COVID-19 Update January 11, 2021

Today, the official application and top-line instructions for the second round of PPP loans were released to the public. If you’re a first-round PPP loan applicant, there is similar info available, so if you need those, please let us know, and we will be happy to send them your way.

Furthermore, we received some clarifications on the Earnings Retention Tax Credits (ERTC), including the various parameters to determine eligibility for the 2020 tax credits vs those allowed in 2021.

First, to be eligible for the ERTC in 2020 looking backward, you need to be able to show that you were either shut down by some sort of government COVID-19 protocol or prove you had at least a 50% decline in revenue from any quarter in 2019 from the same quarter in 2020. In addition, you must average less than 100 workers for this lookback credit. If you had an average of over 100 workers, you can only request the credit for people that were paid but did not work. Remember, you cannot count these payroll dollars if they have been funded by any source of government assistance, including PPP loans, EIDL loans, Main Street funding on the federal and state level, or any local government-assisted programs. For the 2020 tax credits that you have eligible, the actual credit is 50% of the first $10k of payroll per quarter with a cap of $10k for 2020 per employee. Bottom line is that they don’t want any double-dipping, so if you paid your employees through another funding source, then they are not eligible to count these payroll dollars towards these new tax credits.

Next, the changes for the 2021 ERTC involving proving that your company has shown a decrease in revenue of at least 20% for 2021 vs 2019. The highest amount of credit you can get is 70% of earnings up to $10k per quarter, or $7k per employee per quarter. This 2021 ERTC ends on June 30^th, 2021, so you only have the first 2 quarters of this year to take advantage of this. The eligibility is different for the 2021 tax credits as well, for in addition to the 20% loss of revenue, it’s for any employer with less than 500 employees. For our restaurant clients, tips are included as qualified wages.

The IRS has put out a “Form 7200” that allows you to get an advance on these expected credits. There is no time frame for getting these funds as an advance for the 2021 tax credits. We know of several employers that applied for these tax credits in 2020 instead of PPP, and it took 2-3 months to receive these funds. We recommend utilizing a tax professional to help make sure you don’t double-dip and/or incur any penalties. Hopefully, with Congress and the President behind this, the IRS will not sit on these monies that businesses desperately need.

Lastly, Deloitte has published an article that reviews the tax policy agenda that President-elect Biden laid out on the campaign trail. It also provides an expanded discussion of how the makeup of the new Congress and the priorities of key decisionmakers at the leadership level and on the two tax-writing committees may affect Biden’s ability to advance his tax agenda.