As we approach the new year, it's crucial to stay informed about the latest developments…
Lots of new information shared during our weekly NAPEO Federal Affairs Committee call today.
For those unaware, the Senate Republicans issued a series of bills on Monday evening as their next round of stimulus initiative with a self-imposed goal to keep the next round of spending under $1 trillion. Below is a breakdown of what’s currently proposed, including the base of the new regulations and anticipated tax breaks.
- New Round of PPP Loans Available (with Limitations)
- For businesses that are under 300 employees and can prove a loss of revenue of at least 50% since the start of the pandemic.
- This round would have the same provisions for percentage of 60% toward payroll costs and the estimate of eligibility would be created the same way as the first round.
- In addition to what was previously allowed to be expensed, they have added PPE purchases for employees to protect themselves as well as any changes to the work area to make your offices safe for social distancing.
- These new expenses would be also eligible for PPP loans, so keep your receipts dating all the way back to the beginning of the pandemic.
- PPP Loan Forgiveness
- For this round and for previous rounds, up to $150k would not have to fill out an application or prepare for an audit.
- $150k to $2 million would still require the application filled out but no audit.
- Over $2 million would require an automatic audit.
- Democrats’ bill had 100% coverage subsidy for healthcare coverage until December 2021, while Republicans have nothing in their bill about any subsidy.
- The Republican bill has a waiver of liability for businesses that clearly abide by all government guidance for COVID-19.
- Workers’ comp will be settled state by state. Governor of Connecticut just signed an executive order for those who worked during the pandemic and came down with Covid-19 now being eligible for workers’ comp coverage.
- The CDC has released new guidance for healthcare workplace precautions.
- The Democrats’ bill wants to keep the $600 federal subsidy through January 2021, while the Republican bill extends the supplements through the end of September 2020 at $200 above the state funds. Effective October 1, 2020 unemployment would be 70% of your wages that you normally made before your layoff with a cap of 500 dollars.
- Here are some tips on how to communicate layoffs to remote employees.
- Tax Breaks
- You can’t use the money already allocated for the first round of loans toward any of these incentives, so the new round of PPP money or any of these tax incentives/breaks are on new payroll dollars.
- Employee Retention Tax Credits (ERTC): up till now if you took the PPP loans you would not be eligible for these credits. The Republican bill allows you to apply for these tax credits in the 3rd & 4th quarter of 2020 if you have exhausted your funds before the end of the 2nd quarter in 2020. These credits will be limited to businesses that have had at least a 25% reduction in revenue. So, if you had over 50% loss of revenue you can get another round of PPP loan, and if you were between 25 – 50%, you would be eligible for these tax credits.
- Health workforce Tax Credits (HWTC): this is a new proposed tax credit toward payroll taxes of 50% of the cost for PPE, or safety supplies for employees along with expenses for reconfiguring the workspace to make things safe for employees to return to work. These credits would be capped between $500-$1000 per employee, depending on the size of your workforce.
- Work Opportunity Tax Credits (WOTC): these have been around for a long time, mainly used in hiring disabled, veterans, and many more employee criteria. New additions would include anyone that you would be hiring and taking them off Unemployment due to Covid-19. This tax credit is not payroll tax, but it goes toward your annual corporate taxes. We manage this through a 3rd party for many of our clients. If you would like more info on this program, please let us know.
- The ERTC and HWTC would apply toward your federal tax liability, but interestingly, they have not confirmed if you have more credits than taxes and whether you would be eligible for a refund/advance on your taxes.
Once again, everything is still in proposal stages until signed. After next week’s call, we should be able to share any updates, especially with so much unanswered for payroll and tax providers. Who is going to audit these 941’s if the employer gets the monies and does not let the tax preparer know to include them on the tax forms? One thing we know is that the IRS will always get its money – it’s not worth trying to beat the system, but as always, people will try.
Hope this information was helpful, albeit lengthy!