Finally, the new stimulus bill becomes law! What does it mean for you?
The second round of PPP loans (PPP2) are now available.
Previous PPP recipients may apply for a second loan of up to $2,000,000 if they:
- Have 300 or fewer employees.
- Have used or will have used the full amount of their first PPP loan.
- Can show a 25% gross revenue decline in any 2020 quarter compared with the same quarter in 2019.
As with the initial round of PPP loans, eligible forgiveness costs are:
- Covered mortgage interest
Other potentially forgivable PPP2 costs are:
- Worker protection and facility modification expenses to comply with COVID-19 federal health and safety guidelines (including personal protective equipment).
- Expenditures to suppliers that are essential at the time of purchase for current operations.
- Operating costs such as software, cloud computing services, and accounting needs.
Loan amount can be up to 2.5 months of average payroll costs based on either calendar 2019 in 2020, depending on the new loan date.
- For businesses in accommodation and food service industries, the loan amount is 3.5 months of average payro ll costs.
- Special rules apply to seasonal employers and businesses not in operation for all of 2019.
PPP loan forgiveness and related deductions:
Most importantly for small businesses, the bill clarifies that PPP forgiveness will not result in taxable income, while the expenses paid with PPP funds are deductible for tax purposes.
Economic Impact Payments
- Direct payments of $600 per adult & qualifying child.
- The payment phases out by $5 per $100 of modified adjusted gross income over: $75,000 if filing single, $112,500 if filing head of household, & $150,000 if married filing jointly.
- Treasury is authorized to issue payments in the same way it made earlier stimulus payments.
Covid-related Distributions from Retirement Plans
Special tax rules on distributions from money purchase pension plans are now allowed along with those from 401(k), 403(b) and IRA. See our blog post “Eased Retirement Plan Distribution Options Available for 2020” for the original rules.
FSA Covid-related Changes
- Unused amounts in healthcare and dependent care FSA’s can now be carried over from 2020 to 2021 and from 2021 to 2022.
- Mid-year changes in contributions to these accounts are now allowed.
- FSA grace periods can now be extended to 12 months at the end of plan years 2020 and 2021.
Plan changes are at employer discretion.Check with your employer for your specific plan details.
- In 2021 , the $300 above-the-line deduction for non-itemizers has been increased to $600 for couples filing jointly.
- Also extended through 2021 is the increased limit on deductible charitable contributions for corporations and taxpayers who itemize.
- Be aware that the penalty for overstating charitable tax deductions (thus underpaying your taxes) is increased to 50% of your total deduction, up from the previous 20%.