To our valued clients:
The long-awaited $900 billion coronavirus relief bill has been passed by Congress and is expected to be signed into law by the President. While the final bill is nearly 5,600 pages long, we have highlighted the most critical pieces aimed at helping small business owners.
First, Congress has resolved the debate about deducting expenses paid with Paycheck Protection Program (PPP) funds. Those expenses are deductible, and the loan amount is not included in gross income calculations. Second, the Economic Injury Disaster Loan (EIDL) advances are also received tax free and you can deduct the expenses. Third, the new bill dramatically simplifies new applications for loans under $150k. Under the new rules, you just need to sign and submit to the lender a certification that provides:
- The number of employees the eligible recipient was able to retain because of the covered loan.
- The amount of your loan that you spent on eligible payroll costs.
- An attestation that you accurately provided information, complied with the applicable requirements and plan to retain records for the required period. That is four years for employment records and three years for other records.
Here is a more detailed summary of what the stimulus package includes:
- Paycheck Protection Program (PPP): The relief package creates a second loan from the Paycheck Protection Program, called a “PPP second draw” and allocates $325 billion in aid to small businesses, with $284.5 billion of that going to reauthorize the Paycheck Protection Program.
- Up to $2 million in forgivable loans will be available to businesses with 300 or fewer employees to cover essential costs including payroll and rent.
- Businesses that took a PPP loan and saw their revenues fall by 25% will be eligible for a second loan under the new terms.
- Some of the PPP funds will be set aside for the smallest businesses and community-based lenders.
- PPP borrowers will be allowed to take tax deductions for covered business expenses.
- The new rules also simplify the loan forgiveness application process.
- Paid Sick and Family Leave Credits: Extends the paid sick and family leave credits against employment taxes from the Families First Coronavirus Response Act (FFCRA) for three additional months to March 31, 2021.
- It should be noted that the bill does not extend the FFCRA’s mandate to provide paid sick leave or paid family and medical leave beyond December 31, 2020.
Just as important are the provisions of the relief package geared toward employees:
- Stimulus checks: A second round of stimulus will include direct payments of up to $600 per adult and per child. Unlike the original Cares Act legislation, this bill will now allow mixed-status households with undocumented family members to receive the direct payments as long as one household member has a social security number.
- Unemployment benefits: Two expiring CARES Act programs – the Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation – were extended for 11 weeks. Also, Congress will add $300 to all weekly unemployment benefits. Workers who rely on multiple jobs and have lost income will also be eligible for a weekly $100 boost.
While this bill provides much needed relief to small businesses affected by the Coronavirus, we anticipate potential modifications and clarifications from the Department of the Treasury. We will continue to monitor the news out of Washington, DC to keep you up to date on any changes. We are also confirming the necessary payroll reports you may need, which you will be able to request by contacting your Makai HR account manager. In the meantime, you should consult with your financial planner and/or tax advisor to maximize your benefits and make proper financial, tax and business decisions.
Makai HR Support