How the Stimulus Bill Benefits Small Employers

The Families First Coronavirus Response Act has expired as of December 31, meaning that employers are no longer obligated to provide two weeks of emergency paid sick leave to employees who miss work because they are sick with COVID-19 or were exposed and quarantined.

However, employers may still voluntarily provide this paid sick leave through March 31, 2021, and claim the federal payroll tax credit if they do so.

The same holds true for paid family leave if schools are completely closed (which rarely has been happening in the Panhandle of Texas). If an employer voluntarily pays up to 10 weeks in paid family leave while still following the FFCRA rules about who is eligible for this leave, the employer can get the federal government to absorb the cost of that leave through the tax credit mechanism.

This tax credit extension during the first quarter of 2021 is just one part of the new stimulus bill signed into law on December 27 that affects employers. To be clear, if an employee has already used up the 80 hours of emergency paid sick leave or 10 weeks of paid family leave during 2020, this tax credit extension does not mean that you as an employer can take a tax credit for any additional COVID-related leave given to that employee in 2021.

The helpful Paycheck Protection Program has been funded again in the new stimulus bill, but there is a new twist to it that may be very beneficial to small businesses who continue to be adversely affected by the pandemic. A business can apply for a second PPP loan, even if you received one in 2020, as long as you can show that you had at least one bad revenue quarter in 2020.

These “Second Draw” PPP loans are available if you can demonstrate:

  1. You employ no more than 300 employees; and
  2. You have used all of your earlier PPP loan; and
  3. You had gross receipts in one quarter of 2020 that were at least 25 percent less than the same quarter in 2019.

Another piece of good news coming out of the stimulus bill is that Congress corrected a ridiculous IRS opinion that said while your PPP loan(s) were going to be taxed as income to your business, you couldn’t deduct the business expenses that you paid with the loan proceeds. That has now been clarified to reflect Congress’ original intention—the loan proceeds will not be taxed as income and the expenses that you paid with them (payroll, rent, utilities, etc.) will be deductible as normal business expenses.

Congress also simplified that forgiveness process even more for PPP loans under $150,000. You’ll now have to just self-certify that you spent the PPP loans as required by law.

Congress also addressed unemployment insurance for the 20 million Americans who are still out of work. Under the CARES Act passed in the spring of 2020, in addition to state unemployment benefits (which are very skimpy in Texas), the federal government provided an additional $600 per week through July 31, 2020. After that expired, the unemployed were left with just their state benefits. Under the new stimulus bill, the feds are adding $300 per week to state unemployment payments for 11 weeks, through March 14, 2021. The new bill includes a return to work reporting requirement, meaning that the states must allow employers to report when a worker refuses an offer to return to his/her job without good cause.

If you were one of the few employers who deferred their employees’ payroll taxes from September – December 2020 under President Trump’s vague Executive Order issued in August, you will now have to increase their withholding to pay back those deferred amounts. Your employees have until the end of 2021 to get those amounts repaid. The December stimulus bill extended that deadline from April 30, 2021 to December 31, 2021. Some employees were hoping for complete forgiveness of these deferred taxes, but alas, an extended time to repay was all they received.

Finally, employers may be happy to learn that business meal deductions have returned to their previous 100% level for 2021 and 2022. So once this pandemic has subsided, you can fully deduct your celebratory meals with your clients.

What did the new stimulus bill not do?

  • There will be no $2000 per person stimulus checks. The $600 check is it, and it phases out at higher incomes.
  • Liability protections for businesses from lawsuits for COVID-related injuries did not make it into the final bill.
  • Help for states and municipalities whose tax revenue has declined but who have had enormous COVID-related expenses was not approved.

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