As businesses and taxpayers are still reeling from the effects of the pandemic into the new year, additional relief programs and assistance are being offered at both the state and federal level. You’ll have to be quick because there’s a few short application windows on the horizon.
Below is a brief update on some of the programs to be aware of, highlighting specific opportunities that businesses should review to determine if immediate action is needed.
MASSACHUSETTS
Small Business Relief Package
In a parallel effort to the recent federal relief program, Massachusetts established a $668 million Small Business Relief Package, providing financial support to eligible small businesses in Massachusetts affected by the coronavirus pandemic. The deadline for this new program has a short application window, closing at 11:59pm this Friday, January 15.
The relief program will offer grants of up to $75,000, but not to exceed more than three months of operating expenses, to help businesses pay for employee compensation, rent, utilities, debt obligations and other operational costs. Businesses that applied to receive relief this fall, but did not, will receive priority in this round of funding and do not need to reapply.
To be considered, grants will be given to specific sectors in more dire need of support. The following industries will receive priority funding:
- Restaurants, bars, caterers
- Gyms and fitness centers
- Indoor recreation and entertainment establishments
- Event-support professionals (photographers, videographers, etc.)
- Personal services
- Retail
Please include the documentation below to ensure that your application has been completed in its entirety.
- Certificate of Good Standing from the Massachusetts Secretary of State’s office (required prior to funding)
- Complete 2019 Federal Business Tax Return
- Complete 2019 Federal Personal Tax Returns for each business owner with 20% or greater ownership
Businesses are expected to hear back by early February regarding the status of their grant request.
Tax Relief Extension
While state and federal programs are offering relief packages and extensions, the IRS is not forgiving taxes, so it’s important to put a plan in place in order to meet upcoming deadlines.
Massachusetts extended the administrative tax relief measures for businesses that need extra time to pay state taxes due to impacts related to the ongoing pandemic, especially businesses in the hospitality and restaurant sectors.
If you owe regular sales tax, meals tax, and/or room occupancy tax between March 2020 and April 2021, you can now defer payment to May 2021. According to the state, “Businesses that collected less than $150,000 in regular sales plus meals taxes in the twelve month period ending February 29, 2020 will be eligible for relief for sales and meals taxes, and businesses that collected less than $150,000 in room occupancy taxes in the twelve month period ending February 29, 2020 will be eligible for relief with respect to room occupancy taxes.”
Eligible businesses that defer administrative tax payments will not accrue interest or penalties during the extension timeframe.
FEDERAL
The federal government has issued many relief programs over the past 9 months and specifics on the most recent legislation are still being rolled out.
The Consolidated Appropriations Act
The Consolidated Appropriations Act (CAA) was signed into law at the end of 2020. This program was a massive tax, funding, and spending bill that contained a nearly $900 billion coronavirus aid package. Some of the measures in this Act include the following:
Paycheck Protection Program
Additional funding is now available for the PPP loan program administered through the SBA totaling $284 billion. The new deadline to apply for a PPP loan is March 31, 2021.
- Businesses that did not apply by the August 5, 2020 deadline now have additional time to apply for loans up to $10 million based on 2.5 times their average monthly payroll. Similar criteria apply for these loans (small business concern, 500 or fewer employees, and not an ineligible business).
- Certain businesses are eligible for a second-draw loan of up to $2 million per borrower. Small businesses are defined as those with no more than 300 employees and whose revenues dropped by 25% during 2020 (measured on a quarterly basis). The loan will be up to 2.5 times a business’ average monthly payroll costs or 3.5 times for certain accommodation and food service sector businesses.
- The SBA and Treasury issued guidance last week for this reconstituted Paycheck Protection Program. With the three-month application window, we expect to get additional clarity and guidance on this program within the next few weeks.
- The new relief bill also includes a provision that now allows eligible expenses related to forgiven PPP loans to be deducted by businesses that received the loans. Specifics are still to come.
Employee Retention Tax Credit
This credit has been extended and modified through the CAA. Of note, the availability for the credit was extended from December 31, 2020 to July 1, 2021, and employers are now eligible regardless of whether they received any PPP funding. The credit limitations of 50% of qualified wages to a $5,000 annual cap were also expanded to 70% of wages with a $28,000 annual cap.
Paid Sick and Family Leave Tax Credits
These credits, which were first enacted under the FFCRA, have now been extended through March 31, 2021 on a voluntary basis. This means that while employers are not required to provide the FFCRA leave between January 1, 2021 and March 31, 2021, if they do so, they will be eligible for the tax credits for wages paid with respect to the leave.
Temporary 100% Deduction for Business Meals
Historically, qualified business meal expenses have been limited to 50% for income tax deduction purposes. The CAA has temporarily expanded the deductibility for business meal expenses to 100% of the cost for food and beverages during 2021 and 2022, if the expenditure was incurred at a restaurant.
Next Steps
As the CAA was only recently signed into law, more information is expected to unfold in the coming weeks and months, clarifying the contents of the 5,000+ page Act.
Please reach out to us with any questions at (781) 247-5569 or email me at stu@erocktax.com about how the above state and federal relief programs may apply to your business.
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About Stu: With more than 30 years of experience as a tax professional, Stu Steinberg brings a broad depth of knowledge to his work with his clients. Stu founded Erock Tax to help provide tax and financial planning strategies to individuals, families and small businesses and is passionate about empowering his clients through education about their money health. Stu is highly energetic and brings a sense of optimism, creative problem-solving and a deep level of commitment to every Erock client.