New Legislation on PPP Round 2 and other COVID-19 Stimulus
Dear Clients and Friends of PracticeCFO,
Well, the New Year is starting off with some excitement. Around 10% of our clients across seventeen states are now reporting staff getting COVID-19 – and in all cases, believed to have been contracted outside the workplace. Prior to December, we could count these stories on one hand. Thankfully, everyone seems to recover quickly and vaccines are on their way in 2021!
Hot Topics for this Newsletter:
- The new Stimulus Bill signed 12/27/20 and what it means for your office.
- Thoughts if an employee gets COVID-19.
- California-only topics.
New Stimulus Law:
President Trump signed into law a new COVID-19 relief package on 27 December called the Consolidated Appropriations Act of 2021. We will summarize some of the key business and personal topics.
Bottom line for now on PPP Round 2: The SBA has not put out a new PPP application - therefore, no one can apply yet. We expect they will be available next week. We’ll send out an announcement when we learn more about the application process.
Business Topics in the New Legislation:
- Eligibility: 2nd Round PPP (AKA “Second Draw”)
Congress allocated an additional $284B to the SBA for additional forgivable PPP small business loans. Businesses with under 300 employees that suffered a decline of 25% or more in revenues (collections) in any quarter of 2020 compared the same quarter of 2019 will be eligible. Dentists may qualify for 2.5 times their average monthly payroll costs, same as PPP1. Qualifying expenses include the same qualifying expenses under PPP1 (Payroll, rent, utilities, and mortgage interest), but also PPE, supplies, software costs, and any expenses to modify the facility to comply with COVID-19 health and safety guidelines. As with PPP1, at least 60% of PPP2 funds must be used for payroll during a 24 week period.
Based on the size of the current pool of funds, the more stringent eligibility requirements, and the fact that second installment of the original PPP loan was never fully used, we don’t expect there to be a similar stampede to receive funds as the first round. Our prediction is that the process will be much more streamlined as lenders, the SBA, and applicants have become acclimated to the process.
- EIDL Grants
Under the new law, EID Grants no longer reduce the amount of PPP1 forgiveness.
- When can I apply?
The new application has not been released by the SBA. No release date has been disclosed, however we anticipate that it will be sometime next week.
- Can PracticeCFO help?
Until the application is released, it is unclear whether PCFO will be able to file for forgiveness on behalf of our clients, particularly during tax season. Once we've reviewed the application and process, we will, at a minimum, provide instructions on how to complete the applications. More details to follow.
- Changes to the taxability of forgiven PPP loans.
The new law allows forgiven PPP funds to truly be tax-free. Prior to the change, the original CARES Act allowed businesses to exclude forgiven PPP loan proceeds from taxable revenue, but the IRS quickly pointed out that the expenses paid for with that free money would not be deductible. In other words, forgiven PPP would effectively by taxable. The new bill fixes that.
Your CFO may have been tax planning assuming PPP funds were taxable, in which case many of you may have a refund. We recommend that large refunds be applied toward the 2021 tax year, as large refunds often received extra scrutiny and delay from the IRS.
- Business Meals
The new law now provides a 100% tax deduction for business meals for 2021 and 2022 (up from 50%).Business meals are meals a representative of your company has with a current or potential business customer, client, consultant or similar business contact. Entertainment expenses, e.g., concerts, sporting events, remain non-deductible.
- Student Loan Payments
The new law extends the moratorium on student loan debt repayments to January 31, 2021.
- Qualifying SBA Loan
The new law extends the time that the government will pay principal, interest, and fees on certain qualifying SBA loans. For SBA 7(a), 504, and microloans that were made prior to the enactment of the CARES Act, the SBA will resume its payments of principal and interest for an additional 3 months (8 months for certain small businesses hardest hit by the pandemic), capped at $9,000 per borrower per month.
For SBA 7(a), 504, and microloans made within 6 months of enactment of the CARES Act or approved between February 1 and September 30, 2021, the SBA will pay the first 6 months of principal and interest, capped at $9,000 per month.Please contact your lender directly if you think you qualify.
