How the Recent COVID-19 Relief Bill Affects Small Businesses and Taxpayers

 Posted on January 08, 2021 in Small Business Taxes

The COVID-19 pandemic has led to struggles for many people and businesses. While the rollout of vaccines in 2021 will eventually allow for a return to normal activities, many businesses will continue to experience a loss of revenue due to requirements to close, scale back operations, or lay off employees. Fortunately, the federal government has implemented programs meant to provide relief to businesses and taxpayers who have been affected by the pandemic. The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (CRRSAA), which was signed into law on December 27, 2020, made a number of changes that may benefit both small businesses and individual taxpayers. These include:

• Additional PPP loans - The Paycheck Protection Program, which was implemented as part of the CARES Act of 2020, provided loans for businesses, and these loans were forgivable so long as a business could show that a certain percentage of the loan was used for payroll purposes. Under the CRRSAA, businesses that had previously received a PPP loan will be able to receive an additional loan, although to qualify, a business must not be publicly owned, it must employ fewer than 300 people, and it must be able to show that its gross receipts in any quarter of 2020 were 25% less than in the same quarter in 2019. First-time loans will also be available to businesses that had not previously taken a PPP loan, and eligible businesses include self-employed individuals, independent contractors, and sole proprietors.
• PPP loan forgiveness - Loans of $150,000 or less may be forgiven if a business used at least 60% of the loan for payroll expenses, including wages and benefits. The remaining 40% can be used for operational costs. In addition to rent, utilities, and mortgage interests, operational costs have been expanded to include software, personal protective equipment for employees, and modifications necessary to meet health guidelines.
• Tax deductions for business expenses - PPP loans are treated as tax-free if they are forgiven. In addition, businesses may claim tax deductions for payroll and operating expenses, even if a PPP loan was used to pay these expenses.
• EIDL Grants - Businesses in low-income communities may be able to receive up to $10,000 in Economic Injury Disaster Loan grants. Businesses that receive both grants and PPP loans will no longer be required to deduct an EIDL advance from the amount received in a PPP loan.
• Employer tax credits - If a business were required to close due to government orders or experienced a decrease in gross receipts of 50% in 2020 compared to the same period in 2019, it will be eligible for a 50% payroll tax credit, which will apply to wages of up to $10,000 per employee. This employee retention credit is not available for those who have received a PPP loan.

Contact Our San Jose, CA Small Business Tax Attorney

If you have questions about what forms of COVID-19 relief you may qualify for or how this will affect your taxes, John D. Teter Law Offices can provide the legal help you need. We will work with you to make sure you can make use of the tax benefits available to you, and we will help you determine the best strategies to minimize your tax burden and address any taxes that you owe. To learn more about how we can help, contact our San Jose tax lawyer at 408-866-1810.

Sources:

https://www.uschamber.com/co/start/strategy/federal-small-business-stimulus-aid-programs-guide

https://www.cnn.com/2020/12/23/success/covid-relief-bill-small-businesses-ppp-loan/index.html

https://www.nerdwallet.com/article/small-business/coronavirus-relief