May 7, 2021

PPP with Paul and Dan Video Series

With new updates and legislation evolving quickly around the Paycheck Protection Program (PPP), our CARES Act Research and Response Team has been focused on relaying information you need to know. Two of the team members, Paul C. Rhea and Daniel K. Schindler, are sharing the latest changes around PPP loans and the forgiveness process in their video series: PPP with Paul and Dan.

View each segment of the series below. Check out more CARES Act content in our COVID-19 Resource Center, or learn how we can help your business recover from COVID-19.

May 7, 2021

March 12, 2021

February 12, 2021

February 8, 2021

December 29, 2020

December 29, 2020

November 10, 2020

October 13, 2020

October 7, 2020

September 18, 2020

September 4, 2020

August 28, 2020

August 21, 2020

August 13, 2020

July 24, 2020

July 16, 2020

June 25, 2020
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May 4, 2021

Pandemic-Related Relief for Dependent Care Flexible Spending Accounts

The American Rescue Plan Act (ARPA) was signed into law on March 11, 2021, offering many pandemic relief benefits to individuals and businesses. One big highlight for families is around Dependent Care Flexible Spending Accounts (DC-FSA). The ARPA raised pre-tax contribution limits for DC-FSAs and increased the value of the dependent care tax credit for 2021.

What is a Dependent Care FSA?

A Dependent Care Flexible Spending Account (DC-FSA) is a benefits account that individuals can use to save pre-tax dollars for eligible dependent care expenses. Common uses for a DC-FSA are to pay for childcare such as babysitters and before/after school programs, summer camps and expenses for a spouse who is physically or mentally disabled. Annual contribution limits for DC-FSAs are set by the IRS each year.

What changed for DC-FSAs?

New Limits

The previous DC-FSA 2021 contribution limits were $5,000 for married couples filing jointly and single taxpayers, and $2,500 for married couples filing separately. With the ARPA, the limits are now $10,500 for couples filing jointly and single taxpayers and $5,250 for married filing separately.

Employer plans must be amended for employees to take advantage of the increased limits.

Interaction with Dependent Care Credit

The dependent care tax credit also has increased limits under the new law. For 2021, the maximum amount of expenses eligible for credit is $8,000 for one qualifying individual and $16,000 for two or more qualifying individuals (up from $3,000 and $6,000 in prior years).

The credit is now equal to up to 50% of expenses for taxpayers with AGI of $125,000 or less and decreases to 20% as income increases. That 20% minimum will decrease further for taxpayers with AGI over $400,000.  In prior years, the maximum was only 35% for taxpayers with AGI of $15,000 and capped out at a 20% minimum for everyone.

Employees should consider their specific circumstances to determine the combination of the DC-FSA deferral and the dependent care credit that is most advantageous.

Rollovers

The IRS and Congress also provided DC-FSA relief with the Consolidated Appropriations Act (CAA) signed into law at the end of 2020, and IRS Notice 2021-15 issued in March 2021. The CAA allows employers that offer DC-FSAs to allow participants to rollover unused funds from 2020 to 2021 and funds from 2021 to 2022. This gives participants a larger window of time to submit expenses to utilize those funds instead of losing them since COVID-19 quarantines and shutdowns may have caused a lack of childcare expenses in 2020.

Age Out Extension

IRS Notice 2021-15 allows employers to extend the DC-FSA coverage period for dependents who turn 13 years old during the COVID-19 public health emergency timeframe. These dependents would typically ‘age out’ and therefore any expenses for them would not be eligible for reimbursement through the DC-FSA. The limiting age for 2021 is now set at 14 years old, but the expenses can only be reimbursed from unspent 2020 funds.

What should employers do?

Employers must share any plan amendments created by the ARPA, CAA, and/or IRS Notice 2021-15 and communicate to participants that they can make mid-year DC-FSA contribution changes.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss questions around DC-FSAs or recovery options, contact an Anders advisor below.

