Paycheck Protection Program (PPP)
New/Second PPP Loan
The $900 Billion COVID Relief Plan allocated $284 billion for a new round of PPP new loans.
Who is eligible for the new PPP 2.0 Loans?
Businesses may qualify for a second loan if they received funds in the first round of PPP and plan to use or have fully used their first PPP Loan. First time applicants are welcome as well.
What businesses qualify?
The business may not have more than 300 employees
The business must have at least a 25% reduction in revenues in at least one quarter in 2020 when compared to the same quarter in 2019 (see new business exceptions below).
How is the 25% reduction in revenues calculated?
Business owners will compare gross receipts of the business before expenses are subtracted. They will compare those for any quarter in 2020 to the same quarter in 2019 to determine if revenues decreased by at least 25%.
If the business began operations in the third and fourth quarter of 2019, then they may compare any quarter in 2020 with the third or fourth quarter of 2019 to determine whether gross receipts were reduced by at least 25%.
If the business began operations in the fourth quarter of 2019, then they may compare any quarter in 2020 with the fourth quarter of 2019 to determine whether gross receipts were reduced by at least 25%.
A business must have been in business by Feb. 15, 2020 to apply. A business that wasn’t in business in 2019 but was in business before February 15, 2020 will compare gross receipts from the second, third or fourth quarter of 2020 to that first quarter of 2020.
How is the loan amount determined?
The maximum loan amount is $2 million
A business may qualify for up to 2.5 times average monthly payroll costs (includes gross wages, state unemployment cost, employer retirement plan matching contributions, and employers contribution toward the cost of employee group benefits). Businesses with a NAICS code beginning in 72 (generally hospitality businesses) may receive up to 3.5
How is average monthly payroll cost calculated?
There are two methods:
- Divide the annual payroll for the 1-year period before the date of the new the loan application by 12
- Divide the annual payroll cost for 2019 by 12
For Example, Payroll Cost for the year were $1.2 Million, divided by 12 = $100,000 (Average monthly payroll cost) multiplied by 2.5 = $250,000 (PPP Loan Amount)
New businesses (that were not in business for the 1-year period preceding February 15, 2020) will use a slightly different formula to arrive at the average monthly payroll costs. They will divide the payroll costs paid or incurred by the date they apply by the number of months in which those costs were incurred and multiply the result by 2.5.
Seasonal businesses may apply based on the average monthly payroll costs for any 12-week period between February 15, 2019 and February 15, 2020.
Resources for Maximizing PPP Loan Forgiveness
FREE Forgiveness Application Tool https://www.ppp.bank
There are currently 3 loan forgiveness application versions: 3508, 3508EZ and 3508S . Which application to use is determined by either the amount of the loan or reduction in number of full-time equivalent employees, wages and/or hours.
3508 is used when there has been a reduction in full-time equivalent employees or a reduction of 25% or more in wages/hours for an affected employee, with certain exceptions.
3508 EZ can be used for loans of more than $150,000 when there have been no reductions as detailed above.
3508S is a single page application that simplifies forgiveness for loans of $150,000 or less. Importantly, a borrower that uses SBA Form 3508S (or lender’s equivalent form) is exempt from any reductions in the borrower’s loan forgiveness amount based on reductions in full-time equivalent (FTE) employees or reductions in employee salary or wages that would otherwise apply.
Employee Retention Tax Credit
Extension and expansion through June 30, 2021
IMPORTANT: The Employee Retention Credit is NOW AVAILABLE to those receiving PPP Loans.
The employee retention tax credit has been extended for qualifying businesses.
Original Law: Business operations that are either fully or partially suspended by a COVID-19 lockdown order (see pages 27 – 43); or, for any quarter in 2020, if gross receipts are less than 50% of gross receipts for the same quarter in 2019.
New Law: Effective Jan. 1, 2021, business operations that are either fully or partially suspended by a COVID-19 lockdown order, or for a quarter in 2021, if gross receipts are less than 80% of gross receipts for the same quarter in 2019. Previously, employers who received a PPP Loan were not eligible to receive the Employee Retention Credit. The new law changed this, retroactively, to wages paid after March 12, 2020 through June 30, 2021.
ELIGIBLE Wages From March 12, 2020 and BEFORE January 1 , 2021
50% of the qualified wages paid per employee (with a maximum credit of $5000 for all of 2020) , plus the cost to continue providing health benefits to the employee.
