward to future years without any expiration. The CARES Act temporarily raises the limit on how much business interest can be deducted in one year, allowing businesses to deduct business interest up to 50% of adjusted taxable income for 2019 and 2020.

Note:  Your state may not conform to these tax benefits.

You may not see the above federal tax benefits on your state tax return if you operate in Virginia, Florida, California and other states that only adopt federal changes as of a specific date, or not at all.  You will only see these tax benefits on your state tax return to the extent your state adopts the federal tax law changes. The effect on your tax return in these states may be significant.

If you operate in the District of Columbia, Maryland, New York, Pennsylvania and other states that adopt federal tax law changes as they occur, your state will probably adopt the tax benefits discussed above. No guarantees. The Comptroller of Maryland is allowed to decide not to conform to new tax law changes if the effect on the state budget would be more than $5 million.

To determine whether your state will adopt the above federal tax benefits, it’s vital that you consult your tax advisor about the rules in your state. Official guidance may take some time.

There are many more details related to the high points discussed in this article. 

There are also many more details contained in the new legislation. New federal tax guidance will be provided by the Secretary of the Treasury. This information is intended to be a summary of the basics and is not a substitute for individual advice. For specific information about how these provisions apply to you, contact your finance professional.

More about COVID-19-related relief for small employers:

The Consolidated Appropriations Act of 2021 (CAA) allows hard-hit small businesses a second PPP draw.

New Act Extends Emergency Leave Credit for Employers—Including Self-Employed.

©2021 Renner and Company, CPA, P.C. All Rights Reserved.

Empty Nonprofit Daycare hit hard by Covid 19

New Law Allows PPP Second Draw for Hard-Hit Charities

Renner Nonprofit News; January 13, 2021—Joan M. Renner, CPA, CGMA

The Consolidated Appropriations Act of 2021 (CAA) includes a number of provisions to help small employers affected by the pandemic. One of the biggest features is the expansion of the Paycheck Protection Program (PPP) originally created by the CARES Act.  The new law extends the time to apply, provides for a second PPP loan for hard-hit small organizations and adds more entities to the list of eligible organizations, including organizations exempt under Section 501(c)(6).

Who qualifies for a second PPP?

The new law offers a second PPP loan of up to $2 million for certain hard-hit entities. Borrowers that previously received a PPP loan can receive one “PPP Second Draw Loan” if the entity:

  • Is a business, nonprofit, veterans’ organization or self-employed individual, now including certain 501(c)(6) organizations, destination marketing organizations, housing cooperatives and news organizations,
  • Has 300 or fewer employees,
  • Has used, or will use, the full amount of the prior PPP loan before the expected date of the disbursement of the second PPP,
  • Has had at least a 25% reduction in gross receipts in any quarter of 2020 compared to the same quarter of 2019,
  • Is not primarily engaged in political or lobbying activities,
  • Did not receive a grant under the Shuttered Venue Operator Grant program,
  • Is not ineligible for SBA loans in general under 13 CFR 120.110, and
  • Has no board member that is a resident of the People’s Republic of China.

Organizations must have been in operation on Feb. 1, 2020 to receive a PPP loan as well as a second draw.

Churches and religious organizations are not excluded.

The new law affirms the sense of Congress that organizations principally engaged in teaching, instructing, counseling or indoctrinating religion or religious beliefs should not be considered ineligible for initial and second draw PPP loans.

Nonprofits should use the organization’s gross receipts to calculate their reduction in revenue.

How much can businesses receive?

The loan amount is still 2½ times the average monthly payroll costs paid or incurred. Now, the borrower can calculate using either 2019 payroll or payroll in the 12-month period leading up to the date of the loan, which is basically 2020.

Seasonal employers can base their loan amount on payroll costs for any 12-week period between Feb. 15, 2019, and Feb. 15, 2020, for loans made on or after Dec. 27, 2020. Your organization qualifies as a seasonal employer if you either 1) operate for seven months or less during any calendar year, or 2) during the preceding calendar year, you had a slow six-month period during which your gross receipts were one-third or less than the other six-month period.

How will the loan be forgiven?

The loan will be forgiven if the borrower spends the proceeds on eligible costs during the forgiveness period. Eligible costs include payroll costs such as wages, retirement contributions and health insurance, and non-payroll costs for rent, mortgage interest and utilities. At least 60% of the expenditures qualifying for loan forgiveness still must be payroll costs.

The new law clarifies that eligible payroll costs include other types of group insurance such as group life, disability, vision and dental insurance. Wage limitations contained in the CARES Act continue.

The new law also clarifies that eligible non-payroll costs include software, cloud computing services and certain costs to protect workers from COVID-19. Non-payroll costs now include the cost of essential or perishable goods ordered before or during the covered period.

The expanded forgivable expenses may be used by any borrower whose PPP loan has not been forgiven by Dec. 27, 2020.

Is PPP forgiveness reduced by an EIDL advance?

