with PPP Round 2 –Take the Expanded Benefits of the ERC · 2021. 1. 19. · Howard Zangwill, CPA,...

Staying Alive with PPP Round 2 – Take Advantage of the Expanded Benefits of

the ERC

January 19, 2021

Today’s Objectives• Employee Retention Credit

– Can you get a $14,000 Credit per employee in 2021– Or retroactive $5,000 per employee in 2020

• Summary of PPP changes in the New Act

• PPP Round 2– First time applicants– Second Draw Borrower

• Q & A

Original Employee Retention CreditOverview

• Overshadowed by the PPP Loans in 2020• Provided a credit to qualifying businesses that were either shut down or had a 50% revenue reduction

• One could not take this credit and PPP Loan

Expanded Benefits of Employee Retention Credit

Effective January 1st, Provides a credit to qualifying businesses • 20% reduction in gross income 2021 vs. 2019• 70 % of wages up to $10,000 per quarter through June 30, 2021 ‐ $14,000 per employee max

• Entities with 500 or less full timeemployees

Employee Retention Credit (ERC) • You can now claim the credit and have a PPP loan ‐ No double dipping for PPP wages

• Should you claim ERC in 2021 vs. PPP Round 2?– PPP certification “Current economic uncertainty makes this loan necessary to support the ongoing operations of the Applicant”

• Amend 4th Qtr. 941 ‐ claim the 2020 credits• Review Round 1 forgiveness application, if not filed

Employee Retention Credit (ERC)

Original NowEnd date December 31, 2020 June 30, 2021

Maximum number of full‐time equivalent employees

100 500

Per employee benefit50% of wages up to $10,000Or $5,000 max

70% of wages up to $10,000 per quarter, or $14,000 max

Reduction in gross receipts threshold

50% 20%

Participation in ERC & PPP? NOYES – Note, however, that wages applied to PPP forgiveness DO NOT qualify

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HZ1 Can we spruce this slide up?Howard Zangwill, 6/22/2020

2020 ERC > 50% Reduction in Revenue

Employee 3rd Quarter 2020 4th Quarter 2020Tom $ 4,000 $ 6,000Richard $12,000 $14,000Chelsea $10,000 $15,000Howard $ 8,000 $ 9,000Total Wages $ 34,000 $44,000

Eligible Wages $32,000 $8,000Credit 50% 50%Refundable Credit $16,000 $4,000

2021 ERC > 20% Reduction in Revenue

Employee 1st Quarter 2021 2nd Quarter 2021Tom $ 4,000 $ 6,000Richard $12,000 $14,000Chelsea $10,000 $15,000Howard $ 8,000 $ 9,000Total Wages $ 34,000 $44,000

Eligible Wages $32,000 $35,000Credit 70% 70%Refundable Credit $22,400 $24,500

ERC Process

• No application process ‐ therefore no Bank• Nothing to certify• Claim the credit on your quarterly payroll tax return ‐ 941

• Refundable credit – Keep the cash• Reduce your payroll tax deposits now

Employee Retention Credit –Poll Question

• Is it likely your business will claim the Employee Retention Credit for 2021?– Yes – No– Need assistance to determine ….

PPP Significant Improvements

• NOT TAXABLE and can DEDUCT expenses• Second Draw Loans• Streamlined Forgiveness – Loans $150,000 or less• Select your covered period – from 8 to 24 weeks• Additional Eligible Expenses• EIDL Advance – additional $10,000Grant

PPP Round 2 – Are you Eligible if you already received a PPP loan?

• No more than 300 employees (vs 500) – by headcount, not FTE from forgiveness application

• Can show a 25% reduction in gross revenue in any quarter or annually ‐ 2020 compared to 2019

• Have already used all of their first PPP loan • Maximum loan $2M

PPP Round 2 – New Borrowers

• 500 or fewer employees as of the date the loan is disbursed

• Expanded Eligibility– Most 501(c)(6) organizations, trade groups, chamber of commerce groups(business leagues)

– Nonprofit and tax‐exempt news organization, newspapers, broadcaster, radio stations

PPP Round 2 – Who is not Eligible

• Entity engaged primarily in political or lobbying activities

• People’s Republic of China Connections– Entity organized under Chinese laws – Business with significant operations in China– 20% ownership by individuals or entities from China or board members who are residents

Certification of Loan Necessity• Same standard as Round 1

– “Current economic uncertainty makes this loan necessary to support ongoing operations”

• Per SBA FAQ’s‐ “must make certification in good faith, taking into account current business activity and ability to access other sources of liquidity sufficient to support ongoing operations in a manner that is not significantly detrimental to the business

Certification of Loan Necessity

• Forward looking assessment• Recommendation

– Perform analysis at time of application– Document assessment– Maintain records

PPP Round 2 – Amount of Loan

Similar computation to original loan • 2.5 times average monthly payroll costs• Accommodation & Food Service Industries (NAICS 72) = 3.5 times average monthly payroll costs

However, you have 2 choices1. Average monthly payroll incurred within the 1‐

year period2. Average monthly payroll in 2019

PPP Round 2 – Amount of Loan

• Average monthly payroll is still capped at $100,000 on an annualized basis

• Payroll costs include– Group insurance cost ‐ Expanded from just health insurance to include life, disability, vision and dental

– Salary, wages, tips, paid leave– Retirement benefit payments

PPP Round 2 –Application Form

• Generally same format as Round 1

• If loan >$150,000 must include documentation supporting revenue reduction calculation

• If loan < $150,000 revenue documentation is required at time of forgiveness application

PPP Forgiveness

• No Change in the limitations – The lessor of– Covered expenses– Payroll Costs divided by 0.6

• Recommend waiting for new forgiveness applications PPP Round One

Streamlined Forgiveness Application

• Loans up to $150,000– One‐page signed attestation of compliance– No complex figures or computations required– No documentation submitted– Three‐year record keeping requirement– Stay tuned – SBA has 24 days to release form

Additional Eligible Expenses

• Covered operation expenditures• Covered property damage costs• Covered supplier costs• Covered worker protection expenditures

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Covered Operation Expenditures

Any business software or cloud computing service that facilitate business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses

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Covered Property Damage Costs

Costs related to property damage and vandalism or looting due to public disturbances that occurred during 2020 that was not covered by insurance or other compensation

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Covered Supplier CostsExpenditures made by a borrower to a supplier of goods for the supply of goods that (A) are essential to the operations of the borrower at the time at which the expenditure is made (B) is made pursuant to a contract, order, or purchase order (i) in effect at any time before the coverer period with respect to the applicable covered loan or (ii) with respect to perishable goods, in effect before or at any time during the coverer period with respect to the applicable covered loan

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Covered Workers Protection

Operating or a capital expenditure to facilitate the adaptation of the business activities of an entity to comply with requirements established or guidance issued by HHS, the CDC, OSHA or any equivalent requirements established, or guidance issued by state or local governments

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Additional Eligible Expenses

What if you already applied for forgiveness, can you amend your forgiveness application?

We do not believe the SBA will allow you to change applications already submitted

Please note that the information included in this webinar is subject to change based on further rulings or guidance issued by the U.S. Treasury, the Small Business Administration and other U.S. Government Agencies.

Tom Neff, CPA, Managing [email protected]

RINA Accountant & Advisors – “Your Future is Our Focus”

Howard Zangwill, CPA, Leader of the RINA CARES [email protected]

Chelsea Maemori, [email protected]

Richard DelleFave, CPA, [email protected]

with PPP Round 2 –Take the Expanded Benefits of the ERC · 2021. 1. 19. · Howard Zangwill, CPA,...

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