On December 27th, President Trump signed the $900 Billion Stimulus Package into law that included a provision allowing practices to claim the Employee Retention Tax Credit (ERTC) even if that practice had received a PPP Loan. What does that mean for you and your practice?
To be eligible for the ERTC, you either needed to be required to temporarily close your practice due to a government order or have your collections for Q2 of 2020 be at least 50% lower than your collections for the same quarter of 2019. Once the Stimulus Package was signed into law, we started looking to see if our clients would qualify for the ERTC, and we confirmed that most practices saw their revenue fall by between 70% and 80% during Q2 of 2020 as compared to Q2 of 2019.
We then looked to see how long our clients would be eligible for this valuable payroll tax credit of 50% of the first $10k paid to each employee. Unless a client saw their 2020 Q3 revenue dip by more than 20% as compared to 2019 Q3 revenue, only those wages paid between 4/1/20 and 9/30/20 would qualify for the credit – and only if those wages were not counted towards the PPP Loan forgiveness calculation or were not reimbursed through FFCRA.
Here is where things get tricky:
- Practices that received the PPP Loan had a 24-week Covered Period to spend those funds to qualify for full forgiveness.
- Most practices got their PPP Loan in April or May, meaning the 24-week Covered Period went through to October or November.
- Up to 40% of the PPP loan could be spent on rent and utilities to qualify for forgiveness.
- The remainder needed to be spent on Payroll Costs that includes not only wages but also retirement contributions, health insurance, and certain payroll taxes.
That means that the PPP Covered Period overlaps with the ERTC period. To maximize the combined subsidy you might receive, start by not rushing to submit the PPP Loan forgiveness paperwork. The PPP and ERTC rules are still fluid, and the new rules haven’t even been written yet. Plus, you have 10 months from the end of the Covered Period to file with your lender for forgiveness.
Next, figure out all the non-wage expenses to include when applying for your PPP Loan forgiveness to help maximize the 4/1/20-9/30/20 wages eligible for this valuable payroll tax credit. The goal is to have at least $10k of wages per eligible employee during the 6-month ERTC period available for the credit.
Lastly, remember that if your practice revenue dipped by more than 25% for any calendar quarter in 2020 as compared to the same quarter from 2019, you should be eligible to apply for PPP Round 2. Based on what we’ve seen from our clients, most practices forced to temporarily close last spring should be eligible. Please contact your PPP lender for more info about PPP2.
More info about the ERTC is available at: https://schwartzaccountants.com/2021/01/employee-retention-tax-credit-ertc-updates/
U.S. Department of Labor Publishes Guidance on Expiration of Paid Sick Leave and Expanded Family and Medical Leave for Coronavirus
WASHINGTON, DC – The U.S. Department of Labor’s Wage and Hour Division (WHD) today announced additional guidance to provide information to workers and employers about protections and relief offered by the Families First Coronavirus Response Act (FFCRA). The FFCRA’s paid sick leave and expanded family and medical leave requirements will expire on Dec. 31, 2020.
The new guidance, in the form of Frequently Asked Questions on the WHD website, addresses whether workers who did not use their leave entitlement under the FFCRA in 2020 may use such leave after Dec. 31, 2020. It also explains how WHD will maintain its enforcement authority over employers’ leave responsibilities while the FFCRA’s paid leave requirements were in effect, even after these leave entitlements have expired.
Additionally, the Consolidated Appropriations Act (CAA), 2021, extended employer tax credits for paid sick leave and expanded family and medical leave voluntarily provided to employees until March 31, 2021. However, the CAA did not extend employees’ entitlement to FFCRA leave beyond Dec. 31, 2020, meaning employers will no longer be legally required to provide such leave.
“The Wage and Hour Division is attuned to the critical need for American workers and employers to understand this relief program as they deal with the effects of this crisis on the workplace,” said Wage and Hour Division Administrator Cheryl Stanton. “The guidance we issued today provides clarity around some of the novel issues that the FFCRA’s expiration raises. We remain committed to providing as many tools and as much information as possible to all parties.”
