8: How The New Stimulus Package And Additional PPP Loan Guidance Will Impact Your Small Business
Today we are going over how the new stimulus package, PPP loan guidance and the government appropriation provisions will impact your small business. There is a lot going on in this bill – it’s actually over 5000 pages, but I am breaking it down into bite sized pieces so you know exactly what you need to do in your small business. There’s even some good news about the business meals deduction you are NOT going to want to miss. Start your 2021 year off right, and listen in to find out more about how this new bill will impact you and your small business.
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Have you heard about the bill that was passed on December 27th, 2020, but you are wondering just how it is going to impact your business.As always, we’re here to help you understand so, listen in as we talk about some of the big changes and what you need to know for your small business…
Welcome Back…Today we are going to go over some of the main points in the Consolidated Appropriations Act, 2021 – or the CAA bill that the president signed into law on Sunday December 27th, 2020. The bill is over 5000 pages long, and I promise I’m going to break it down so you can understand it and it’s relatable to you and your business. This bill included government appropriation provisions, the stimulus package as well as updates on the PPP loan.
First, I’ll cover the $600 stimulus payment to individuals with income limitations on it. This is calculated much like the first stimulus payment and the eligibility will be based on your 2019 tax return, but it is actually a credit that will be applied to your 2020 tax return. If you already received the stimulus payment, you will not receive the credit on your tax return, but if you haven’t received the stimulus payment and based on your 2020 tax return you should have received it, you will be getting that credit on your 2020 tax return. There is also a $600 payment for each child dependent that is 16 years or under. Please note at the time of recording of this podcast, the president is trying to increase the direct payments from the $600 per person in the bill to $2000 per person instead.
There is also a $300 weekly federal enhancement in unemployment benefits for 11 weeks from the end of December through March 14th.
Alright, let’s talk about what will impact your small business…
To start off, the PPP loan forgiven amount is not considered gross income, and any deduction you used for the forgiveness of your PPP loan is not disallowed. This bill restores the tax deductibility of expenses used for the PPP loan forgiveness and states that no deduction shall be denied. This means that any expenses you used for your PPP loan will also be deductible as an expense on your tax return. This will make a huge impact on your 2020 tax return.
There is a second round of PPP loans that will be available which are for smaller and harder-hit businesses. There is a maximum loan amount of $2 million and in order to receive this “second draw” PPP loan, the eligible entity must:
· Not employ more than 300 employees
· Have used, or will use the full amount of the 1st PPP loan funds
· Must demonstrate at least a 25% reduction in gross receipts in the first, second, or third quarter of 2020 in comparison to the same quarter in 2019.
This bill also simplifies the forgiveness process for loans under $150,000 for both the first PPP loan as well as this second PPP loan. This simplified process will include a one-page forgiveness certification for loans under $150,000. I do want to mention, you still need to file for forgiveness with this new application, it is not an automatic forgiveness.
They have loosened up the expenses you can use for your second PPP loan as well. You can now use eligible non-payroll costs to include certain covered operations expenditures, property damage costs, supplier costs and worker protection expenditures. This means you could use expenses that you may have incurred for a drive-through window, new ventilation, business software, the processing, payment or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses.
The covered period does not have to be either 8 or 24 weeks as it was stated in the previous PPP loan, it can be anywhere in between these durations.
The FFCRA (Families First Coronavirus Response Act) which originally required employers with fewer than 500 employees to provide mandatory paid sick and paid family leave for certain reasons related to COVID-19 a tax credit for any amounts paid to employees for the required paid leave. This new bill now extends the tax credit portion for employers that “voluntarily” offer paid sick or paid family leave through March 31, 2021. The mandatory leave portion of the bill will terminate on December 31, 2020.
An item that many small businesses are happy to see is that the EIDL Grants that were received of $10,000 or less will no longer reduce the PPP loan forgiveness, and it is understood that if you already filed for forgiveness, you should get your EIDL Grant forgiven as well.
If you are familiar with the business meals deduction, you probably already know that they are currently only 50% deductible. With this new bill, they are making the cost of meals a 100% deductible business expense. This new provision is effective for expenses incurred after 12/31/20, and expires at the end of 2022.
So, what does all of this mean? Well, first of all…it’s going to take some time for the SBA and the treasury to get their forms, guidance and processes in place, not to mention, it’s going to take a bit for the banks and lenders to get up to speed.
What can you do now? If you feel that you are eligible for the second round of PPP loans, you can contact your lender. You should also start gathering your information so you have it ready to go. This information would include the comparison of your gross receipts for 2020 to your 2019 gross receipts.
You might be asking how you can get these numbers, and of course, the answer is “it depends”. If you are using a software like QuickBooks, you will be able to generate a profit and loss report for each quarter, and you can actually customize these reports to include the quarter from the previous year. When you have this information, you will be able to quickly calculate if you fall in the 25% reduction in gross receipts. If you do your bookkeeping manually, you can do the same, it will just take you a bit longer. This is just one more reason why you should have your bookkeeping up to date. If your bookkeeping is behind, obviously these numbers are going to be harder to gather and take more time.
If you are a small business owner and want to gain confidence and clarity when successfully doing your own bookkeeping, I will be opening my Bookkeeping Basics course in the next few weeks. This course will help to ensure you are keeping up to date so when a situation like this new bill arises, you are ready to jump in and get all the reports you need to qualify. If you are interested in learning more about this course, go to FinancialAdventure.com/BookkeepingBasics. I’d love to help you make sure you start your 2021 year off right.
I also want to let you know about my upcoming MASTERCLASS. I will be talking about 7 Mistakes To Avoid In Your Small Business. In this masterclass, you can learn the insider secrets successful entrepreneurs have overcome to raise the level of success in their businesses. If you are interested in attending this free masterclass, please go to FinancialAdventure.com/Mistakes and register today to save your seat.
And, you know I’m going to ask…what’s at least one thing you will take away from this episode that will help your business succeed and grow your bottom line? If you need some accountability, join our PRIVATE Facebook community and post your action item, we’d love to support you.