New $100K Subsidy Available For Practices That Started After 2/15/20

On March 11, 2021, President Biden signed the $1.9 Trillion American Rescue Plan Act of 2021 into law. ARPA included a provision expanding the Employee Retention Tax Credit (ERTC) to include “Recovery Startup Businesses (RSB)” – those that opened after 2/15/20 with annual revenue of less than $1 Million.

The ERTC for RSB’s is only available for Q3 and Q4 of 2021 and is equal to 70% of the first $10k paid to each employee per quarter, capped at $50k per quarter. And unlike established businesses, an RSB does not need to show a decrease in revenue or being impacted by a government shutdown to qualify.

It appears that eligible startup businesses will claim this valuable tax credit just by checking a box that will be available on their Q3 and Q4 quarterly payroll tax filing Form 941. Expect the IRS to issue guidance soon.

PPP Loan Forgiveness

Business owners who received a PPP loan have 10 months following the end of the 24-week Covered Period to submit to their lender for forgiveness. Assuming you received your PPP loan in mid-April, you have until July 31st to complete the forgiveness application with the IRS.

We can help you apply for PPP Loan Forgiveness with your lender. Our fee for to complete the Form 3508S is $750, discounted to $500 if you use our firm’s payroll service, while our fee is $1,000 to complete the Form 3508EZ or $1,500 for the Form 3508.

Please email us at practicehelp@schwartzaccountants.com to request our help with our PPP Loan forgiveness application.

ERTC Update

For starters, the American Rescue Plan Act of 2021 (“ARPA”) extended the ERTC (Employee Retention Tax Credit) through the end of 2021.  Practice owners that haven’t fully recovered to 2019 revenue levels might now be eligible for a tax credit of $7k per non-family employee per quarter, which translates to $28k per employee for 2021.

As we explained in our January 4th blog post available at https://schwartzaccountants.com/2021/01/employee-retention-tax-credit-ertc-updates, to be eligible for the ERTC:

 For 2020 – Maximum annual credit of $5k per eligible employee:

  • To first qualify for the ERTC during 2020, your practice either needed to close due to a government orders or see its revenue fall by 50% for a calendar quarter as compared with the same quarter of the prior year.
  • You continue to qualify until the first day of the quarter following the quarter that collections exceed 80% of the collections for the same period of 2019.
  • For each quarter you are eligible, you can take a payroll tax credit equal to 50% of the first $10k of eligible wages paid per employee for the calendar year.

For 2021 – Maximum annual credit of $28k per eligible employee:

  • This payroll tax credit for 2021 has been extended through 12/31/21.
  • You are now eligible for any quarter in 2021 that your collections fall by more than 20% as compared to the same quarter of 2019 (or you can base eligibility on the preceding quarter as compared with that same period from 2019).
  • For each quarter in 2021 that you are eligible, you can take a payroll tax credit equal to 70% of the first $10k paid per eligible employee per quarter.
  • The credit for the first two quarters of 2021 is taken against your staff’s Social Security taxes, while the credit for the last quarters of 2021 is taken against Medicare taxes. Claim Advance ERTC payments on a Form 7200 (https://www.irs.gov/forms-pubs/about-form-7200)

 We also explained in another January 4th blog post available at: https://schwartzaccountants.com/2021/01/ppp-update/ how to prepare a report on your QuickBooks Online to see if you meet the required reduction in quarterly collections.

 Our plan is to help our clients file for the ERTC starting right after the 5/17/21 extended personal tax filing date. Our fee is $500 per eligible employee per quarter. Additional fees apply if we need to amend your 2020 practice and/or personal tax returns.  If you would like our assistance filing for the ERTC, please email us at practicehelp@schwartzaccountants.com.