Erin E. Prest is a contributor to this post.

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April 20, 2021

RECORDED WEBINAR – A Positive Shift in the Economic Outlook: What’s Next?

As the world begins to recover from 2020 and the economic detriment, what is next on the horizon? Download our recorded webinar discussing the current economic state and the positive uptick in the market. You’ll learn about:

  • Economic impact on business post-pandemic
  • Best practices for moving your business forward
  • How to plan for the remaining fiscal year

Special guest Dr. Christopher Kuehl, Managing Director of Armada Corporate Intelligence, returns to partner with Anders for an insightful discussion on the matter. Chris is a frequent speaker and educator for the Missouri Society of Certified Public Accountants (MOCPA).

Download the webinar recording below:

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April 20, 2021

Restaurant Revitalization Fund Offers Grants for Food and Beverage Industry

In an effort to help restaurants and bars recover from the financial impacts of COVID-19, $28.6 billion of the American Rescue Plan is allocated for a Restaurant Revitalization Fund (RRF). Below we cover the basics of the RRF as outlined by the SBA, including eligibility requirements, covered expenses and how to apply for RRF grant funding.

Who is eligible for Restaurant Revitalization Funding?

The American Rescue Plan outlines that businesses in which the public assemble for the primary purpose of being served food and drink are eligible. The Plan indicates that the following food and beverage establishments are eligible:

  • Restaurants
  • Bars
  • Food stands
  • Food trucks and carts
  • Caterers
  • Saloons
  • Inns
  • Taverns
  • Lounges
  • Brewpubs, tasting rooms and taprooms
  • Other similar places of business in which the public or patrons assemble for the primary purpose of being served food or drink

Businesses that are state or local government-operated, publicly traded or have 20 locations or more are not eligible. Those who have already applied for the Shuttered Venue Operators Grant are also ineligible for RRF funding.

How much can I apply for out of the Restaurant Revitalization Fund?

Through the RRF, eligible establishments will be able to apply for a grant equal to their pandemic-related revenue loss, up to $10 million per entity or $5 million per location, limited to 20 locations. Grants will be calculated by subtracting 2020 revenue from 2019 revenue.

Those businesses that have received PPP (round 1 or 2) funding will be eligible for an RRF grant, but the RRF grant total will be reduced by the amount of the PPP loan(s). EIDL loans and Employee Retention Tax Credit funding does not impact RRF funding.

For those establishments not operating for all of 2019, the maximum grant is the average monthly gross receipts in 2020 minus the average monthly gross receipts in 2019. Similar to PPP loan forgiveness, the RRF grant will not be taxable income and all associated expenses will be tax-deductible.

What can an RRF grant be used for?

According to the SBA, grant funding does not have to be paid back if it is used for eligible expenses from February 15, 2020 until March 11, 2023, including:

  • Business payroll costs, including sick leave and costs related to the continuation of group health care, life, disability, vision, or dental benefits during periods of paid sick, medical, or family leave, and group health care, life, disability, vision, or dental insurance premiums
  • Payments on any business mortgage obligation, both principal and interest. Note: this does not include any prepayment of principal on a mortgage obligation
  • Business rent payments, including rent under a lease agreement. Note: this does not include any prepayment of rent
  • Business debt service, both principal and interest. Note: this does not include any prepayment of principal or interest
  • Business utility payments for the distribution of electricity, gas, water, telephone, or internet access, or any other utility that is used in the ordinary course of business for which service began before March 11, 2021.
  • Business maintenance expenses including maintenance on walls, floors, deck surfaces, furniture, fixtures, and equipment
  • Construction of outdoor seating
  • Business supplies, including protective equipment and cleaning materials
  • Business food and beverage expenses, including raw materials for beer, wine, or spirits
  • Covered supplier costs, which is an expenditure made by the eligible entity to a supplier of goods for the supply of goods that:
    • Are essential to the operations of the entity at the time at which the expenditure is made; and
    • Is made pursuant to a contract, order, or purchase order in effect at any time before the receipt of Restaurant Revitalization funds; or
    • With respect to perishable goods, a contract, order, or purchase order in effect before or at any time during the covered period
  • Business operating expenses, which is defined as business expenses incurred through normal business operations that are necessary and mandatory for the business (e.g. rent, equipment, supplies, inventory, accounting, training, legal, marketing, insurance, licenses, fees). Business operating expenses do not include expenses that occur outside of a company’s day-to-day activities.