No, an Economic Industry Disaster Loan (EIDL) advance does not reduce PPP forgiveness. The new law made this retroactive.  Borrowers are to be made whole if their loan forgiveness was previously reduced by the amount of their EIDL advance.

What period of time is used to calculate costs for forgiveness?

Borrowers may select any PPP forgiveness period between 8 to 24 weeks, beginning on the date the loan proceeds are disbursed. After the end of the selected forgiveness period, the borrower must apply to the lender for forgiveness.

Forgiveness will still be reduced if the borrower has cut hourly wages by more than 25% or if the borrower has reduced the number of full-time equivalent employees. Safe harbors for these will continue.

What is the deadline for applying?

The new law extends the period for making PPP loans through March 31, 2021. Contact your bank to discuss its timeline for accepting PPP loan applications.

There are many details contained in the new legislation. New guidance will be provided by the Secretary of the Treasury and the SBA. This information is intended to be a summary of the basics and is not a substitute for individual advice. For specific information about how these provisions apply to you, contact your finance professional.

Questions about your PPP?  Contact us for assistance.

©2021 Renner and Company, CPA, P.C. All Rights Reserved.

Man Applying for PPP Second Draw

New Law Allows PPP Second Draw for Hard-Hit Small Businesses

Renner Business News; January 13, 2021—Joan M. Renner, CPA, CGMA

The Consolidated Appropriations Act of 2021 (CAA) includes a number of provisions to help small employers affected by the pandemic. One of the biggest features is the expansion of the Paycheck Protection Program (PPP) originally created by the CARES Act.   The new law extends the time to apply, provides for a second PPP loan for hard-hit small businesses and adds more entities to the list of eligible organizations.

Who qualifies for a second PPP?

The new law offers a second PPP loan of up to $2 million for certain hard-hit small businesses.  Borrowers that previously received a PPP loan can receive one “PPP Second Draw Loan” if the entity:

  • Is a business, nonprofit or self-employed individual,
  • Has 300 or fewer employees,
  • Has used, or will use, the full amount of the prior PPP loan before the expected date of the disbursement of the second PPP,
  • Has had at least a 25% reduction in gross receipts in any quarter of 2020 compared to the same quarter of 2019,
  • Is not primarily engaged in political or lobbying activities,
  • Did not receive a grant under the Shuttered Venue Operator Grant program,
  • Is not ineligible for SBA loans in general under 13 CFR 120.110, and
  • Is not owned 20% or more by an entity formed or operating in the People’s Republic of China and has no board member that is a resident of the People’s Republic of China.

Businesses must have been in operation on Feb. 1, 2020 to receive a PPP loan as well as a second draw. The new law excludes publicly traded companies.

How much can businesses receive?

The loan amount is still 2½ times the average monthly payroll costs paid or incurred. Now, the borrower can calculate using either 2019 payroll or payroll in the 12-month period leading up to the date of the loan, which is basically 2020. Accommodation and food service businesses assigned to NAICS code 72 can use 3½ times average monthly payroll costs.

Seasonal businesses can base their loan amount on payroll costs for any 12-week period between Feb. 15, 2019, and Feb. 15, 2020, for loans made on or after Dec. 27, 2020.

How will the loan be forgiven?

The loan will be forgiven if the borrower spends the proceeds on eligible costs during the forgiveness period. Eligible costs include payroll costs such as wages, retirement contributions and health insurance, and non-payroll costs for rent, mortgage interest and utilities. At least 60% of the expenditures qualifying for loan forgiveness still must be payroll costs.

The new law clarifies that eligible payroll costs include other types of group insurance such as group life, disability, vision and dental insurance. Wage limitations contained in the CARES Act continue.

The new law also clarifies that eligible non-payroll costs include software, cloud computing services and certain costs to protect workers from COVID-19.  Non-payroll costs now include the cost of essential or perishable goods ordered before or during the covered period.

The expanded forgivable expenses may be used by any borrower whose PPP loan has not been forgiven by Dec. 27, 2020.

Is PPP forgiveness reduced by an EIDL advance?

No, an Economic Industry Disaster Loan (EIDL) advance does not reduce PPP forgiveness. The new law made this retroactive.  Borrowers are to be made whole if their loan forgiveness was previously reduced by the amount of their EIDL advance.

What period of time is used to calculate costs for forgiveness?

Borrowers may select any PPP forgiveness period between 8 to 24 weeks, beginning on the date the loan proceeds are disbursed. After the end of the selected forgiveness period, the borrower must apply to the lender for forgiveness.

Forgiveness will still be reduced if the borrower has cut hourly wages by more than 25% or if the borrower has reduced the number of full-time equivalent employees. Safe harbors for these will continue.

What is the deadline for applying?

The new law extends the period for making PPP loans through March 31, 2021. Contact your bank to discuss its timeline for accepting PPP loan applications.

There are many details contained in the new legislation. New guidance will be provided by the Secretary of the Treasury and the SBA. This information is intended to be a summary of the basics and is not a substitute for individual advice. For specific information about how these provisions apply to you, contact your finance professional.