Other ERTC Rules – IRS Issues Notice 2021-20: Guidance on the Employee Retention Credit:

In short, the current rules require that employers looking to claim the ERTC must amend the applicable 2020 quarterly payroll tax filings (Form 941) and must also reduce the deduction claimed for their staff salaries on their 2020 practice tax return by the amount of the credit. You can read all 102 pages of this IRS Notice at: https://www.irs.gov/pub/irs-drop/n-21-20.pdf.  Here are some highlights:

  • No deduction allowed for wages included in ERTC Calculationa similar deduction disallowance applies under section 2301(e) of the CARES Act with regard to the employee retention credit, such that an employer’s deduction for qualified wages, including qualified health plan expenses, is reduced by the amount of the employee retention credit.
  • Family members don’t count: wages paid to related individuals may not be taken into account for determining qualified wages for the employee retention credit.
  • No Credit for Schedule C Income: Self-employed individuals are not eligible for the employee retention credit with respect to their own self-employment earnings. However, a self-employed 21 individual who employs other individuals in the self-employed individual’s trade or business and who otherwise meets the requirements to be an eligible employer may be eligible for the employee retention credit with respect to qualified wages the self-employed individual pays to the employees.

Lastly, the IRS Notice (on page 87) details how to file for the ERTC for wages paid in 2020 as follows:

An eligible employer that received a PPP loan and did not claim the employee retention credit may file a Form 941-X for the relevant calendar quarters in which the employer paid qualified wages…[employers] should not use a subsequent Form 941 to claim an employee retention credit for qualified wages paid in the second quarter of 2020.

Please note that calculating the ERTC goes hand in hand with filing for the PPP Loan forgiveness. The rules seem to imply that you can re-figure the allowable payroll costs for the ERTC calculation even if you offset 100% of the PPP Loan with payroll costs for the forgiveness calculation.  See examples starting on page 73 of the IRS notice at: https://www.irs.gov/pub/irs-drop/n-21-20.pdf.

Lastly, unlike other subsidies offered during the past 12 months including the PPP Loans and HHS Provider Relief Funds that provided relatively short windows to apply for those subsidies, practice owners eligible for the ERTC have 3 years to file an amended payroll tax form – 941-X.

Our plan is to help our clients file for the ERTC starting right after the 5/17/21 extended personal tax filing date. Our fee is $500 per eligible employee per quarter. Additional fees apply if we need to amend your 2020 practice and/or personal tax returns.  If you would like our assistance filing for the ERTC, please email us at practicehelp@schwartzaccountants.com.

Additional EIDL Advance Funds May Be Available

As we wrote in February at https://schwartzaccountants.com/2021/02/additional-eidl-advance-funds-may-be-available/, the SBA has started reaching out to inform practice owners who didn’t receive the full $10k EIDL Advance last April that they might be eligible for an additional grant now.  To qualify for the Targeted EIDL Advance, your practice must be located in a low-income community per the map available at: https://sbaeidl.policymap.com/app and you need to demonstrate a 30% reduction in revenue for an 8-week period beginning 3/2/20 or later. Plus, you need to wait to be contacted by the SBA to apply.

If you have been contacted by the SBA by email regarding additional EIDL funds available, please read through our blog post or check out what the SBA posted about the new Targeted EIDL Advance at: https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/covid-19-economic-injury-disaster-loans.

Businesses Can Temporarily Deduct 100% of Meals As Of 1/1/21

IR-2021-79, April 8, 2021

WASHINGTON — The Treasury Department and the Internal Revenue Service today issued Notice 2021-25 providing guidance under the Taxpayer Certainty and Disaster Relief Act of 2020. The Act added a temporary exception to the 50% limit on the amount that businesses may deduct for food or beverages. The temporary exception allows a 100% deduction for food or beverages from restaurants.

Beginning January 1, 2021, through December 31, 2022, businesses can claim 100% of their food or beverage expenses paid to restaurants as long as the business owner (or an employee of the business) is present when food or beverages are provided and the expense is not lavish or extravagant under the circumstances.

Where can businesses get food and beverages and claim 100%?

 Under the temporary provision, restaurants include businesses that prepare and sell food or beverages to retail customers for immediate on-premises and/or off-premises consumption. However, restaurants do not include businesses that primarily sell pre-packaged goods not for immediate consumption, such as grocery stores and convenience stores.

Additionally, an employer may not treat certain employer-operated eating facilities as restaurants, even if these facilities are operated by a third party under contract with the employer.