What Do I Need To Know About the COVID Relief Bill?

Congress has finally passed another COVID relief bill and we want to unpack what this means to both you personally as well as your business. This bill was over 5,500 pages long so what we outline here is a high level overview. It will take a bit of time for the SBA and banks to unpack much of this, so it will be evolving.

What Is Included In the COVID Relief Bill for Individuals?

This is specific to individuals, not businesses.

• Relief Rebates or Stimulus Checks 
  • This works very similar to the first round that went out. It is based on your 2019 tax return information.
    • $600 per individual (Including qualifying children) – Note: Adult dependents are not eligible.
    • Starts to phase out at $75k (Single), $150k (Married), $112.5k (Head of Household) 
    • Nothing needs to be done to receive the rebate. If you had a high income in 2019 and phase out but in 2020 you do not expect to phase out, you will get the benefit when filing your 2020 tax return. 
• Unemployment Benefits
  • Extends certain unemployment benefit items for 11 weeks.
  • Additional $300 per week to supplement state unemployment compensation.
• Charitable Contributions
  • Above the line contribution is extended through 2021 at $300 (Single) and $600 (Married).
• Flexible Savings Account (FSA)
  • Can be rolled from 2020 into 2021 and 2021 balances can be rolled into 2022.

What Is Included In the COVID Relief Bill for Businesses?

This would be specific to businesses.

• Original Paycheck Protection Program (PPP)
  • Forgiveness is not taxable and businesses ARE able to deduct expenses paid with forgiven PPP funds. This is big!
  • Simplified forgiveness process for loans under $150k.
  • No longer deduct the amount of any EIDL advance (up to $10k) from the PPP forgiveness amount.
• Paycheck Protection Program (PPP) 2.0
  • PPP Round 2 with some changes:
    • Must have at least a 25% drop in gross receipts in a 2020 quarter compared to the same quarter in 2019.
    • Limited to business with 300 employees or less.
    • Maximum loan size is $2MM.
    • Have used or will use the full amount of the original PPP loan
    • Qualifying expenses extended to include: property damage, supplier costs, or PPE equipment in addition to payroll, rent, utilities, etc.
• Employee Retention Tax Credit (ERTC)
  • Employer may claim a 70% tax credit (up from 50%) on up to $10,000 in ages paid to employees per quarter (up from $10k per year) through July 1, 2021. This results in a maximum credit of $14k per employee (up from $5k).
  • To Qualify:
    • Must be suspended due to government actions related to COVID, or
    • Have a 20% decline in gross receipts during a calendar quarter when compared to the same quarter the previous year.
  • May use both the PPP and ERTC but cannot double benefit from both programs. Basically if you used payroll costs for your PPP forgiveness you cannot use the same dollars for the ERTC.
• Economic Injury Disaster Loan (EIDL)
  • Extends deadline to apply to December 31, 2021
• SBA 7a Loans
  • Loan debt relief extended 3 months (8 months for some industries).
  • Loan payments made on behalf of government here are not taxable.
• Business Meals
  • 100% deductible for 2021 and 2022.

As we discussed this is a massive bill so things will continue to evolve and this is just scratching the service. If there are certain parts of the items discussed here that are relevant to you, definitely take some time to research further on those points.

Here are a few followup pieces that you can look into:

Tax Foundation: Congress Passes $900 Billion Coronavirus Relief Bill

CNN: Here’s what’s in the second stimulus package

CNet: Everything in the new stimulus bill: $600 stimulus, $300 unemployment checks, more

If you don’t have an accounting or tax advisor (or you need assistance with anything discussed), click here to book your complimentary strategy session with JETRO.