How can I apply for the RRF?

The SBA offers three ways to apply for the RRF funding:

  1. Through a recognized SBA Restaurant Partner
  2. Through SBA directly at restaurants.sba.gov
  3. By calling (844) 279-8898

Download the latest SBA Restaurant Revitalization Funding Program Guide for more information on the RRF and documentation requirements. The application process is expected to open soon, with the first 21 days being prioritized for women-owned, minority-owned and veteran-owned businesses.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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April 13, 2021

How to Report PPP Loans on Financial Statements

A key part of the Coronavirus Aid Relief and Economic Security (CARES) Act, the Paycheck Protection Program (PPP) authorized banks to provide low interest rate loans to businesses with a guarantee from the Small Business Administration. Best of all, PPP loans may be eligible for tax-free forgiveness if the proceeds are used for certain approved expenditures. This raises questions about how to present PPP loans in year-end financial statements and how to treat a loan that was forgiven. While U.S. GAAP does not provide specific guidance for PPP loans, there are a couple of options available for reporting the PPP loan on financial statements.

Option 1: FASB ASC 470: Debt

Under this option, entities record the loan as a liability on the balance sheet and interest is recorded as it would be with any other financing arrangement. After the company has applied for loan forgiveness and has been legally released from the debt, the company will record a gain on extinguishment of debt. This gain should be recorded as an extraordinary item and excluded from operating income.

Option 2: FASB ASC 450-30: Gain Contingency

Under ASC 450-30, the earnings impact is recognized when all contingencies have been met and the gain related to the forgiveness of the PPP loan is realized or realizable for nongovernmental entities. The proceeds from the loan are initially recorded as a liability until the proceeds are realized or realizable. Once they are realized or realizable, the earnings impact is recorded. There is less specific on guidance on this method than ASC 470, and it is generally not preferred.

Financial Statement Disclosures

Disclosures under ASC 470 will be similar to traditional debt disclosures. Under ASC 450-30, there are no specific disclosure requirements. It’s important to note that material PPP loans should adequately disclose all key terms of the loan in the notes to the financial statements.

Which guidance to follow on presentation of the loan is ultimately up to management of the company. The PPP loan should be presented on the company’s balance sheet and after it is forgiven, it will need to be recognized outside of operations as other income or as a gain on loan forgiveness. Contact an Anders advisor below to discuss financial statement presentation or recovery options,

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed on our COVID-19 Resource Center. Tune in to our video series PPP with Paul and Dan to learn more about the Paycheck Protection Program.

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April 6, 2021

Employee Retention Tax Credit Offers Huge Relief Opportunities for the Construction Industry

The Employee Retention Tax Credit (ERTC) has been a valuable COVID-19 relief option for businesses who faced revenue losses due to ongoing impacts of the pandemic. While some industries were impacted more than others, certain sectors of the construction industry actually expanded in 2020, including homebuilders and industrial contractors. Even if your company performed well overall last year, there could still be an opportunity to claim the ERTC.

Who Qualifies for the ERTC?

Originally part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the ERTC allows businesses to take a credit against payroll taxes in order to help offset some of the business losses due to COVID-19. The original ERTC was only available for businesses who were forced to shut down or whose gross receipts in 2020 were 50% less than the same quarter in 2019. The ERTC has since been expanded, modifying the reduction in revenue by an additional 30%. For 2021, businesses are eligible if gross receipts are less than 80% of the gross receipts for same quarter in the prior year.

