Fortunately, this past week the Senate finally passed the house version of a bill to extend the 2nd Draw PPP program for another two months.
To recap, in order to qualify for the PPP 2nd Draw request a business must experience a 25% drop in revenue for a quarter in 2021 as compared to a similar quarter of 2019. In addition, the expenses that qualify for forgiveness has been expanded to include administrative and other expenses.
Please remember that a business needs to apply for forgiveness of the PPP proceeds within 10 months from when the last of the PPP funds have been used up.
Another program that does not get enough attention is the Employee Retention Credit (ERC) This is a credit that can be applied to an employer’s current payroll taxes. While the ERC was introduced with the PPP, it was under-utilized due to the fact that a business had to choose between taking the PPP or the ERC. Businesses can now partake in both.
The changes in the ERC are that it has now been extended to include all of 2021; that in order to qualify a business has to have seen a 20% reduction in business down from 50%; that the amount of qualified wages has been increased to $10,000 per employee per quarter from $10,000 per employee per annum and the credit was raised from 50% of qualified wages to 70% of qualified wages. This effectively means that the maximum per employee credit, on an annual basis, has been raised from $5,000 to $28,000.
Unfortunately, the IRS has fallen desperately behind on processing paper returns so it behooves a business that the credit be claimed when it electronically files its current quarter 941 in lieu of filing a paper amended Form 941.
If you have any questions regarding the PPP or ERC please call our office and we will gladly discuss them with you.