By Jessica Nunn, CPA, Skytale Group

After a wild week of political gamesmanship, President Donald Trump signed the much-awaited economic stimulus package—the Consolidated Appropriations Act, 2021—which is worth more than $900 billion in relief. While the media has focused on the $600 stimulus checks paid directly to individuals, the bill contains several other provisions that could be important to our small business clients.

Stimulus Checks and Unemployment

The agreement includes $600 per person in direct payments to adults and children for taxpayers who fall below income thresholds. Additionally, unemployment benefits will be supplemented up to $300 per week through March 14, 2021. Contract worker eligibility for unemployment benefits has also been extended.

PPP Borrower Tax Relief

The new agreement allows for the deduction of costs paid for using Paycheck Protection Program (PPP) funds. We'e been preparing our clients for a potential tax bill related to the receipt of PPP funds. This excellent news results in PPP funds essentially not being taxable to borrowers upon forgiveness.

Simplified Forgiveness of PPP Loans

Borrowers who received less than $150,000 in PPP loans during the first round will have a simplified application for loan forgiveness. Your bank will circulate the new application when it is finalized.

Second Round of PPP Loans

Businesses with fewer than 300 employees could be eligible for a second PPP loan. To be eligible, your business must demonstrate at least a 25% reduction in total revenue for any quarter in 2020 versus the same quarter in 2019. The loan amount would be 2.5 times your business's monthly average payroll costs, which is the same calculation as the first round. The U.S. Small Business Administration is currently sorting out the details, and we suspect you'll hear from your bank when it's ready to take applications for new PPP loans. Also, there is money set aside specifically for employers with fewer than 10 employees, which is good news for many of our clients.

Employee Retention Tax Credit

The employee retention tax credit is now offered to taxpayers who also received PPP funds. Most of our clients are not eligible for the credit, since they had received PPP funds, but now will be able to get a tax credit for wages paid to employees if their gross receipts are 20% less than the prior year.

Families First Coronavirus Response Act

The tax credit portion of the Families First Coronavirus Response Act (FFCRA), which covers sick and Family and Medical Leave Act (FMLA) leave for virus-related reasons, was extended through March 2021. There is some debate regarding FFCRA provisions, which expired 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 FMLA leave to take the tax credit through March 31, 2021. So, while FFCRA is not required, and the balances have not reset, there are tax credits for those providing leave until the end of March. Additionally, employers with fewer than 500 employees do not have to provide paid 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.

Deductibility of Business Meals

In an effort to support the restaurant industry, business owners are no longer being penalized for meal expenses. Typically, meals are only 50% deductible, but the grant provides for full deductibility of meals provided by a restaurant in 2021 and 2022.

Other Provisions

Within the more than 5,000 pages of the bill are other key provisions, including:

• $20 billion in targeted Economic Injury Disaster Loan (EIDL) grants for the hardest-hit businesses; and
• EIDL advances are now exempt from PPP forgiveness reduction and are also tax-free and deductible.

This bill is more than 5,000 pages, which leaves a lot to digest, so we'll continue to push out relevant information about provisions of the act as more details emerge.

Jessica Nunn is a partner at Skytale Group who takes pride in her experience helping business owners and their families increase their financial awareness. Over the course of her career, Jessica has built trust with her clients by making the complex simple; she delivers financial solutions that are meaningful and relevant to her clients' lives and businesses. Jessica provides small businesses, their owners, and their families a holistic financial perspective. Her clients sleep well at night because they can rely on Jessica to guide them through the complicated aspects of their lives and businesses. Her commitment to the Skytale core value of fun is the reason she is able to make complex financial planning an enjoyable process for her clients.