Less than 100 Employees
Cannot include any wages paid with the proceeds of a PPP loan
ELIGIBLE WAGES AFTER JANUARY 1, 2021 and before July 1, 2021
70% of qualified wages(up to a maximum credit of $14,000 per employee) which is includes the cost to continue providing health benefits. 500 or less employees Cannot include any wages paid with the proceeds of a PPP loan
Clients who are eligible for the Employee Retention Credit have two options for claiming the credit:
- Apply for an advance of the tax credits by filing form 7200 with the IRS.
- Notify your Payality Client Support Specialist and we will instantly apply the tax credits by reducing the amount of federal taxes collected and paid to the IRS.
American Rescue Plan Act of 2021
The American Rescue Plan (ARPA) signed into law in March, is a $1.9 trillion economic stimulus bill passed to speed up the United States’ recovery from the economic and health effects of the COVID-19 pandemic and the ongoing recession. The package builds upon many of the measures in the FFCRA and CARES Act from March 2020 and in the Consolidated Appropriations Act from December 2021.
Recently released guidance includes these key payroll provisions:
- Tax credits are now available for qualified wages paid for COVID related leave taken through September 30, 2021.
- The 10-day limit for paid COVID sick leave resets after March 31, 2021.
- Increases the amount of wages eligible for the credit for expanded family and medical leave wages from $10,000 per employee to $12,000.
- The legislation also adds leave for the time it takes to get a COVID-19 vaccine or to receive from complications as a reason for which paid sick leave may be provided.
- Creation of a COBRA tax credit for employers who choose to make the COBRA premium payments for their laid-off or terminated employees. The legislation provides a subsidy of 100% of COBRA premiums beginning April 1 and ending on September 30, 2021. Employers may claim the credit as a payroll tax credit on Form 941.
How will Payality help clients to take advantage of these credits?
Because the 10 days of eligible leave resets after April 1 and other changes, Payality has added new earning codes to replace the earnings codes used previously for COVID Sick Pay Credits and these codes need to be used going forward.
Clients will simply report the hours (or amounts in the case of COBRA) for affected employee’s each pay period using the following codes:
- ARPAREG – (Replacing CVDREG) will be used for reporting paid sick time taken for covered the employees OWN care, plus, the additional ARPA covered reasons of:
- The employee is getting a COVID-19 vaccine.
- The employee is recovering from complications due to receiving the vaccine.
- The employee is awaiting the results of a COVID-19 test or diagnosis for coronavirus.
Employee is eligible for up to 10 days at their regular rate of pay, capped at $511 per day.
- ARPACARE – (Replacing CVDCARE) is used to track paid sick time taken for the employee to care for others at two-thirds the employee’s regular rate of pay for up to 10 days, capped at $200 per day.
- ARPAFMLA – (Replacing CVDFMLA) is used to track leave time taken for the expanded FMLA at two-thirds the employee’s regular rate of pay for up to 10 weeks, capped at $12,000 total.
Employers may also claim a tax credit for maintaining insurance for their employees on paid sick or expanded FMLA. The tax credit is limited to qualified health plan expenses and is in addition to the tax credit for sick or leave wages paid to the employee.
Two (2) new memo earning codes have been added.
ARPAINS – Used to track the amount of qualified health plan expenses for employees taking 10 days of paid COVID sick leave.
ARPAFMLAINS – Used to track the amount of qualified health plan expenses for employees taking expanded COVID FMLA leave.
We have added a new earning code (and corresponding deduction code) to claim the COBRA premium tax credit.
ARPACOBRA – Enter the amount of COBRA payments made on behalf of the former employee. (Make sure to make a separate entry for each employee)
California Golden State Stimulus
Provides an additional $2.075 Billion to the California Small Business COVID-19 Relief Grant Program on top of the $500 million that was already rewarded in two application rounds that ended February 8, 2021.
Round 3 (waitlisted from Rounds 1 and 2):
Friday, March 5th through Thursday, March 11th, 2021
Eligible applicants: This is a closed round and only available to eligible applicants who were waitlisted in Rounds 1 and 2 – only existing applicants will be selected. If you were waitlisted, you do not need to reapply. New applications will not be accepted in this round.
Round 4 (nonprofit cultural institutions only):
Tuesday, March 16th through Tuesday, March 23rd, 2021
Eligible applicants: Only nonprofit cultural institutions with any revenue size that meet eligibility criteria.
