As the COVID-19 pandemic continues throughout the US, it also continues to impact small businesses across the country as well as in Arizona. State and federal resources are available if your small business has taken a financial hit or is struggling to stay afloat. Learn how the new stimulus bill can help your small business survive the upcoming months of continued pandemic-related restrictions.

Extended Tax Credits

As part of the new stimulus bill, a number of tax credits that can help your small business have been extended:

Employee Retention Tax Credit. Enhanced and extended through June 30. If your business has fewer than 500 employees (expanded from 100), you have been forced to partially suspend your business operations because of the pandemic, or you had a 20% revenue decline in any quarter in 2020 as compared with the same quarter of 2019, you may qualify for this tax credit.

The employee retention tax credit will be equal to 70% of each employee’s wages, including health insurance premiums you’ve paid for them, up to $10,000 for each employee per quarter. It can be used to cut your portion of the employee’s Social Security taxes (FICA) or if the credit is larger than your tax debt, you can receive a refund for the difference.

Families First Tax Credit. Extended through March 31. Previously, the Families First virus tax credit had required you as an employer to continue paying your employees who were forced to miss work because of the COVID-19 pandemic. For example, if an employee had to stay home when schools were closed. The tax credit had been provided to help cover the cost.

Now you are no longer required to pay these workers. The new stimulus bill has, however, extended the refundable tax credit through the end of March if you voluntarily choose to continue paying your employees who cannot work because of pandemic-related reasons.

Work Opportunity Tax Credit. Extended through 2025. As a small business owner, you can earn a tax credit for hiring someone from selected categories, including veterans, welfare recipients, and ex-felons. You can also earn the credit for hiring someone who has been unemployed for more than six months. The tax credit is calculated per employee and can range from $1200 to $9600. It is taken on your company’s tax and is available for pass-through organizations, such as S-corps and partnerships.

Carrying Over Losses. A continued benefit from the first round of stimulus funding in March 2020 allows you as a small business owner who may have lost money in 2020, 2019, or 2018 to carry back that loss for up to five years against your prior tax returns. So, if you paid taxes in those years, you may be eligible for a tax refund. You will need to file a return to receive the refund, as it is not automatic.

Paycheck Protection Program (PPP)

As part of the new stimulus bill, the PPP has received renewed funding and an extension as well. The program has an additional $284 billion and is now open through March 31. Your small business may qualify for a forgivable loan, whether or not you received a PPP loan in the first round of funding. If you did receive a first-round PPP loan, the new stimulus bill authorizes you, as a hard-hit business with fewer than 300 employees and at least a 25% drop in gross receipts over a particular period of time, to qualify for a second loan.

As part of the new stimulus bill, a portion of the PPP funding has been set aside specifically for low-income communities and for loans from community-based and minority-owned lenders. The maximum loan amount has been reduced from $10 million to $2 million but expands how the funds can be used.

The requirement to use 60% of the PPP loan for payroll remains, but qualified expenses now also include: 1) operations expenses for items such as software and computing, 2) supplier costs for goods essential to the operation of the business, 3) worker protection expenses such as items need to protect workers and customers to comply with CDC guidance i.e., plexiglass, expansion of outdoor dining etc., and 4) property damage expenses as result of riots.

In addition, the new stimulus bill clarifies that, even though forgiven PPP loans are not counted as taxable income, your small business can deduct expenses paid with the forgiven loan funds.

Economic Injury Disaster Loan (EIDL)

The new stimulus bill can help your small business through the EIDL program, which has been extended through December 31, 2021. The program has been funded with $40 billion, $20 billion of which has been set aside for employers in low-income areas with 300 or fewer employees and who have experienced at least a 30% economic loss. If you receive an EIDL and a PPP, the new bill has removed the requirement for the EIDL funds to be deducted from the calculation of PPP loan forgiveness.

CONTACT CLEAR VIEW BUSINESS SOLUTIONS FOR HELP

Even though the new stimulus bill can help your small business through the turbulent times of the COVID-19 pandemic, the regulations can be confusing. At tax time and throughout the year, the experts at Clear View can help ensure that you are maximizing your available credits and deductions and minimizing your tax payment. We work closely with you to help you be better prepared to make sound financial decisions and to plan for your success.

The past year, in particular, has been a challenge for many small business owners and solo-preneurs and we are here to guide you with professional business advisory services, tax planning and preparation, accounting, and bookkeeping. Learn more about how we can help you and your business by contacting Clear View Business Solutions to speak to our team about our services. Give us a call at (520) 544-0177.