Is There a Software for Accountants that Incorporates the New 5,593-Page COVID-19 Relief Bill?

15 minute read

Many tax planning professionals are looking for answers regarding the new Coronavirus Relief and Omnibus Agreement that passed at the end of 2020. Now that it’s signed into law, what are the most important inclusions for tax and accounting firms to know about? What changed that will make a big financial impact on your clients? What’s retroactive…and what’s not retroactive?

More importantly, how can you help your clients navigate this complex 5,593-page legislation? Tax planning professionals need to be prepared for this new legislation and help their clients save as much money as possible. The good news is that there is a software for accountants that is already applying these new changes to help firms tax plan for 2021 and beyond!

How is the PPP Changing Under the New Bill?

The newest COVID-19 relief bill contains $285 billion for the Paycheck Protection Program. Many of your clients are likely confused about the new PPP rules. They have no idea how to act on the new $900 billion Omnibus Relief Agreement and many need consulting.

The PPP was originally launched with the CARES act on March 27, 2020. The purpose of it was to inspire business owners to continue to pay payroll, and allow the funds that are appropriately used to be fully forgiven. Funds were first come, first serve, which caused chaos for both lenders, borrowers and accountants trying to advise clients on what to do during 2020.

While the PPP Program ended on August 8th, 2020, the PPP Program reopened to borrowers in January 2021.

With the new law, there has been confusion around the wording for PPP Round 1 and PPP Round 2. Here are some clarifications:

PPP 1st Draw

  • Was originally funded in March 2020. PPP funds ran out and a second round of funding came through with the Interim Emergency Bill that stated PPP would end August 8th, 2020. With the new law in December, this opens PPP 1st Draw back up to eligible borrowers.

PPP 2nd Draw

  • Brand new to law. Allows only eligible PPP 1st Draw borrowers to obtain a 2nd Draw.

The new law will include over $284 billion for funds related to PPP. $35 billion will be for PPP 1st Draw, and $15 billion of this is for smaller, first-time borrowers with 10 or fewer employees, or loans less than $250,000 in low-income areas.

The remaining amount of funds will go towards PPP 2nd Draw, where $25 billion is allocated for second draw PPP loans for smaller borrowers with 10 or fewer employees, or loans less than $250,000 in low-income areas.

What’s Included in PPP First Draw?

Funding opens back up to all small businesses underneath the same eligibility requirements inside the CARES act (does not have the gross receipts requirement like PPP 2). This allows borrowers who returned all or part of their PPP loan to reapply for the maximum amount applicable so long that they have not received forgiveness. It also allows borrowers whose loan calculations have increased due to changes in interim final rules to work with lenders to modify their loan value.

  • Eligibility includes:
    • Businesses with 500 or fewer employees
    • Sole props and independent contractors
    • Nonprofits & churches
    • Added 501(c)(6) eligible organizations
    • Added Housing Cooperatives & News Organizations
    • Certain entities who are involved in bankruptcy proceedings
  • Entire listing of Eligible businesses can be located here.
  • Note: If the business WAS NOT in operation before 2/15/2020, they are not considered eligible for PPP 1st or 2nd draw loans.

What’s Included in PPP Second Draw?

The new second round of PPP allows businesses who received the first round of PPP to apply for a second round of PPP funds. Both can qualify for forgiveness.

  • Eligibility Includes
    • Less than 300 Employees
    • Has or will use full amount of PPP 1st draw (this prevents someone applying for PPP 1st draw to immediately apply for 2nd draw)
    • 25% reduction in gross receipts during any calendar quarter in 2020 compared to the same calendar quarter in 2019

The Act excludes certain PPP borrowers from second PPP Loans, including: Businesses primarily engaged in lobbying or other political activities; Businesses owned by an entity created in or with significant operations in China that owns or holds, directly or indirectly, not less than 20% of the economic interest of the business or with a director that is a resident of China; and recipients of a shuttered venue operator grant under Section 24 of the Act.

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Main Changes to the PPP Program

  • The loans are now topped out at $2 million per business, compared to $10 million before
  • The business must have less than 300 employees
  • Each business must prove at least a 25% drop in sales from the same time in 2019
  • Publicly traded companies are now ineligible for PPP
  • $12 billion has been set aside specifically for minority-owned

Additional details on spending the funds:

  • 60/40 split on payroll and non payroll costs
  • Payroll costs can now include:
    • Group life
    • Disability
    • Vision
    • Dental insurance costs
  • Non Payroll costs can now include:
    • covered operations expenditures
    • covered property damage costs
    • covered supplier costs
    • covered worker protection expenditures

PPP Forgiveness Changes

There are simplified forgiveness applications for loans up to $150,000. The application requires:

  • Number of employees the borrower was able to retain because of the covered loan
  • Estimated total amount of the loan spent on payroll costs
  • Total loan amount

It needs to Include attestation of complied with loan requirements and to keep on hand loan documents and support of funds used (minimum 4 years). The Act does not alter the documentation that a borrower with an initial draw PPP loan of more than $150,000 is required to submit with its PPP loan forgiveness application. Borrowers can also now choose a covered period that is between 8 and 24 weeks. The covered period for all PPP loans extends through 3/31/2021.