Businesses that averaged no more than 100 full-time employees in 2019 qualify for the ERTC in 2020 on wages paid to all employees. For the ERTC in 2021, this employee threshold increases to no more than 500 full-time 2019 employees. Full-time employees are those that work at least 30 hours per week. Union employees are included in the employee count for the credit, but those working part-time (less than 30 hours/week) are not.

How Much Can Businesses Qualify for?

For 2020, eligible employers can take a credit of 50% on qualified wages up to $10,000 paid to employees between March 12, 2020 and January 1, 2021. In 2021, the tax credit is increased to 70% of qualified wages, which are limited to $10,000 per employee per quarter. With the 70%, the maximum ERTC amount available is $7,000 per employee per quarter, for a potential total of $28,000 per employee in 2021. We have seen clients qualify for anywhere from $5,000 to $2.5 million through the ERTC.

How Could My Company Qualify for the ERTC After a Good Revenue Year?

Unlike other industries, construction revenue typically isn’t cyclical, and contractors can have revenue fluctuations that vary from month to month or quarter to quarter depending on projects. To qualify for the ERTC, the business only needs to have a quarter-by-quarter drop in revenue of 50% when comparing a 2020 quarter to 2019, and 20% when comparing a quarter in 2021 to 2019. You can also look back a quarter for the ERTC, so if your company was down 20% in Q4 of 2020 compared to 2019, you would qualify for Q1 of 2021.

ERTC Case Study

In one unique scenario, a taxpayer with a 40% increase in revenue in 2020 vs 2019 overall assumed they would not qualify for the ERTC. When taking a closer look, we discovered their revenue dropped 50% in Q4 of 2020 compared to 2019, making them eligible for the ERTC in Q4 of 2020 and Q1 of 2021. Projected total benefit for this taxpayer exceeds $200,000.

How Can I Take Advantage of the ERTC?

Initially, the CARES Act prohibited employers who had received a PPP loan from also utilizing the ERTC. New laws allow an employer to claim the credit for any wages paid beyond the proceeds of the PPP loan that have been forgiven. Taking advantage of both PPP loan funding and the ERTC is a great way to maximize COVID-19 relief opportunities.

If you discover you qualified for the ERTC in 2020, you can amend your quarterly payroll returns to claim the credit. If you identify that you qualify in advance, you can reduce payroll deposits for 2021 to take advantage of the credit.

Find out if your business is eligible for the Employee Retention Tax Credit in 2020 or 2021.

While the above highlights the opportunity for eligible businesses, please contact an Anders advisor below to discuss your situation and recovery options. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources.

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March 30, 2021

Businesses Now Have Until May 31 to Apply for a PPP Loan

President Biden recently signed a bill to extend the Paycheck Protection Program (PPP) application deadline to May 31, 2021. This extension from the March 31 deadline is welcome news to business owners still needing to apply for a PPP loan. The bill also gives the SBA an additional 30 days beyond May 31 to process PPP loans.

Visit the SBA’s website for more information on how to apply for a PPP loan.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed on our COVID-19 Resource Center. Tune in to our video series PPP with Paul and Dan to learn more about the Paycheck Protection Program. To discuss your situation and recovery options, contact an Anders advisor below.

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March 25, 2021

Should You Take Advantage of the Economic Injury Disaster Loan Increases?

The SBA recently announced an expansion to the Economic Injury Disaster Loan (EIDL) program for small businesses and not-for-profit organizations. Starting the week of April 6, organizations that received an EIDL that was capped at $150,000 will soon be notified that they may be eligible for an increase up to a total loan amount of $500,000.

What is changing with the EIDL program?

EIDL funding was designed to cover those organizations suffering COVID-19 related economic damage for six months. With new changes by the SBA, the program is now being extended to 24 months. This will potentially provide significant increases for many loan recipients as past financial information will still be used in determining qualification. It will also further defer payments out 18-24 months.

Should I increase my EIDL?

