New Relief Package Set to Allow PPP Covered Expense Deductibility, Expanded Credits and Stimulus Payments
Over the last couple of months, we have been fielding questions from many clients about the CARES Act – especially the loans and the forgiveness of loans available for small businesses that we outline in our Coronavirus Resource Center. I actually co-wrote an article back in March with Jennifer Mailhes, CPA from Doeren Mayhew entitled “Five Things Small Businesses Should Know About the COVID-19 Disaster Loan Relief”.
Congress has finally settled on a new COVID-19 stimulus legislation – The Emergency Coronavirus Relief Act of 2020, which expands the employee retention credit, extends various expiring tax credits, distributes stimulus payments, and allows the deductibility of Paycheck Protection Program (PPP)-funded expenses, even if forgiven…this is a big change from prior IRS Accouchements. As an example, If you had a forgiven $100,000 PPP Loan that you used for payroll and other allowable expenses, earlier this year, the IRS stated that these expenses were not deductible. With that PRIOR IRS interpretation, someone in the 37% tax bracket would have had an extra $37,000 tax liability. With this legislations Congress corrects that problem allowing impacted businesses to deduct these expenses – with the majority being employee payroll (remember the legislation was the “PAYCHECK Protection Program”) that helped many employees from being furloughed.
The $900 billion bill, the second-largest next to the Coronavirus Aid, Relief, and Economic Security (CARES) Act in U.S. history, would initiate the following relief measures, among others:
- Direct stimulus payments of $600 to most Americans.
- Enhance unemployment benefits by $300 per week through March.
- Enforce Direct the Internal Revenue Service (IRS) to allow the deductibility of expenses related to PPP loan forgiveness.
- Provide an additional $284 billion in funds available through the PPP.
- Allow an additional 13 weeks of unemployment benefits for those that have exhausted their regular state benefits.
- Extension of the employee retention credit, with an increase to 70% of qualifying wages and $10,000 per quarter limit on creditable wages.
- Make the earned income tax break and child tax credit available to people who have lost wages during the pandemic.
It is anticipated that President Trump will sign the bill into law before the new year…so stay tuned. Both Avidian Wealth and Doeren Mayhew will keep you updated as the bill progresses through the legislative-making process.