The FFCRA helps the U.S. combat and defeat the workplace effects of the coronavirus by giving tax credits to American businesses with fewer than 500 employees to provide employees with paid leave, either for certain of the employee’s own health needs or to care for family members, for certain reasons related to COVID-19. Please visit WHD’s “Quick Benefits Tips” for information about how much leave workers are qualified to use, and the wages employers were required to pay. By extending these tax credits to employers who voluntarily provide FFCRA leave, the CCA enables employers to provide paid leave, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus.
WHD provides updated information on its website to ensure that workers and employers have the information they need about the benefits and protections of this law. The agency also provides information on common issues employers and employees face when responding to the coronavirus and its effects on wages and hours worked under the Fair Labor Standards Act and on job-protected leave under the Family and Medical Leave Act at https://www.dol.gov/agencies/whd/pandemic
Recently, the Massachusetts Growth Capital Corporation issued more information about the $668 million grant program. When reading through the guidelines of the Sector-Specific Relief Grant Program for Massachusetts Businesses, you might get a sense that this program might not be available to most healthcare practices.
For starters, MGCC clearly states as part of the Program Overview available at: https://www.empoweringsmallbusiness.org/covid-19-response/sector-specific-relief-grant-program-massachusetts-businesses:
This business relief fund targets the hardest hit small businesses that have an exceptional need of cash relief. Though many businesses have been negatively affected by the pandemic, not all needs are equal. To ensure that these limited funds get to the most severely impacted businesses, you SHOULD NOT APPLY if you:
- are not showing an operating loss due to the coronavirus pandemic
- have access to other sources of relief
- have been able to continue to operate without significant financial distress
- have adequate available reserves
The Program Overview goes on to detail eligible businesses, and does include Personal Services, but then only lists Nail Salons, Barber Shops, and Independent Pharmacies in that subsection.
If you read through the guidelines and still feel that your practice is entitled to one of these grants, the deadline to apply is 1/15/21. With $668 Million earmarked for this grant program, and each grant limited to $75k, there should be at least 8,900 small businesses in Massachusetts who will benefit from this program.
Click on this link to begin the application process: https://massgcc4.submittable.com/submit if you didn’t apply last month when this grant was first announced. Any business owner who has previously applied will automatically be included in the pool of applicants to be considered for this round of grants.
More details on how to apply and eligibility requirements are available at www.empoweringsmallbusiness.org.
On December 27th, President Trump signed the $900 Billion Stimulus Package into law that included a provision allowing practices to claim the Employee Retention Tax Credit (ERTC) even if that practice had received a PPP Loan. The Stimulus Package also increased the amount of this tax credit and made qualifying easier.
Most healthcare practices should be eligible for this payroll tax credit for at least the period 4/1/20 – 9/30/20. Please remember that wages paid with PPP funds or reimbursed through FFCRA aren’t included as part of the ERTC calculations.
You determine if your practice qualifies for this valuable credit on a quarter by quarter basis.
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 $14k per eligible employee:
- This tax credit has been extended through 6/30/21.
- You are eligible for either of the first two quarters in 2021 that your collections fall 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.
You will apply for this payroll tax credit in connection with your quarterly payroll tax filings. Hopefully guidance will be issued soon. Later this year as the rules are released, we plan to help our clients figure out how to best coordinate the PPP loan forgiveness with the ERTC to maximize the subsidies your practice will receive.
Additional Resources from Forbes:
Breaking Down Changes To The Employee Retention Tax Credit In The New Covid Relief Bill, Part 1 (forbes.com)
Breaking Down The Changes To The Employee Retention Tax Credit In The New COVID Relief Bill, Part 2 (forbes.com)
On December 27th, President Trump signed the $900 Billion Stimulus Package into law that introduced a second round of PPP loans (PPP2). Most healthcare practices that were required to close their offices last spring should qualify for PPP2. Same goes for self-employed practitioners, practice owners who didn’t apply for PPP Round 1, and those practitioners who returned the PPP Loan they received.