After the CARES Act was passed, some businesses applied to receive a substantial amount of EIDL funding early on because there was a great amount of uncertainty around future funding opportunities. This was a good opportunity for some businesses to keep their doors open, but the EIDL funding comes with some very restrictive loan covenants and terms on how the funding can be used. They are designed for disaster recovery, so if a company is back on solid footing, they may want to re-evaluate the opportunity before increasing the loan amount to make sure it fits long term.

How can I increase my EIDL?

According to the SBA, businesses that receive a loan subject to the current limits do not need to submit a request for an increase. The SBA will reach out directly via email and provide more details about how businesses can request an increase closer to the April 6 implementation date.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your EIDL funding or recovery options, contact an Anders advisor below.

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March 25, 2021

Shuttered Venue Opportunity Grants Offer COVID-19 Relief for Entertainment Venues

Updated 4/26/2021

As part of the Economic Aid to Hard-Hit Small Businesses, Nonprofits and Venues Act signed into law in December 2020, the Shuttered Venue Opportunity Grant (SVOG) was created to offer COVID-19 relief to entertainment venues. The American Rescue Plan allocated an additional $1.25 billion to the program, bringing the total funding available to $16 billion.

Who is eligible for a SVOG?

According to the SBA, the following organizations may apply for a SVOG as long as they were in operation as of February 29, 2020:

  • Live venue operators or promoters
  • Theatrical producers
  • Live performing arts organization operators
  • Museum operators
  • Motion picture theatre operators
  • Talent representatives

How much can I apply for?

Eligible organizations can apply for a grant equal to 45% of gross revenue, up to $10 million. $2 billion of SVOG funding is allocated for eligible organizations with up to 50 full-time employees.

What can SVOG funds be used for?

According to the SBA, SVOG funds may be used for:

  • Payroll costs
  • Rent payments
  • Utility payments
  • Scheduled mortgage payments (not including prepayment of principal)
  • Scheduled debt payments (not including prepayment of principal on any indebtedness incurred in the ordinary course of business prior to February 15, 2020)
  • Worker protection expenditures
  • Payments to independent contractors (not to exceed $100,000 in annual compensation per contractor)
  • Other ordinary and necessary business expenses, including maintenance costs
  • Administrative costs (including fees and licensing)
  • State and local taxes and fees
  • Operating leases in effect as of February 15, 2020
  • Insurance payments
  • Advertising, production transportation, and capital expenditures related to producing a theatrical or live performing arts production. (May not be primary use of funds)

Organizations with SVOG funding should maintain good recordkeeping including receipts for three years following the receipt of the grant and four years of employment records.

Can I apply for a SVOG if I have a PPP loan?

Organizations that received a Paycheck Protection Program (PPP) loan on or after December 27, 2020 can also apply for a SVOG, but the SVOG amount will be reduced by the amount of the PPP loan. Those who received a PPP loan before December 27, 2020 can apply for a SVOG without deducting the PPP loan amount.

How can I apply for a SVOG?

Applications can now be submitted through the SBA’s Shuttered Venue Operators Grant Application portal. Please note that the portal is moving slowly due to high volume.

Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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March 19, 2021

How Employers Can Take Advantage of the Expanded Employee Retention Tax Credit

On March 11, President Biden signed into law the American Rescue Plan Act of 2021 (ARPA). This relief bill comes in response to the continued COVID-19 pandemic and makes some changes to the Employee Retention Tax Credit (ERTC) that was originally part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and later expanded and extended under the Consolidated Appropriations Act (CAA) of 2020. Below we dig into the changes and expansions that were part of the CAA and the recently enacted ARPA.

QUICK REFRESHER ON THE ORIGINAL ERTC

Let’s first revisit the provisions of the ERTC in the original CARES Act. Enacted in the spring of 2020, the Act allowed businesses to take a credit against payroll taxes in order to help offset some of the business losses due to COVID-19. The law allowed eligible employers to take a credit of 50% of qualified wages up to $10,000 paid to employees between March 12, 2020 and January 1, 2021. Consequently, the maximum credit for each employee was $5,000 ($10,000 in wages X the 50% tax credit rate).

