COVID-19 Federal Legislation Updates for 2021

by PayPro, on Feb 24, 2021 5:01:58 PM

Many important and beneficial funding and credit opportunities were created with the Taxpayer Certainty and Disaster Tax Relief Act of 2020, which was enacted December 27, 2020. 

Employee Retention Tax Credits (ERTC)

Employers could qualify for up to $19,000 in credits per employee. Qualified Employers who took advantage of the PPP loan can now also utilize the ERC.

Key Features of the Employee Retention and Employee Retention and Rehiring Tax Credits

Credit Feature

ERTC in the CARES Act

ERTC in the COVID-related Tax Relief Act

Effective Dates

March 13, 220 – December 31, 2020

January 1, 2021 – June 30, 2021

Credit Rate

50%

70%

Maximum Credit Amount

$5,000 in 2020

(50% of $10,000 in qualifying Wages

$14,000 in 2021

(70% of $20,000 in qualifying wages)

Eligibility

Employers who (1) are required to fully or partially suspend operations due to a COVID-19 related order (including nonprofit employers): or (2) have gross receipts 50% less than gross receipts in the same quarter in the prior calendar year (with no credit being available once gross receipts are 80% of prior year calendar quarter gross receipts).  

Eligible employers include tax-exempt organizations. 

Employers receiving Paycheck Protection Program (PPP) loans are eligible.

Employers who (1) are required to fully or partially suspend operations due to a COVID-19 related order (including nonprofit employers): or (2) have gross receipts 20% less than gross receipts in the same quarter in the prior calendar year or prior calendar quarter. 

Eligible employers include tax-exempt organizations. 

Employers receiving PPP loans are eligible. 

Qualified Wage Base

Employers with more than 100 full-time employees: wages when employee services are not provided.

Employers with 100 or fewer full-time employees: wages paid by eligible employers are credit eligible.

Employers with more than 500 full-time employees: wages paid when employee services are not provided.

Employers with 500 or fewer full-time employees:  Wages paid by eligible employers are credit eligible.

Public Entities

Government entities generally ineligible.

College and university and medical or hospital government entities are credit eligible. 

 

How Employee Retention Tax Credits Are Obtained

PayPro can assist you in determining your credits.  Contact your Human Capital Specialist to inquire about our services. 

Once the credits are determined, amended form 941’s for 2020 will need to be created.  Credits can then be utilized on future tax liabilities or a claim for refund can be made on form 7200. 

View our recorded ERC webinar for more information on whether or not you qualify and how PayPro can assist you with Employee Retention Credits.  

Updates to COVID Paid Sick and Family Leave New call-to-action

  • Tax credits for paid sick and family leave were extended to be available thru March 31, 2021.
  • Employers are not required to give COVID-related paid leave for leave utilized in 2021.
  • Eligible employers may claim credit for paid sick leave provided to an employee for up to 80 hours sick leave for 2020 and 2021 combined.
  • Qualification of hours and rate of pay stay consistent with the original FFRCA laws and regulation.

Taxable changes to loan treatment 

  • Borrowers should deduct, capitalize, or adjust basis for expenses attributable to forgiven PPP loans just as they do any other expenses.
  • Act confirms that forgiven amounts do not generate taxable income and that it is excluded from gross receipts.
  • Act changes grants under the Economic Injury Disaster Loan (EIDL) program from taxable to nontaxable income.

Employers may be eligible for a second round of PPP Funds

To qualify for a second draw on the PPP loan employers must – 

  • Average no more than 300 employees, together with its affiliates (unless special rules apply that allow employees to be counted by location, which apply to NAICS codes 72-restaurants and hospitality, 511110 or 5151 news organizations and borrowers assigned a franchise identifier code by the SBA);
  • Demonstrate at least a 25% reduction in gross receipts between comparable quarters in 2019 and 2020; and
  • Make the required certification regarding economic necessity.
  • First PPP loan was utilized for the authorized purposes.
  • Maximum loan amount is $2,000,000.00.
  • The list or qualified uses of loan proceeds has been expanded to include:
    1. Covered operations expenditure, i.e., payments for business software or cloud computing services needed to keep business operations running (for example, HR, accounting, payables, inventory, etc.);
    2. Covered property damage costs not covered by insurance attributable to looting and vandalism during public disturbances that took place during 2020;
    3. Covered supplier costs, i.e., expenditures for goods that are essential to operations pursuant to an obligation made prior to the covered period. Expenditures for perishable goods qualify even if the obligation arises during the covered period;
    4. Covered worker protection expenditure necessary to ensure that the business complies with guidance regarding COVID-19 sanitation, safety, or social distancing standards; and  
    5. Life and disability benefits (also increases payroll as for calculating the maximum loan amount).
    6. Last day to apply is March 31, 2021 or exhaustion of funds. 

Want to learn more about the qualifications for the Employee Retention Credit and the PPP? Learn about the common misconceptions businesses have with this new round of legislation.

CARES Misconceptions CTA Horizontal

Topics:PayrollHuman Capital SolutionsCOVID-19Legislation Updates

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