Managing Member
CPA | ABV | CFP®
I have recently been asked about the 2nd or (1st for some) PPP loan and the Employee Retention Tax Credit.
The PPP Program has been expanded
It is possible to obtain a 2nd PPP loan if 1) you have less than 300 employees, 2) you have used or will use the first loan, and 3) can demonstrate a 25% reduction in gross receipts in the first, second or third quarter of 2020 relative to the same quarter in 2019. If you have not obtained a previous PPP loan, the requirements for your first PPP loan are basically the same as before.
Qualified uses of the funds have been expanded, as have the time period for loan forgiveness (from 8 to 24 weeks). As before, the PPP loan is obtained from SBA, through your bank. If you believe you qualify, contact your bank to pursue it. We have heard that some banks are not excited about doing new (or any more) PPP loans, so prepare for possible resistance.
The Employee Retention Tax Credit was changed and expanded
You no longer are disqualified if you received a PPP loan. The new rules commence January 1st and run through June 30th of this year. It is generally available for up to 70% of qualified wages, for businesses with a year-over-year decline in gross wages of 20%, on per employee creditable wages of up to $10,000 per quarter.
The Employee Retention Tax Credit is obtained on your payroll tax returns (Form 941), not on your annual business tax return (as yet, anyway). The credit expansion and extension are new and the “how-to” is still a work-in-process. It is actually treated as a reduction of the employer’s share of FICA on the 941 form (even if it ends up being a negative number). If you think you qualify, consult with your payroll department or provider as they will be the ones completing the form and obtaining the credit.
On another note
We have been asked about the first or second stimulus check when individuals who were claimed as dependents on prior returns did not receive it. The stimulus is actually a 2020 tax credit. If your 2020 tax return shows that your income now qualifies you for the stimulus, or you are no longer claimed as a dependent, you will receive it as a tax credit on your 2020 return.
This may offer some tax planning on how dependents should be claimed on 2020 tax returns.