Thursday, March 25th through Wednesday, March 31st
Eligible applicants: current waitlisted small businesses and nonprofits not selected in Rounds 1, 2, or 3 and new applicants that meet eligibility criteria.
Wednesday, April 28th at 9:00 AM through Tuesday, May 4th at 5:00 PM
Notifications will begin Friday, May 7th
Eligible applicants: current waitlisted small businesses and/or nonprofits not selected in Rounds 1, 2, 3, 4 or 5 and new applicants that meet eligibility criteria.
How much of a grant would I be eligible for?
$5,000 for applicants with an annual gross revenue of $1,000 to $100,000 in the 2019 taxable year.
$15,000 for applicants with an annual gross revenue greater than $100,000, and up $1,000,000, in the 2019 taxable year.
$25,000 for applicants with an annual gross revenue greater than $1,000,000, and up to $2,500,000), in the 2019 taxable year.
Who can apply?
A sole proprietor, independent contractor, 1099 employee, C-corporation, S-corporation, cooperative, limited liability company, partnership, or limited partnership, a registered 501(c)(3), 501(c)(6), or 501(c)(19) nonprofit entity with an annual gross revenue of less than $2,500,000, but greater than one $1,000, in the 2019 taxable year.
(B) Began operating prior to June 1, 2019.
(C) Is currently active and operating, or has a clear plan to reopen when the state permits reopening of the business.
(D) Has been impacted by COVID-19 and the related health and safety restrictions, such as business interruptions or business closures incurred as a result of the COVID-19 pandemic.
What criteria will be used to determine which qualified small businesses receive the grant?
(1) Geographic distribution based on COVID-19 health and safety restrictions following California’s Blueprint for a Safer Economy and county status and the Regional Stay Home Order.
(2) Industry sectors most impacted by the pandemic, including, but not limited to, those identified as in the North American Industry Classification System codes beginning with:
(A) 61 – Educational Services.
(B) 71 – Arts, Entertainment, and Recreation.
(C) 72 – Accommodation and Food Services.
(D) 315 – Apparel Manufacturing.
(E) 448 – Clothing and Clothing Accessory Stores.
(F) 451 – Sporting Goods, Hobby, Musical Instrument, and Book Stores.
(G) 485 – Transit and Ground Passenger Transportation.
(H) 487 – Scenic and Sightseeing Transportation.
(I) 512 – Motion Picture and Sound Recording Industries.
(J) 812 – Personal and Laundry Services.
(K) 5111 – Newspaper, Periodical, Book, and Directory Publishers.
(3) Nonprofit mission services most impacted by the pandemic, including, but not limited to, emergency food provisions, emergency housing stability, childcare, and workforce development.
(4) Underserved small business groups that have faced historic barriers to access to capital and networks, and are defined as businesses majority owned and operated on a daily basis by women, minorities or persons of color, and veterans, or businesses in rural and low-wealth communities.
(5) Disadvantaged communities tracked by socioeconomic indicators that may include, but are not limited to, low to moderate income, poverty rates, unemployment, educational attainment, and other disadvantaging factors that limit access to capital and other resources.
Additional COVID-19 Resources
Click Here for Tips on Managing Your Finances During the Coronavirus Outbreak
- IRS Coronavirus Website
- Department of Labor Fact Sheet for Employers
- Department of Labor Fact Sheet for Employees
- Department of Labor Questions and Answers
- Download a Copy of the Required FFCRA Poster Here
US Small Business Administration Loans
Federal Disaster Loans for Businesses, Private Nonprofits, Homeowners, and Renters
COVID-19 HR Resources
In recent weeks we’ve received inquiries from employers about how to manage various situations related to COVID-19. Resources and information regarding COVID-19 can be found at the Centers for Disease Control (CDC) website https://www.cdc.gov/coronavirus/2019-ncov/index.html. In addition, our HR content creators have added several important resources that are available for download and viewing below:
Click on the link below to view a recorded webinar from our HR Support Center Labor Law Attorney with COVID-19 HR Related Matters
Payality will continue to monitor the situation closely and provide any updates as the situation evolves.
Please note that this web page is being provided for informational purposes. The SBA and Treasury has not yet issued final guidance and it is subject to change. This web page should not be considered legal, accounting, investment or fiduciary advice. Clients should consult their attorney or other professional advisor.
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