Updated COVID Related Programs Aimed to Support Small Business
January 7, 2021
Written by Jessica Dorsett, CPA
There are many programs that have been created to help support businesses impacted by the COVID pandemic. These programs change frequently. Below is a summary of various programs you will want to review.
PPP Round 2:
Companies, who already had received and properly used the 1st round PPP loan, may be able to apply for a 2nd draw. However, the eligibility rules have changed. The maximum loan amount is $2,000,000. A qualifying company:
- Has 300 or less employees
- Had a decrease in gross receipts in any quarter in 2020 compared to the same quarter in 2019 (use accounting method normally followed by the business on the tax returns)
- Was in business as of 2/15/20
- Is not in a prohibited industry and is not affiliated with entities in the People’s Republic of China.
The loan amount is calculated the same as round 1, at 2.5 times average monthly payroll. You can use 2019 payroll, or the 12 months prior to the application (i.e. 2020 total payroll). Businesses in the hospitality industry (such as restaurants, hotels, etc.) can use 3.5 times the average monthly payroll.
While this loan is available through March 31, 2021, many are concerned the funds will run out quickly as they did before. Some banks really struggled to process the large application load and fell short on the communication. If you are concerned about applying through your existing lender, please contact us immediately. We have partnered with several lenders that are ready to quickly process your loan application once the SBA has opened it up.
On January 7th, Jessica Dorsett, CPA presented a PPP Round 2 conference for our colleagues at San Diego North Economic Development Council. We expect to have the recording available on our website by the end of the day Friday January 8th.
Employer Retention Credit:
This credit has been expanded through 2021 and companies who received the PPP loan are now able to claim this credit as well (if qualified).
- For the 2020 tax year, a business is eligible for a credit of up to $5,000 per employee per year if they are (1) affected by a government mandated shut down or (2) have a 50% drop in Gross Receipts in any quarter compared to 2019 in addition to the PPP loan, but wages paid with PPP funds cannot be applied to the credit calculation.
- For the 2021 tax year, a business is eligible for a credit of up to $7,000 per employee per quarter if they are (1) affected by a government mandated shut down or (2) have a 20% drop in Gross Receipts in any quarter compared to 2019 (pre-COVID). This is a much bigger deal as the credit is much larger in the current tax year, and the threshold for qualifying has been significantly lowered.
Here is a link to the IRS page giving more detail (which has not yet been updated for the 2021 credit).
California Small Business COVID-19 Relief Grant:
- Applications are being accepted until January 13th, 2021 to receive grants between $5,000 and $25,000.
- Apply online at: https://careliefgrant.com and select an application partner in your county.
- Businesses with no more than $2.5 million in gross receipts, operating in California as of June 1, 2019 and affected by COVID-19 are eligible to apply.
Main Street Small Business Tax Credit:
On December 1, 2020, the California Department of Tax and Fee Administration (CDTFA) began accepting applications for tentative small business hiring credit through an online reservation system. Qualified small business employers must apply with the CDTFA for a credit reservation. The credit reservations will be allocated to qualified small business employers on a first-come, first-served basis. The reservation system will be available from December 1, 2020 at 8:00 a.m., through January 15, 2021. Within 30 days of receiving an application, CDTFA will notify each applicant via email whether a tentative credit reservation has been allocated to them and the amount of the tentative credit reservation.
Please note, this credit only applies to California small businesses that meet the following qualifications:
- Employed 100 or fewer employees as of December 31, 2019, and
- Suffered a 50 percent decrease or more in income tax gross receipts (generally, all income less returns and allowances), when comparing second quarter 2020 to second quarter 2019.
Additional information can be found here:
PPP Round 1:
If your company did not yet apply for the PPP funding, either because you were ineligible or were unable to apply, it is being reopened. The same original qualifiers exist, but it is now opened to additional businesses, including 501(c)6 organizations (subject to certain restrictions). The maximum loan amount is $10,000,000. A qualifying company:
- Has 500 or fewer employees
- Has been negatively impacted by COVID (this decision is much different now with 10 months of pandemic hindsight)
- Was in business as of 2/15/20
The loan amount is calculated at 2.5 times average monthly payroll. You can use 2019 payroll, or the 12 months prior to the application (i.e. 2020 total payroll).
For both Round 1 and Round 2 loans – forgiven amounts are NOT TAXABLE income for federal purposes (waiting to see if CA will conform). Additionally, any EIDL advance received will not reduce the forgivable portion, so both forgiven PPP Loans and EIDL advances convert to tax exempt government grants!
Please contact us if you need assistance with any of these programs.