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I’m Donna Bordeaux with CalculatedMoves.com, wanted to give you a brief update on the new COVID relief bill that was passed right around the end of the year. Now there’s still a lot to be said about this bill. It is 5,593 pages. That’s the longest bill ever passed through house, through the Congress and Senate. So it’ll take a long time to get all the details ready, that need to go through this. They’re still learning to read the bill, but here’s what we know today. Now, this is January 8th, so 2021. So if you’re watching this after the fact, some things may have changed. So please make sure to watch our future updates too.
First off, that bill was signed and the old PPP payroll protection program is no longer taxable. There was some big question as to whether or not you’re going to have to add that back to your income. It is not taxable. And the second piece of that is there is a PPP2 along the way.
So let’s dig in just a little bit more. I’ll give you some basics. First off, if you’ve been collecting unemployment or your staff has been the pandemic unemployment assistance program has been extended through April 5th of 2021. So that means there’s an extra $300 a week for 11 weeks. As long as you haven’t used up your time. The second piece of that is there’ll be stimulus payments coming out again. You can double-check how much stimulus you’re expecting on the IRS website. Those have started to dribble out, but we haven’t seen a lot of activity yet, but those will be coming at any time in the next week or two.
EIDL loans: If you have not applied for any EIDL loan, they’ve extended the amount of time you were under a deadline to apply before the end of 2020, you now have an extra year, so you can still apply for the EIDL loan right now if you haven’t already done. So the initial grants where they were giving up to $10,000, which was based on a thousand dollars per employee, no longer need to reduce the PPP loan they were. When you did the forgiveness program, the banks were telling you, you had to pay back that EIDL advance. This is one of the big reasons we did not want anybody to apply for forgiveness yet. We wanted to make sure that this got into play, which thankfully it did. So you no longer have to repay that if you already did your PPP forgiveness, and you have to repay that EIDL, advance, and it hasn’t come out yet, but they will be forgiving that part of it too.
So you might want to contact your bank. I doubt they have any details just yet, but that’ll be on the way. So you do not have to pay that back. On the PPP1 program, the original program, they do have forgiveness, a simplified package for under $150,000 coming. They keep changing the rules. So I’m still suggesting that no one applied for forgiveness just yet be patient. I’ve never seen anybody get so excited about filing a tax return. As I’ve seen people get excited about filing this forgiveness application. Patience is going to be the key here. There is no automatic forgiveness process in place yet. It’s I believe it’s coming. The treasury department still has to interpret the bill and get new policies and procedures in place. So it’ll still be a while. Remember you have 10 months from the end of the timeframe, the eight weeks or the 24 weeks, the 24 is the longest, 24 weeks after you got your PPP.
You still have 10 months after that, before you have to apply for forgiveness. So be patient, hang out, don’t jump. Your banks are going to be jumping at you to tell you to apply in a lot of cases. Don’t worry about the bank. They want a whole different thing than you do. So put that on the back burner for right now, we’ve got a lot of things to worry about. They also removed, that 60% payroll cost stipulation on the forgiveness. So that’s good news. If you had to close your operations, but you still had to pay a lot of rent you’re in luck, that’ll be able to be forgiven. So it was the rent, the payroll costs, and they’ve added some additional things. They’re fine details, we’ll get into those later on, but again, no need to even apply for that forgiveness yet.
All of these rules for the PPP1 only apply if you haven’t applied for forgiveness yet. So if you already applied for forgiveness, you can’t use these other costs or remove that 60%. So please, please, please put this forgiveness off of your mind for today’s agenda. Do not apply for forgiveness until we give you that big sign later on. I promise it will be worth your while to wait. Okay. And again, the big news was it’s no longer taxable.
Now PPP2 is a whole new PPP program with obviously new rules and requirements. You have to have less than 300 employees, no publicly traded companies anymore. A 501 C (6) organizations like social organizations, chambers of commerce business organizations can now apply for this. That was excluded before.
You must have been in operation by February 15th of 2020. So if you started your business after that, you’re out of luck. The biggest criteria is that your revenue must have decreased by 25% measuring by any quarter over the last year. So if we look at quarter one of 2019 versus quarter one of 2020, for most people quarter two is probably when the revenue went down, you get a check quarter by quarter and see if your revenue decreased by 25%. If it did that triggers the fact that you are eligible for PPP2 you can take two and a half times your monthly payroll costs. Those monthly payroll costs can be calculated based on 2019 or 2020.
If you’re a hotel restaurant or caterer, you can use three and a half times that amount.
More details of becoming the banks are not accepting any applications yet for PPP2 it’s still in kind of the formation and the marinading stage. So bear with us. There are some questions about whether you can use payroll that was paid or accrued. We’re still waiting on further details and you must have spent all of PPP1 to qualify for PPP2.
There are a couple of things on income taxes. First off, if you’re going to a restaurant, normally I would tell you, you get a 50% deduction for business meals, but that will be changed to 100% for 2021 and 2022. Support your local restaurants. Now that food must be purchased from a restaurant they’re trying to preclude you any, anybody from purchasing from a grocery store. I don’t know what the definition of a restaurant versus a caterer versus a store is. Your Walmart will make a bucket of chicken in the back. I don’t know why that’s any different than the restaurant. So we’ll have to play that by ear.
Above the line, charitable contributions, no longer require that you itemize to take a charitable deduction. In 2020, that was limited to $300. In 2021 it’s limited to $600. If you spent more than that and you can itemize, obviously, you can still deduct that. But this is valuable if you’re not qualifying to itemize, which many people don’t anymore.
If you had flex spending accounts where you had balances in your medical accounts or your daycare accounts, that money can be carried forward into 2021 and 2022. Usually, it’s a use it or lose it deal at the end of the year, but we get to carry that over.
The medical expenses were limited by 10% of your income for a while. Now they are back down to 7.5% and that’s a permanent change.
They have expanded the employee retention tax credit. This is actually going to be a big deal for many businesses that are down significantly. There’ll be a whole lot more detailed coming, but this one takes a lot more to analyze and make sure you qualify.
With the family leave program (when we had people who went out for COVID or had to take care of a family member for COVID), there was a special way you could pay them and get a payroll tax credit for their wages that was scheduled to end on December 31st. It has been extended to March 31st of 2021.
If you are a live venue or operator or a promoter, theater, live arts, agents, managers, they’re going to be some special relief options for those folks because they’ve pretty much been shut down.
Also, if you have an existing SBA 7 (a) loan, the SBA was paying payments for you for three months before that has been extended, three months for most everybody, and eight months for some industries. So check on your SBA loans. They may be making that payment for you again.
So it’s going to take us a while to unpack all of this information and get it into motion. We’ll have more details as they become available for you.
Donna Bordeaux, CPA with Calculated Moves
Creativity and CPAs don’t generally go together. Most people think of CPAs as nerdy accountants who can’t talk with people. Well, it’s time to break that stereotype. Lively, friendly and knowledgeable can be a part of your relationship with your CPA as demonstrated by Donna and Chad Bordeaux. They have over 50 years of combined experience as entrepreneurial CPAs. They’ve owned businesses and helped business owners exceed their wildest dreams. They have been able to help businesses earn many times more profit than the average business in the same industry and are passionate about helping industries that help families build great memories.