Paycheck Protection Program (PPP)
The PPP Extension Act of 2021 was signed into law by President Biden on March 30, 2021, which extends the deadline for PPP applications by 60 days to May 31, 2021. The previous deadline was March 31, 2021. This Act will allow additional time for small businesses to apply for first and second draw PPP loans. It also provides the Small Business Administration (SBA) the needed time to address validation errors on current PPP loan applications and provide guidance regarding changes to the PPP loan amount calculation for self-employed borrowers. Last Wednesday, the associate administrator of the SBA’s Office of Capital Access testified in front of the Senate that, at the current lending rate, the PPP should have enough funding to last through mid-April. Therefore, those businesses interested in applying for a PPP loan are encouraged to begin this process now.
Economic Injury Disaster Loan (EIDL)
The SBA announced on March 24, 2021 that it will be increasing the maximum amount small businesses can borrow through the EIDL program. Starting April 6, 2021, the current maximum loan amount of $150,000 will be raised to $500,000. Businesses that received an EIDL subject to the $150,000 limit will not need to submit a request for the increased loan. The SBA will directly contact each eligible business via email providing additional details on how the business may request an increase of its loan. Be on the look out for this communication from the SBA on or around the April 6th implementation date. For businesses who have not applied for an EIDL, the SBA is currently accepting applications. More information can be obtained at https://www.sba.gov/.
Last month, the SBA also announced that it would extend the loan deferral period for all EIDLs until 2022. Disaster loans made in 2020 will have the first payment extended to 24 months from the date of the note, and the first payment for loans made in 2021 will be extended to 18 months from the date of the note. Previously, the loan deferral period for a disaster loan was 12 months.
Employee Retention Tax Credit (ERTC)
The Consolidated Appropriations Act expanded the ERTC eligibility to allow taxpayers who had previously received a PPP loan to also apply for a ERTC. This allowed many more employers who had been negatively impacted from the COVID-19 pandemic to be able to receive additional stimulus funding through the form of a payroll tax credit.
For 2020, the ERTC can be claimed by employers who paid qualified wages after March 12, 2020 and before January 1, 2021, and who experienced a full or partial suspension of their operations or a 50% decline in gross receipts in a quarter in 2020 compared to the same quarter in 2019. The credit is equal to 50% of qualified wages paid, including qualified health plan expenses, up to $10,000 per employee in 2020, meaning the maximum credit available for each employee is $5,000 for the year.
For 2021, the ERTC can be claimed by employers who paid qualified wages, and who experienced a full or partial suspension of their operations or a 20% decline in gross receipts in a quarter in 2021 compared to the same quarter in 2019. The credit is equal to 70% of qualified wages paid, including qualified health plan expenses, up to $10,000 per employee in each quarter of 2021, meaning the maximum credit available for each employee is $7,000 per quarter. A business that qualifies for the ERTC in each quarter in 2021 may receive a maximum credit of $28,000 per employee for 2021.
If you think your business has experienced a significant decline in gross receipts or been subject to a government shutdown, please contact one of our professionals for further information.
If you have specific questions related to your business or any of the economic stimulus programs listed above, please reach out to us. We would be happy to answer your questions and work with you on a strategy specific to your current business circumstances. Santora CPA Group’s professionals are Right, By Your Side.