Yesterday, we covered the personal tax benefits proffered by the American Rescue Plan Act of 2021.  Today, we’ll talk about the benefits provided for businesses or businesses to its staff members.

FFCRA (tax credit for COVID-19 related illness)

Let’s start with the FFCRA- the Families First Coronavirus Response Act.  Those of us who employ 500 folks or less now have a tax credit that extends until the end of September 2021.  It affords leave for employees- it’s not required, but there is a tax credit for those who do so provide their staff.  And, that is now available not just for COVID-19, but for getting the vaccine or recovering from the effects of said inoculation, or to obtain a COVID-19 test (even if symptoms are not manifesting).

Moreover, if the firm employed all the days of sick leave for its staff, the act provides a new deposit (more available days) as of 1 April 2021- 10 more days of paid sick leave.   These also expire at the end of September 2021.

The cap- the maximum amount of tax credits- has also been raised; it has grown from $ 10K to $ 12K.  The credit applies against the remuneration of the  Medicare and Social Security portion of the employer taxes.

ERC (Employee Retention Credit)

The ERC was scheduled to expire at the end of June,  but now will exist for all of 2021.  For any quarter the firm garners 10% less revenue than the corresponding quarter of 2019,  the employer may treat all said quarter’s wages as subject to the ERC.  So, for a client whose Q1 2021 revenue is $ 244,000, but the Q1 2019 revenue was $ 275,000, the wages paid that quarter (up to $ 50,000 per quarter) can be credited against the Social Security taxes due for said quarter.  (Obviously, this client is limited to $ 15,200- which is the total employer portion of the  social security taxes for the quarter.  (6.2% of $ 244,000= $ 15,128).

PPP (Payroll Protection Program) Loan- Second Bite of the Apple

Not only can those firms who demonstrate a loss of gross revenue due to the pandemic apply for a second PPP loan, non-profits and internet publishers can also do so during this round

Moreover, the hospitality industry (hotels, restaurants, etc.) now have a 3.5 multiplier for their loan proceeds- instead of the 2.5 afforded other businesses.  In so doing, it is hoped that we can help our valuable hospitality industry to survive the pandemic. (July 4th is not that far away!)

Consider two clients.  One is a physical fitness facility  (PTF).  It’s gross payroll for its staff  (not exceeding $ 100K per annum income) is $ 195,000.  That means the ‘base loan value” is  $ 16,250 (1/12 of the payroll); it’s PPP loan is limited to 2.5X that amount of $ 40,625.  As long as PTF is used to pay the $ 40625 in payroll, benefits, and certain other costs, this loan will be forgiven.

Now, let’s consider another client- a restaurant.  It’s payroll is $ 725,000 for the year, or 60,416.67 a month.  But, given the special new benefits afforded hospitality industry firms, it’s loan is topped off at $211,458.   That should let the restaurant continue to eke out a living until more normal times are around.

1099K

So, I’m not sure many businesses will consider this a benefit, but it will make them more accountable.  As of this year, credit card processors must issue 1099-K (statement of payments made via credit card) to ALL entities that receive $ 600 or more a year, regardless of the number of transactions.

COBRA

Since many employees were not fired- but furloughed (this is an arcane concept where the benefits, but not salaries, are still provided to the employee who is no longer working at the firm), this may be of use to many.  COBRA benefits, covering health insurance, for which the employee shells out nary a penny, offer a tax benefit to the former employer.  The benefit is recovered from the funds paid for Medicare employer taxes.   (Note that the Medicare tax is only 1.45%, so the credit will be a longer tail.)

So, there we have the corporate tax benefits.  But, this reconciliation bill includes a lot of other NON-tax benefits, too.

Enjoy your new found gains.