Federal Coronavirus Relief Packages and Stimulus

As of January 11, 2021, another round of Coronavirus relief and economic stimulus has been launched and is now ready for applications.

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Read more about what’s here.

Last week there were several new changes added that could affect you. Here’s what’s different this time around:

Download the application here.

Timeline of when you can apply:
  • Community financial institutions will be able to offer PPP Loans to first-time borrowers today, January 11, 2021.
  • Then, on Wednesday (January 13th), lenders can offer PPP loans to second-time borrowers.
  • The PPP program will open to all participating lenders shortly thereafter.

Loans probably won’t be approved same-day this time around, as lenders are taking more caution to approve lending and avoid fraud. This means that same-day approvals will be very unlikely this time around.

This additional support was built for small businesses. Who is eligible for what, exactly? Those businesses who:

  • Have less than 300 employees per physical location.
  • Business that have suffered revenue declines of more than 25 percent in any given quarter this year compared to last year
  • Qualified businesses can receive loans are up to $2 million
Minority-owned businesses and business located in a Low to Moderate Income Areas (LMI) are eligible for more support.
  • A low-income person is someone whose total annual income is 50% or less of the Area Median Income (AMI) or average income for the community where they live.
  • LMI geographies can be defined in many ways – city borders, county lines and zip codes. The most precise way to look at a geography is by using census tracts.
  • A low-income census tract is an area where more than half of the people living in that census tract meet the definition of low-income.
  • If you’re unsure about your area, here’s the government’s dataset and map service to figure it out.

Additionally, there is more support set aside for certain types of businesses. You’re eligible for these exclusive funds if you:

  • Have 10 or fewer employees
  • Are a minority that owns a business
  • Are located in a LMI area
  • Run a small community bank, credit union, or small agricultural credit institution
  • Run a mission based-community lender like community development financial institutions (CDFIs), certified development companies (CDCs), minority depository institutions (MDIs), and SBA Microloan intermediaries.

If you received money from the first round of PPP funding, you must have used or will use the full amount of your first PPP, and you need to demonstrate at least a 25 percent reduction in gross receipts in the first, second, or third quarter of 2020 relative to the same 2019 quarter.

If you have an existing PPP loan, you can request an increase. If these new interim rules changed your loan calculations, you’re permitted to work with lenders to increase the loan amount, regardless of whether you’ve received it all or not. Reach out to your SBA banker about increasing your PPP loans.

Forgivable Expenses

“Forgivable” expenses have been expanded beyond payroll-related expenses, utilities and rent. They now include:

  • Operating costs, such as payment for any software, cloud computing, and other human resources and accounting needs.
  • Property damage costs, related to property damage due to public disturbances that occurred during 2020 that are not covered by your insurance.
  • Any supplier costs, such as a contract, purchase order, or order for goods expenditure before taking the loan that was essential to your day-to-day operation. Perishable goods, however, can be forgiven before or doing the life of a loan.
  • Worker protection costs, such as personal protective equipment and adaptive investments to help you comply with federal health and safety guidelines

Depending on your industry, you can save up to $54,000 in principal and interest payments on a new loan or $72,000 on an existing loan. Hard hit industries such as food service, arts, entertainment and recreation, educational, laundry, and personal care services are eligible for 8 months of forgiveness principal and interest payments and are capped at $9,000 a month. For those loans approved before September 20 2021, your first 6 months of principal and interest up to $9,000 a month is also forgiven.

Employee Retention Tax Credit

The Employee Retention Tax Credit   has been expanded and extended into July 1, 2021.

  • The credit rate was increased from 50% to 70% of qualified wages.
  • Eligibility for the credit was extended by reducing the required year-over-year gross receipts decline from 50% to 20% and provides a safe harbor that allows employers to use prior quarter gross receipts to determine eligibility.
  • The limit on per-employee creditable wages was increased from $10,000 for the year to $10,000 for each quarter.
  • For more information on the Employee Retention Credit system, read here.

In addition, you can take advantage of the Employee Retention Tax Credit through 2026 if you hire those on welfare or veterans.

Social Security Taxes Deferred

Deferral of social security taxes has been extended through March 2021 and you can pay them as late as the end of 2022. While extending these payments doesn’t relieve you of your obligations, it does provide an ‘interest-free loan’ from the government.

The government will give a tax benefit for supporting restaurants. You can now deduct 100% of business meals that take place at a restaurant in 2021 and 2022.

Nonprofits can get more donations. Make sure you include this in your marketing!! The “above-the-line” charitable contribution has been extended through 2021 at $600 for those married filing jointly and $300 for others. This means taxpayers will be able to take the standard deduction and deduct up to $600 in charitable giving when calculating their taxable income. For the 2020 tax year, taxpayers could deduct up to $300 above-the-line for charitable contributions.

For sole proprietors – you can apply for this loan as well! However, how you calculate your loan and its forgiveness differ from a small business with employees.

You can calculate your loan by dividing last year’s profit by 12 to get a monthly average net profit. Multiply that figure by 2.5 to determine the amount of your PPP loan.

Since sole proprietors don’t have payroll, 2.5 months’ worth of new profit is automatically forgiven, without having to actually spend it on anything. This is called “Owner Compensation Replacement” – read the official text here.

Here is the PPP Forgiveness Application for sole proprietors.

Disclaimer: This publication is for informational purposes only and is not intended as legal or tax advice. Financial, bookkeeping, tax filing and legal advice should always be obtained from qualified professionals for any business conditions or loans or grants associated with them. Every possible effort has been made in preparing and researching this material. We make no warranties with respect to the accuracy, applicability of its contents or any omissions.