Navigating the recent CARES Act Extension and the 5,600 pages of the COVID-19 relief bill can be a cumbersome task, but it’s essential to know the various relief solutions available to you in order to navigate through a pandemic. Your friends at Staley Technologies created a nine point summary to ensure customers like you have all of the relevant information.
1. 100% Meal Reductions
Meals are now a 100% deductible business expense for years 2021 and 2022. (previously 50% deductible)
2. Payroll Tax Deferment
A business may defer the employer share of 2020 social security taxes with 50% due by 12/31/2021 and the remaining 50% due by 12/31/22. This can provide immediate liquidity.
3. PPP Loan Funds Cover More Than Payroll
While 60% of Payroll Protection Program (PPP) loan funds must be spent on payroll to qualify for forgiveness; the other 40% may cover non payroll expenses such as mortgage interest, rent, utilities, PPE, cleaning products and services, supplier costs for perishable goods, and expenses related to making efforts for social distancing.
4. Second PPP Draw at 3.5x
The PPP allows restaurants to take a second draw at 3.5 times the average monthly payroll cost (vs. 2.5 times for other industries) not to exceed $2 million. To be eligible, an employer must:
- Have 300 or fewer employees per location (vs. 300 all location cap in other industries)
- Have seen a 25% reduction in gross receipts for a quarter in 2020 compared to the same quarter in 2019
5. Employee Retention Tax Credit
For 2020, this credit is equal to 50% of qualified wages paid to employees up to $10,000 ($5,000 in credit).
- Eligible employers must have seen gross receipts reduced by at least 50% compared to the same calendar quarter in 2019.
For 2021, this credit is equal to 70% of qualified wages paid to employees up to $10,000 ($7,000 in credit) per quarter.
- Eligible employers must have seen gross receipts reduced by at least 20% compared to the same calendar quarter in 2019. Restaurants may be automatically qualified in the first quarter of 2021 if receipts in the 4th quarter of 2020 were reduced by at least 20% compared to 4th quarter of 2019.
6. Required Paid Sick Leave
Family First Coronavirus Relief Act Credit – Under EPSLA employers are now required to provide paid sick leave (up to 80 hours) if the employee is unable to work (including telework) due to COVID-19.
- The credit allows for up to $511 per day to be paid to employees caring for themselves or $200 per day for those caring for family members. The credits are refundable to the extent that they exceed the employer’s payroll tax and are in effect through March 31, 2021.
7. WOTC Extension
Work Opportunity Tax Credit (WOTC) has been extended by five years. This is a tax credit available to employers who hire individuals from certain targeted groups. The WOTC can reduce the employer’s tax liability up to $9,600 per employee.
8. QIP Bonus Depreciation
The CARES act designated Qualified Improvement Property (QIP) as 15-year property, previously 39-year property under TCJA, making it now eligible for 100% bonus depreciation. This allows businesses, who placed QIP into service in 2018 or 2019, to potentially file an amended return and take 100% bonus depreciation.
9. SBA Lending Enhancements
Temporary enhancements to SBA (non-PPP) lending programs such as:
- Increases 7(a) loan guarantee with no fees
- No fees for 504 loans
- Extends CARES Act principal and interest waiver for 7(a), 504, and micro loans
- Loans made to restaurants prior to the CARES Act, allows eight months of principal and interest to be paid by the government
We encourage you to connect with your existing CPA for questions and further explanation regarding the CARES Act Extension.