To qualify for PPP2, practice owners must:
- Be able to demonstrate a 25% decline in revenue for any calendar quarter during 2020 as compared with the same quarter of 2019
- Special rules apply to practices not yet open in 2019
- Have fully spent or plan to fully spend the funds received from PPP Round 1
- Have been open prior to 2/15/20 and are still currently open for business
To see if you meet the 25% decline in revenue, log onto your QuickBooks Online, click on Reports, then Profit and Loss Comparison. Change the dates to 4/1/20-6/30/20 and pull down on the Compare to another period box.
In that dialog box, click on the Previous Year, $ Change, and % Change, then click on Run Report to see if the revenue is down by more than 25% for the quarter.
Just as with PPP1, eligible practices should receive 2.5 times the average monthly qualifying payroll costs. The amount received then needs to be spent on certain allowable payroll and facility costs over the 24-week Covered Period starting when the funds are received.
Expect the SBA to issue guidance about PPP2 by 1/13/21, which is 17 days from the date that Trump singed the Stimulus package into law. You might also reach out to your lender who helped you with PPP Round 1 to get the PPP2 ball rolling. The deadline to apply for your PPP2 loan appears to be 3/31/21.
For more information about PPP Round 2, please read these articles:
COVID-19 relief bill addresses key PPP issues – Journal of Accountancy
The Small Business Owner’s Guide to the Paycheck Protection Program: Round 2 | Gusto
During the spring, the SBA offered practice owners an Economic Injury and Disaster Loan of up to $150k in addition to the PPP Loan of 2.5 times eligible monthly payroll costs and the EIDL Advance of $1k per employee, up to $10k. While almost all our clients accepted the PPP Loan and EIDL Advance, a small percentage took the EIDL Loan too.
As we wrote previously at: https://schwartzaccountants.com/2020/05/more-info-about-eidls/, there are certain pitfalls with the EIDL loan, so please consider paying it off as quickly as you can. We gave instructions to paying off the EIDL Loan at: https://schwartzaccountants.com/2020/10/how-to-pay-off-the-eidl-loan-2/.
Now, it appears there are even more headaches associated with maintaining this loan as the SBA is requesting additional filing requirements for businesses with an outstanding EIDL Loan as follows:
DUTY TO MAINTAIN HAZARD INSURANCE
The document that we need is the Declarations Page of your Hazard Insurance policy. This document must:
- 80% of the business contents needs to be covered
- Be current as of day of the day that I review it
- The address on the policy must match the address that we have on file for you
- The name of the insured must match the name of the Business
- The Coverage period must be 12 months
The Duty to Maintain Hazard Insurance requirement may be found on page 4 of the Loan Authorization and Agreement which you signed “…the Borrower will provide proof of an active and in effect hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable value. Borrower will not cancel such coverage and will maintain such coverage throughout the entire term of this Loan.”
RESOLUTION OF BOARD OF DIRECTORS
The Resolution must:
- Be called the Resolution of Board (Corp), Certificate of Limited Liability Entity (LLC), or Certificate of Limited Liability Partnership (LLP) or some other such document
- Be provided by you (we cannot provide a template)
- List the Business Name
- State that a business meeting was held and specify on which date
- State that the Business has agreed to assume this SBA loan
- Specify the loan amount
- Authorize the signatory to sign on behalf of the business
- State the name of the signatory
- Be signed by corporate
The Resolution of the Board requirement may be found on page 7 of the Loan Authorization and Agreement which you signed. It states that the borrower shall “…submit the appropriate SBA Certificate and/or Resolution to the U.S. Small Business Administration…”
Please reach out to your practice attorney to property draft the required Resolution of the Board of Directors. Or, Attorney Neil Cohen can help you prepare this Resolution for $300. You can email Neil at: email@example.com.
Then forward the Declarations Page of your hazard insurance policy and the Resolution of the Board of Directors to the SBA per their instructions. Or, just repay the EIDL Loan if your feel your practice can afford to pay back that loan now and you aren’t overly concerned that you’ll need those funds to financially survive in the event of another forced shut down in 2021.