- Employee Retention Tax Credit
This credit was previously disallowed if you received PPP. The new law opened up this credit to dentists even if they received PPP. Additionally, its retroactive back to March 12, 2020 and remains in force through July 1, 2021. It’s available to businesses that continued to pay staff during COVID-19 mandated office closures and saw a reduction in gross receipts of 20% or more when compared to the same quarter in 2019.
The tax credit amount is capped at $5,000 per employee for quarters in 2020 and $7,000 for the first two quarters of 2021. Keep in mind that although PPP recipients are still eligible for this credit, any PPP forgiveness allocated toward payroll can not be used towards this credit. Only payroll costs NOT paid using PPP would be eligible.
MyPay clients: once we get guidance from them on how to apply, we will notify you on the process. PracticeCFO will not be completing this application on behalf of clients. However, we will provide guidance and answer questions upon request.
- Paying staff who tested positive for COVID-19 (or are presumptively sick) and the related tax credits.
COVID-19 sick pay is no longer mandatory but can be voluntarily given through 3/31/2021 and still be eligible for a dollar-for-dollar tax credit (up to $511/day). So not much downside in paying it. More information is included in the following links:
- Original FFCRA requirements
- FFCRA Update (Ends 3/31/2020)
If you haven't paid COVID-19 Sick time before, you simply code their normal hours to a special “COVID-19 Sick Pay” line item in MyPay Solutions. The maximum payment would be two weeks based on their normal weekly schedule. This line needs to be requested from MyPay Solutions. If needed, please ask Ginger at MyPay Solutions via email to enable the code in your system: email@example.com.
Personal Topics in the New Legislation:
- Stimulus Checks
$600 stimulus payments per adult and child under 17 will be direct deposited/mailed out, phasing out entirely for singles who earned more than $87K in 2019; $174K married. Again, most of our clients will not qualify. Many eligible people have already started getting their deposits.
Extended from 39 weeks to 50 weeks (through March 14th, 2021). In addition to what the state offers, federal government will add $300 per week of benefit.
Thoughts If An Employee Gets COVID-19 (Please consult your employment attorney for specific legal advice)
- Key Requirements
- Alert any staff or patients who may have been exposed by the employee to immediately get tested.
- Exposed staff can only return to work if they test negative.
- In certain states, like California, you may need to alert your Worker’s Comp provider and local health department/OSHA. Here is the California version of these rules.
- Pay any COVID-19 sick or presumptively sick employees using the COVID-19 Sick pay line described earlier. Thereafter, the employee will need to use Sick or Vacation time, or in case of work-related infection in certain states and after a waiting period, get Worker’s Compensation.
- California Relief Grant program for businesses
More information can be found here. Deadline to apply is January 13, 2021. Applications will be considered individually and are NOT first come, first served. They are administered by agencies chosen by counties, which is confusing. Go to the website, drill down to your county and select an agency to apply with. PracticeCFO will not be completing these applications for clients. All grants are taxable.
- Main Street Small Business Tax Credit
Did you suffer 50% or greater revenue loss in Q2 2020 compared to the same quarter the prior year? Did you also increase your total number of employees from Q2 compared to the July to November 2020 time period? Then you may be eligible for a $1,000 credit per added employee. Application deadline is January 15, 2021. First come, first serve. PracticeCFO will not be doing these applications. More here.
- California dentists can now administer the COVID-19 vaccine, but a few technicalities:
- Unless you have cold storage that can keep vaccines between -25C and -60C, it’s probably not going to happen out of most dental offices.
- It’s unclear how or how much a dentist would get paid by insurance companies or the government.
- Some training is required.
- It’s too early to tell how accommodative and accessible this option will be. More information can be found here.
- 2021 Legal Updates for California Employers
Refer to the newsletter from our friends over at Scott & Whitehead Law with important legal and labor law updates here. This includes mandates on how and to whom to report both COVID-19 infections in your office and COVID-19 eligibility for Worker’s Compensation.