However, not every business was eligible for this credit. Businesses must have been significantly impacted by COVID-19 either by a shutdown order or by experiencing a significant reduction in revenue. There were also restrictions on which wages were “qualified” if an employer had more than 100 full-time employees. Businesses were also not allowed to take the credit if they used Paycheck Protection Program (PPP) loans to cover employee payroll costs.

UPDATES AND EXPANSIONS TO THE ERTC

The passage of both the CAA and the newly signed ARPA relief bill is good news to many businesses who continue to feel the economic impacts of the pandemic as the laws enhance and expand many provisions of the original ERTC. Under the CAA of 2020, the ERTC was extended until June 30, 2021 and increased the tax credit to 70% of qualified wages for each of the first two quarters of 2021.

With the newly enacted ARPA legislation, the ERTC has been extended again – this time through December 31, 2021. This means an employer eligible for the ERTC in all four quarters of 2021 could receive up to $28,000 in credits per employee ($10,000 quarterly wage cap x 70% x 4 quarters).

ERTC Eligibility

More businesses will be eligible for the ERTC in 2021. The original ERTC was only available for businesses who were forced to shut down or whose gross receipts in 2020 were 50% less than the same quarter in 2019. The CAA modified this reduction in revenue by 30%. Under the CAA guidelines, the test was satisfied for either of the first two quarters of 2021 if gross receipts were less than 80% of the gross receipts for same quarter in 2019. The ARPA extends the 80% gross receipts test for the third and fourth quarters of 2021 as well. 

ERTC Wage Threshold

A change in the threshold for determining which wages “qualify” for the tax credit will also benefit employers in 2021. Under the original CARES act, for businesses with less than 100 full-time employees, all wages qualified for the tax credit, regardless if the employee’s role changed or not due to the pandemic. Whereas businesses with over 100 employees could not claim the credit for employees that were still performing services for the business.

The CAA, effective January 1, 2021, raised the threshold number to 500 employees.  In addition, the ARPA, effective July 1, 2021, also includes a new provision for “severely financially distressed employers.” These employers are defined as those whose gross receipts are less than 10% of the gross receipts for the same quarter in 2019. If an employer meets this definition, they may treat all wages paid to employees as qualified wages regardless of the number of full-time employees. 

Employers with PPP Loans

Initially, the CARES Act prohibited employers who had received a PPP loan from also utilizing the ERTC. The CAA allowed an employer to claim the credit for any wages paid beyond the proceeds of the PPP loan that have been forgiven. This change is retroactive to the effective date under the original law: March 12, 2020. A company that received a PPP loan in 2020 but paid qualified wages beyond the amount of the loan could benefit by filing an amended Form 941 and claiming the credit.

NEW ENHANCEMENTS TO THE ERTC

While many provisions of the CAA and the ARPA enhanced the CARES Act, they also include some brand-new provisions as well. Under the CAA, businesses can take an advanced payment on their credit even if those wages have not yet been paid. Additionally, some government entities not previously allowed to take the credit became eligible with the passage of the CAA, such as public universities, hospitals, federal credit unions, etc.

The ARPA also allows a startup business to take the ERTC even if the business does not meet the other ERTC eligibility tests. To qualify the business must have been established after February 15, 2020 and have annual gross receipts of no more than $1 million. The recovery startup credit is capped at $50,000 per quarter, per employer.

While the above highlights how changes in the recent COVID-19 relief bill have affected the ERTC, please contact an Anders advisor below to discuss your situation and recovery options. Our advisors are closely following COVID-19 relief efforts and will continue to publish insights to keep you informed. Visit our COVID-19 Resource Center for more resources.

Find out if your business is eligible for the Employee Retention Tax Credit in 2020 or 2021.

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