Here’s a look at updates from the latest COVID-19 stimulus bill
Further clarifications were issued on the Consolidated Appropriations Act (CAA), which was signed by former President Donald Trump on December 27, 2020. This $2.3 trillion bill contains $900 billion earmarked to provide COVID-19 economic relief. For a detailed look at what the COVID-relief portion of the bill contains, check out our previous blog post.
This new round of COVID-19 relief funding provided $600 direct stimulus payments, revived Paycheck Protection Program (PPP) loans, extended various unemployment benefit programs, and extended tax credits to businesses. Additional federal guidance has been issued to clear up some of the gray areas around these program extensions.
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Let’s take a look at what’s new:
The PPP loan is intended to help businesses keep their workforce employed during the COVID-19 pandemic by providing funding to cover payroll costs.
New guidance defines “payroll costs” to include group life, vision, and dental insurance. This clarified definition will be applied retroactively, however, you cannot go back and change your application if you’ve already applied for loan forgiveness. Additionally, this expanded definition includes operational expenditures, meaning a business’ costs for software or cloud computing services that facilitate:
- Business operations
- Products or service delivery
- The processing, payment, or tracking of payroll expenses
- Human resources
- Sales and billing functions
- Accounting or tracking of inventory, records, and expenses
Borrowers can now increase the loan amount to the maximum of round one of the PPP loan. It should be noted that borrowers must spend the total amount of the round one PPP loan before getting a round two loan.
Lastly, applicants can now choose between eight weeks or 24 weeks of loan coverage when applying for the PPP loan.
Employee Retention Tax Credit (ERTC)
The Employee Retention Tax Credit assists businesses severely impacted by the COVID-19 pandemic with financial relief.
The ERTC can now be claimed retroactively at 50% of $10k in wages for a year with a maximum of $5k per employee. There are multiple facets of this tax credit for employers to consider and further guidance needs to be issued on making retroactive claims.
The tax credit for 2021 is at 70% of $10k in wages for Q1 and Q2 and the maximum credit is set at $14k per employee for the year. To be qualified for this tax credit, a business now has to show a 20% decline in gross receipts compared to the same calendar quarter in 2019, or the company can compare gross receipts to the immediately preceding quarter. For example, to determine a business’ qualifications for Q1, you can look at Q4 2019, and for Q2 qualifications, you can look at Q1 2019.
CAA updates also adjusted the definition of a small business to employers with less than 500 employees, rather than the initial 100 employees, allowing more businesses to become eligible for the tax credit.
Families First Coronavirus Response Act (FFCRA) Tax Credit
The FFCRA initially mandated paid sick time and paid family leave, provided unemployment assistance for COVID-19-related issues, and offered tax credits to employers. While the paid sick and family leave mandate has not been extended, businesses can claim the tax credit through March 31, 2021.
Unemployment benefits under the FFCRA will now include an extra $300 per week from the federal government on top of regular state unemployment checks for 11 weeks. The federal unemployment assistance has been extended through March 14, 2021.
Finally, a five-year extension has been added to the Work Opportunity Tax Credit (WOTC), placing the new program expiration date at December 31, 2025. The WOTC is a federal tax credit available to employers that hire and retain individuals from groups who have consistently faced barriers to employment, helping employers who may be facing labor shortages as well as individuals who need help finding jobs.
Nextep will continue to keep an eye on new developments and provide updates as we receive them. In the meantime, if you have any questions about how these guidelines impact your business, contact your HR business partner or call us at 888.811.5150. Find more COVID-19 info on our resources page.