Latest Government Pandemic Relief
On 12/31/20, Congress passed another large bill that includes several financial and tax provisions benefiting individuals and businesses. On Sunday, 12/27/20 the president signed the bill into law.
The bill is quite lengthy—5,593 pages—but we have for now highlighted some of the most pertinent provisions of the bill below.
Second Round of Stimulus Funds
- A new round of stimulus payments provides up to $600 per person. Another bill recently passed by the House of Representatives proposes the amount be increased to $2,000.
- Eligibility is tied to taxpayer income; individuals with higher earnings may not qualify for full or even partial stimulus funds.
- Payments are expected to begin in the days ahead.
- We will provide additional information on stimulus payments as more develops.
PPP Funds Taxability
This had been a huge issue but has now been clarified and resolved by the government. In general—
- PPP loan forgiveness will be considered non-taxable income.
- Expenses paid with the PPP funds will still be deductible for tax purposes.
- Note that some states’ laws may treat the PPP funds differently for taxes, however. Minnesota, for example, hasn’t yet adopted the federal treatment of PPP loan forgiveness.
New Round of PPP Loans
The second round will have some differences from the first round.
- Eligible borrowers must be able to show that their gross receipts decreased in any one quarter in 2020 by more than 25% compared to the corresponding quarter in 2019.
- The list of eligible expenses qualifying for forgiveness is also expanded.
- Food service industry businesses may qualify for greater PPP funding levels.
Simplified PPP Forgiveness for Loans Up To $150k
PPP loans not exceeding this amount can be forgiven under a simplified, one-page application.
Government Payments On SBA Loans Not Taxable
The CARES Act provided that the SBA would make the principal and interest payments on certain SBA loans for 6 months. The new bill clarifies those payments are not taxable income.
Extension of Paid Leave Under the FFCRA
The credit for paid leave under the Families First Coronavirus Response Act is extended through March 31, 2021.
100% Deductible Business Meals
Business meals will be 100% deductible in 2021 and 2022. Previously, business meals had been 50% deductible. Business entertainment expenses will still be nondeductible.
Employee Retention Credit
This has been extended through next June and now allows PPP recipients to claim the credit in certain circumstances.
Many tax provisions that would have expired on 12/31/20 have been extended.