Questions about your PPP?  Contact us for assistance.

©2021 Renner and Company, CPA, P.C. All Rights Reserved.

New Law Expands PPP to Many Associations

Renner Nonprofit News; January 12, 2021—Joan M. Renner, CPA, CGMA

The Consolidated Appropriations Act of 2021 (CAA) includes a number of provisions to help small employers affected by the pandemic. One of the biggest features is the expansion of the Paycheck Protection Program (PPP) originally created by the CARES Act.   The new law extends the time to apply, provides for a second PPP loan for hard-hit small businesses and nonprofits and finally adds more entities to the list of eligible organizations, including associations.

Organizations exempt under Section 501(c)(6) of the Internal Revenue Code are now eligible if they pass a few limitations. For a 501(c)(6) organization to be eligible for a PPP loan, the organization must:

  • Have fewer than 300 employees,
  • Not be a professional sports league,
  • Not have the purpose of participating in a political campaign or conducting other political activity,
  • Not receive more than 15% of its receipts from lobbying activities,
  • Not engage in lobbying activities comprising more than 15% of the total activities of the organization, and
  • Not have spent more than $1 million on lobbying activities during the most recent tax year that ended prior to Feb. 15, 2020.

None of the proceeds may be used for federal, state or local lobbying wages or other lobbying expenses.

The SBA will issue a new loan application form that will shed more light on the SBA’s requirements.

The loan amount is 2½ times the average monthly payroll costs paid or incurred, either in 2019, or in the year before the date of the loan.

The loan will be forgiven if the borrower spends the proceeds on eligible costs during the forgiveness period. Eligible costs include payroll, health insurance, rent, interest and utilities. The new law clarifies that eligible costs also include other types of group insurance such as group life, disability, vision and dental insurance. Eligible costs also include software, cloud computing services and certain costs to protect workers from COVID-19.

At least 60% of the expenditures qualifying for loan forgiveness must be payroll costs.

Borrowers may select any forgiveness period between 8 to 24 weeks, beginning on the date the loan proceeds are disbursed. After the end of the selected forgiveness period, the borrower must apply to the lender for forgiveness.

The new law extends the period for making PPP loans through March 31, 2021. Contact your bank to discuss their timeline for accepting PPP loan applications.

There are many details contained in the new legislation. This information is intended to be a summary of the basics and is not a substitute for individual advice. For specific information about how these provisions apply to you, contact your finance professional.

©2021 Renner and Company, CPA, P.C. All Rights Reserved.

New Act Extends Emergency Leave Credit for Employers— Including Self-Employed

Renner Business News; January 11, 2021—Joan M. Renner, CPA, CGMA

The Consolidated Appropriations Act of 2021 (CAA) includes a number of provisions to help small employers affected by the pandemic. If you have had employees who were unable to work due to COVID-19 illness, quarantine or school closings, the Families First Coronavirus Response Act (FFCRA) funds up to 12 weeks of their emergency leave through refundable payroll tax credits.

Time Extended to Use Emergency Leave Credits

The new law extends the period of time for employers to take advantage of those payroll tax credits in the FFCRA. The credits were set to expire Dec. 31, 2020. The CAA now gives employers through March 31, 2021 to provide the emergency leave and use the credits.

FFCRA provided for sick pay for the first two weeks and then family leave for up to 10 additional weeks. Employees unable to work due to school closings were entitled to leave paid at two-thirds of their regular pay up to $200 per day. Employees unable to work due to COVID-19 illness or quarantine were entitled to full pay up to $511 per day for 10 days.

While the CAA extends the amount of time employers have to take the credit, it does not increase the amount of emergency leave provided under the FFCRA. Once a worker has used the two weeks of sick leave and 10 weeks of family leave originally provided for in the FFCRA, no additional credit is available for that employee.

The FFCRA applies to private employers, including nonprofits, with fewer than 500 employees and certain public employers.

Self-Employed Individuals Can Base Credit on 2019 Income

A self-employed individual unable to work due to school closing or illness related to COVID-19 can also get this credit against his or her 2020 self-employment tax. The amount of the credit is based on the individual’s average income per day. The CAA clarifies that a self-employed individual may elect to use his or her 2019 self-employment income to compute his or her average daily self-employment income.

For example, a self-employed person unable to work during 2020 due to school closing, can take a credit of two-thirds of his or her average daily 2019 income for up to the two weeks of emergency sick leave and the 10 weeks of emergency family leave provided by the FFCRA.

Emergency Leave Wages Can’t be Used for PPP

Remember that your emergency sick and family leave wages can not be used to calculate your PPP forgiveness. The same applies to the self-employed. Don’t take the credit using earnings that you used for your PPP forgiveness.

There are many details contained in the new legislation. This information is intended to be a summary of the basics and is not a substitute for individual advice. For specific information about how these provisions apply to you, contact your finance professional.

©2021 Renner and Company, CPA, P.C. All Rights Reserved.