Consolidated Appropriations Act

The Consolidated Appropriations Act was introduced to enhance and extend certain relief previously granted under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.  This site summarizes these important changes.  For additional details on the relief previously granted by the CARES Act please click here.

Relief for Small Businesses

SBA 7(a) Paycheck Protection Program

$284 Billion expansion of the existing 7(a) loan program under the CARES Act.

  • A second PPP loan will be available to businesses that have already received one.
  • Second-time loans are limited to businesses with fewer than 300 employees and at least a 25% drop in gross receipts in any quarter of 2020 compared to the same quarter in 2019.
  • The maximum loan size for second-time borrowers is $2 million.
  • Businesses taking a PPP loan will be able to also take the Employee Retention Tax Credit (ERTC).
  • PPP loans can be used to pay qualifying expenses, which are expanded to include covered property damage, supplier costs, or worker protection expenditures in addition to employee wages or operating expenses like rent and utilities.
  • Eligible expenses are expanded to include expenditures to suppliers that are essential at the time of purchase, covered worker protection and facility modification expenditures, and certain covered operating costs.
  • Expenses paid with PPP proceeds will be tax-deductible.
  • Proceeds from an EIDL advance no longer need to be deducted from PPP loan forgiveness.
  • Forgiveness of PPP loans under $150,000 will be streamlined and simplified.

Loan Summary

  • Restaurants, bars, hotels and other similar businesses are eligible to receive a larger PPP loan equal to 350% of the employer’s average monthly payroll costs for either calendar year 2019 or the 12 months from when the loan is taken.
  • Loan amount up to 250% of the employer’s average monthly payroll costs for either calendar year 2019 or the 12 months prior to when the loan is taken.

Loan Forgiveness

  • Borrowers can select any covered period between 8 weeks and 24 weeks after the loan origination date.
  • Other loan forgiveness criteria remain the same as stipulated in the CARES Act:
    • At least 60% of the forgiveness amount must be used on payroll costs.
    • Reduction in salaries does not exceed 25%.
    • No reduction in the number of Full-Time Equivalent employees.

Employee Retention Credit

Eligible employers are allowed an increased credit against payroll taxes for 70% of the qualified wages of an eligible employee for wages paid from January 1, 2021 through July 1, 2021.  The credit is refundable if it exceeds the employer’s social security or Railroad Retirement Tax due in a quarter.

Who is an Eligible Employer?

Eligible employers are those that carried on a trade or business during the calendar quarter, including tax-exempt organizations, that either:

  • Fully or partially suspended operations due to orders from a governmental authority, limiting commerce, travel, or group meetings due to COVID-19, or
  • The businesses gross receipts for 2021 experienced a year-over-year (comparing calendar quarters) reduction of at least 20%. The business is entitled to the credit for each quarter until gross receipts for a quarter exceed 80% of receipts from the same quarter in 2019.
  • For 2021 only, businesses have the option to elect to satisfy the gross receipts test by looking at the immediately preceding calendar quarter and comparing that quarter to the corresponding quarter in 2019.
  • This credit is not available for self-employed individuals.
  • This credit can be combined with the Paycheck Protection Program but not for the same wages or health care costs.

Credit Summary

  • Eligible employers will receive a refundable credit against the 6.2% employer portion of the payroll tax (Social Security and Railroad Retirement) equal to 70% of qualified wages paid each quarter.
  • The amount of qualified wages per employee cannot exceed $10,000 for each quarter.  This means an eligible employer may take a credit up to $7,000 per employee per quarter.
  • If the employer had 500 or fewer employees on average in 2019, the credit is based on wages paid as well as a portion of the cost of employer-provided health care to all employees.
  • Aggregation rules apply for determining the number of employees, this requires certain affiliated employers to be treated as one.
  • Businesses can advance the credit at any point during the quarter based on average wages paid in the same quarter in 2019.
  • An eligible employer can receive both tax credits for the qualified leave wages and Employee Retention Credit but not for the same wages.

How to Claim the Retention Credit

  • Employers can be immediately reimbursed for the credit by reducing their required deposits of payroll taxes that have been withheld from employees’ wages by the amount of the credit.
  • Eligible employers will report their total qualified wages and the related health insurance costs for each quarter on their quarterly Employment Tax Returns (Form 941) beginning with the second quarter.
  • If the employer’s employment tax deposits exceed the credit, the employer may receive an advance payment from the IRS by submitting Form 7200.
  • If the anticipated credits are not in excess of the remaining federal employment tax deposits, do not file the Form 7200.

Tax Credits for Paid Sick Leave

Employers subject to the requirements are entitled to a refundable tax credit equal to the amount of the qualified paid sick leave requirements paid by the employer per quarter through March 2021.

Who Does This Apply To?

  • Employers with fewer than 500 employees are required to provide paid sick leave.
  • There is a small business exemption where there are less than 50 employees.

Summary of the Credit

  • The tax credits for the paid sick leave wages are capped depending on the qualified reason that the employee is unable to work.
  • Eligible employers will claim credits on their quarterly Employment Tax Returns (Form 941) beginning with the second quarter, but they may benefit more quickly from reducing their employment tax deposits.
  • If the employer’s employment tax deposits exceed the credit, the employer may receive an advance payment from the IRS by submitting Form 7200.

Business Meals

  • For tax years beginning 2021 and 2022, 100% of business meals are deductible.

Relief for Individuals

Recovery Rebate

  • $600 lump sum check for single filers plus an additional $600 for each child. Assistance is expected to be phased out for income levels above $75,000 for single filers and $150,000 for joint filers and assistance will not apply for single filers with income of $87,000 and joint filers with income over $174,000.
  • Eligible individuals must have a valid social security number or tax identification number.
  • The rebate is available to individuals with no income as well as those whose income is from non-taxable means-tested benefit programs, such as SSI.
  • Nonresident aliens and dependents are ineligible to receive the payment.
  • The cash payments will be based on the recent tax information available to the IRS based on the 2019 tax return. This is subject to a “true-up” based on 2020 tax information.

Unemployment

  • Provides an increased benefit of up to $300 per week for eleven weeks from December 26, 2020 through March 14, 2021.
  • Relief is available for a period, up to a maximum of 50 weeks (subject to future extensions).
  • Self-employed workers, with at least $5,000 in self-employment income may be eligible for an additional $100 per week benefit as part of the Mixed Earner Unemployment Compensation.

Charitable Contributions

  • Up to a $300 ($600 for joint filers) charitable contribution can be taken as a deduction in calculating AGI.
  • The 100% AGI limitation on cash contributions will remain in place for 2021.

Health Plans

  • Flexible Savings Account balances can be rolled from the 2020 tax year into 2021, and 2021 can be rolled into 2022.

GM Advisory Group, Inc. (“GMAG”) is a registered investment adviser that provides investment advice to clients on a discretionary and non-discretionary basis. GMAG does not provide any express or implied guarantees that the information contained herein is accurate or complete. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information contained herein, by GMAG, its members, partners or employees, and no liability is accepted by such persons for the accuracy or completeness of any such information.

GM Advisory Group does not provide tax, legal, or accounting advice. This material is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting professionals before engaging in any plan or transaction.