After much debate, and press, the highly anticipated $900 billion COVID-19 Stimulus package has been signed into law. Coming in at well over 5,0000 pages, this lengthy piece of legislation is full of provisions, and plenty of gray area, that will impact just about everyone in upcoming months.
As with all omnibus bills, the new stimulus bill includes many items not directly tied to pandemic relief. Some of the items that matter the most to business owners are related to extended provisions from the Families First Coronavirus Response Act (FFCRA), changes to the Paycheck Protection Program (PPP) and tax provisions.
While there will almost certainly be guidance and updates regarding how the bill is interpreted and applied, here are some important details you’ll want to know.
Families First Coronavirus Response Act (FFCRA)
There has been some debate regarding FFCRA provisions, which are set to expire on December 31, 2020. While the new bill doesn’t include an extension of FFCRA leave requirements, it allows covered employers that voluntarily provide emergency paid sick leave or emergency paid Family Medical Act leave to take the tax credit through March 31 of 2021. So while FFCRA is not required, and the hours/balances have not reset, there are tax credits for those providing leave until the end of March.
Additionally, employers with less than 500 employees will not have to provide paid FFCRA leave under federal law as of January 1, 2021. Keep in mind, however, you may be required to provide paid leave under state or local laws. You will want to take a look at your policies to be sure they are in line with all applicable laws in your area.
Tax related provisions
The refundable payroll tax credit for mandated paid sick and family leave from the stimulus bill earlier this year has been extended through March of 2021. The Employee Retention Tax Credit (ERTC) has been expanded through July 1, 2021 with the following increases, starting January 1, 2021:
- Increased credit rate from 50% to 70%.
- Increases per-employee creditable wages to $10,000 per quarter.
- Makes it easier to get the credit by lowering the limit for declining YoY gross receipts from 50% to 20%.
- Changes the definition of “large employer” for determining the qualified wage based by 100 to 500 employees.
Companies that received PPP funds are no longer restricted from participating in ERTC, however, you can only use the wages that were not paid with forgiven PPP funds to calculate the credit.
Paycheck Protection Program (PPP) Changes
The Paycheck Protection Program was given new life and $284 billion dollars to fund additional forgivable loans. A couple points you will want to note is that the money received through a PPP loan is not considered taxable income. Additionally, you can deduct expenses that were paid with your forgiven PPP funds without restrictions.
There is good news for companies that are considered especially hard hit by the pandemic, as the bill allows for a second PPP loan. What qualifies as “hard hit” according to the stimulus bill? Small companies and non-profits with 300 or fewer employees that can show a 25% loss of gross receipts during any quarter of 2020 as compared to 2019, which totals 2.5 times the average monthly payroll up to $2 million. Companies that can illustrate losses within this range are allowed to re-apply for PPP funds.
Retirement plan distributions
This plan is similar to the original CARES Act in regard to retirement plan distributions. Here are some of the main points you’ll want to know:
- Removes 10% penalty for any qualified disaster distribution.
- Income can be split over 3 tax years from date of withdrawal.
- You have 3 years to repay distributions, it will be essentially treated like a direct rollover during that time period.
- Distributions must be made within 180 days of the enactment of the Act.
$286 Billion in Direct Relief
The direct relief portion of the new stimulus bill was one of the largest sticking points behind the delay in passing the legislation. While there was a lot of debate regarding the amounts of stimulus checks, the original amounts remain in place. This comes down to $600 for individuals making up to $75,000 annually, or couples making up to $150,000 annually with an additional $600 per each dependent child.
Reduced stimulus checks will be offered to eligible people earning between $75,000 and $99,000. Your income and family size will determine the amount, but a family of four that is eligible for the maximum stimulus amount may receive up to $2,400.
When will you receive your stimulus check? As with the first round of checks, people with direct deposit on record with the IRS will start to see funds in as little as a couple weeks. Another thing you’ll want to keep in mind is that the calculations for stimulus checks are based on your most recent tax return.
- Use this stimulus calculator to estimate what your household might qualify to receive.
- Visit Get My Payment, a service of the IRS, for stimulus payment information.
Unemployment benefits were also impacted in the legislation, including a potential delay in rolling out the additional funds. However, as it stands, the original $300 a week in Federal Pandemic Unemployment Compensation (FPUC) was signed into law. This additional unemployment funding ends on March 14, 2021.
The new stimulus bill is a hefty piece of complicated legislation that is packed full of provisions on everything from rental assistance to foreign aid. We are continuing to read through the actual language of the bill and will watch for official clarifications and guidance. As new details and guidance become available, we’ll be sharing it here.
If you’re interested in reading it for yourself, you can find the bill in its complete form here.
The material presented here is educational in nature and is not intended to be, nor should be relied upon, as legal or financial advice. Please consult with an attorney or financial professional for advice.