This flexibility for new PPP loans may enable PPP borrowers to better manage their workforce decisions by tailoring their covered periods to end before a reduction in workforce, thereby avoiding a potential FTE Reduction to the loan forgiveness amount.

PPP Tax Deductibility

Prior to this new bill, PPP expenses were considered not tax deductible, causing major issues with the potential for small businesses unable to pay their tax bill. With the new tax bill, it states deductions for PPP expenses are considered allowable. In addition, PPP forgiveness income will not be considered taxable. This will be retroactive to the date of enactment of the CARES Act, March 27, 2020.

The good news for tax planning professionals is that Corvee already is putting in new PPP deductibility into software for accountants.

Are Changes to the EIDL Happening Under the New Bill?

Congress has allocated another $20,000,000,000 in emergency EIDL grants in the new stimulus bill. This new round contains a targeted EIDL program to help businesses hardest hit.

EIDL loans bear interest at 3.75% and come with big loan program requirements that many borrowers are unaware of. Your clients that receive EIDL loans are unable to pay several things without SBA approval, including:

  • Paying dividends
  • Paying bonuses to employees, including non-owners
  • Using EIDL funds for non-business purposes.

The targeted EIDL program is now for businesses with not more than 25 employees; and has suffered an economic loss of not less than 30 percent; and does not include an agricultural enterprise.

Funding that a covered entity is eligible for is as follows:

Less than the amount of working capital needed by the business for the 180-day period beginning on the date on which the covered entity would receive the funding; or $50,000.

The priority for the targeted EIDL program is given to businesses located in a low-income community; businesses owned or controlled by a veteran or a member of the Armed Forces; or a business owned or controlled by an economically disadvantaged individual or a socially disadvantaged individual.

  • Separate EIDL Advance for low-income communities of $10,000 (noted as a grant)
  • Covered period of EIDL advance is now December 31, 2021
  • PPP borrowers who were forced to deduct their EIDL advance will now be repealed.
  • Tax treatment will be the same as PPP loan forgiveness funds.

What is Happening with ERTC Under the New COVID Relief Bill?

The agreement extends and improves upon the Employee Retention Tax Credit. Under the CARES act, the credit only applied to wages paid after March 12, 2020, and before January 1, 2021. The bill extends the wage period through July 1, 2021.

Meanwhile, the credit which used to be equal to 50% of the qualified wages each quarter has been increased to 70% and can now be used in conjunction with PPP money for wages which aren’t paid for with forgiven PPP proceeds.

Best of all, the $10,000 per employee limit which used to be the aggregate for all quarters, is now the limit per quarter.

Changes to the 2020 credit:

  • Employers can take the PPP & ERTC
  • Cannot use payroll wages paid for PPP, for ERTC & vice versa.
  • Employers can now include allocable health care costs to claim the credit against (included in wages). This includes employers who only paid health care costs to furloughed employees.
  • ALL other changes are consistent with the ERTC released in March 2020.

Modification to Other Credits in New Coronavirus Relief and Omnibus Agreement

Updated modifications to other credits, including Business Meals, Earned Income, Paid Sick & Family Leave Credit, Work Opportunity Credit and much more were also made.

For example, the Work Opportunity Credit was extended to December 31, 2025. Originally it was supposed to end in 2020. The amendment made by this section shall apply to individuals who begin work for the employer after December 31, 2020.

In regard to the Paid Sick & Family Leave Credit, the Families First Coronavirus Response Act required certain small employers to pay up to 10 weeks of qualified family leave when an adult couldn’t work because a child was without school or care. It also allowed for up to 2 weeks of sick leave for a variety of COVID-related reasons.

Employers would receive a fully refundable dollar-for-dollar payroll tax credit equal to the wages paid. The bill extends the credit provisions from December 31, 2020 through March 31, 2021.

Business meals also were affected with temporary allowance of 100% full deduction for business meals. Such expense is for food or beverages provided by a restaurant, and paid or incurred before January 1, 2023. Note that the amendments made by this section shall apply to amounts paid or incurred after December 31, 2020.

These are just some of the changes inside this massive new bill…and with all these modifications, the question many tax planning professionals and accountants should be asking is: How can I price, package, and offer new Stimulus Bill Relief Consulting?

That’s why our growth and development programs are always relevant, coaching you how to stay on top of the latest legislation and take advantage of any changes so you can serve your clients. In addition, you can learn more about our software for accountants that automatically calculates many of the newest legislation changes that affect your clients’ taxes and creates a finalized tax plan in minutes.

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