The US Department of the Treasury announced today that they have disbursed the first batch of Economic Impact Payments from the latest stimulus bill. Nearly 90 million payments have been sent, primarily via direct deposit, and everyone in this first group will have received their funds as of today.
I wanted to take the time to flag a useful page - if you're wondering where your payment is, the IRS has offered this Get My Payment tool to help track yours down.
They've also recently offered additional information on the Economic Impact Payments, as well as a Frequently Asked Questions fact sheet.
This round of checks adds up to a sizable deposit for taxpayers with dependents, and many of our clients and friends are eager to receive this latest round of stimulus. There are more tranches of checks and direct deposit payments to come, so if you are eligible for stimulus payments and haven't received one yet, you should expect yours in the coming weeks. The IRS states that no action is required from taxpayers to generate the payments.
As ever, expect ongoing up to the minute guidance regarding the stimulus's effect on you and your business. You can click here for a PDF of the full 600+ page bill.
American Rescue Plan Act of 2021 - First Take
Tomorrow, the House will likely approve the American Rescue Plan Act of 2021, sending it to President Biden’s desk for signature by the end of this week. You can find a link to the full PDF of the bill's text at the bottom of this email. As this $2 Trillion, 628 page spending bill goes into effect, you are likely to be inundated with emails about its various provisions, so, now that we have the final text, allow me to jump ahead of the email traffic and highlight some of the most pertinent sections of the bill, starting in reverse:
Section 5002 - Targeted EIDL Advances - $10T in additional funding has been provided to fund existing, but unpaid, EIDL Advances. $5T in funding for $5,000 EIDL grants for businesses with less than 10 employees and revenue drops of 50%+
Section 5003 - Support for Restaurants - $28.6T has been authorized for a grant program for restaurants.
The law is written with broad strokes and we expect to wait until mid/late April for actual SBA rules and regulations related to the grants, at which point we will further analyze.
Generally speaking, restaurants will be eligible to be granted their decline in sales from 2019 to 2020, less any PPP money they’ve received.
There is a 21 day priority application period that will segregate applicants based on race, sex, and veteran status.
There is a $5T initial set aside for restaurants that gross less than $500,000 per year.
The formulas for calculating how much a restaurant will be eligible for have not been written; the timing for the applications has not been set; the formulas for how to split up the money amongst applicants have not been written.
It is our belief that these funds will run out very quickly and one of two things will happen: a) the funds will be substantially expanded (e.g. PPP Round 1), or b) the grant sizes will be curtailed to spread the money further (e.g. EIDL loans, which were constricted to $150,000 after being $500,000 at first)
Section 9013 - Extension of Pandemic Unemployment Compensation - Federal pandemic unemployment insurance has been extended at a $300 per week supplemental rate until September.
Section 9021 - Extension of FFCRA Unemployment Provisions - The FFCRA Unemployment program is extended until September 6, 2021.
Section 9601 - 2021 Recovery Rebates to Individuals - The latest round of stimulus payments will be $1,400 for most recipients ($1,400 per adult, child, or other dependent). The phase out limits are $75,000 for a single person, $112,500 for a head of household, and $150,000 for a married couple filing jointly. We expect these checks to go out relatively quickly, using the same mechanism as in previous rebates.
Section 9611 - Child Tax Credit Changes - The Child Tax Credit for 2021 is being increased to $3,600 for each child from 0-5 years old and to $3,000 for each child from 6-18 years old (ages are measured on 12/31/2021). The phase out limits are $75,000 for a single person, $112,500 for a head of household, and $150,000 for a married couple filing jointly.
Unlike in previous years, the credit will become completely refundable and is going to be eligible to be paid in advance via monthly governmental transfers ($250-300 per child) to taxpaying parents, starting in July. This is written as a one year change to the law, but is expected to become one of the most substantial expansions of government social payment policy in years when it is likely extended by future legislation.
Section 9631 - Refundability and Enhancement of Child and Dependent Care Credit - The child care credit is expanding substantially for 2021. The credit jumps to 50% of your childcare expenses (formerly 35%) with a credit limit of $4,000 per child, up to a maximum of $8,000, and is now fully refundable. This credit formerly phased out starting at $15,000, but is now available for households making up to $400,000 (the phaseout starts at $125,000). This will materially increase refunds to a large number of taxpayers.
Section 9651 - Extension of Employee Retention Credit - The Employee Retention Credit is extended until December 31, 2021. The Employee Retention Credit, in our opinion, remains one of the single most important stimulus programs passed in the last 12 months, as employers are eligible for 70% payroll support if they qualify.
Whether you are an individual taxpayer or a business, this stimulus bill likely contains a provision that applies to you. As noted, many of the most complicated business elements of the bill are written in vague terms, and we expect to communicate in detail as the relevant rules and regulations are written. Click here to download a full PDF of the American Rescue Plan Act of 2021.
The Employee Retention Tax Credit is an Invaluable, Less Discussed Tool for Your Business
The new stimulus bill (HRR 133) contains an incredibly valuable expansion of refundable payroll tax credits called the Employee Retention Tax Credit (ERTC). These credits were previously unavailable to any taxpayer that received a PPP loan, but the new stimulus law allows us to help you claim up to $5,000 per employee for 2020 and up to $14,000 per employee for 2021.
You will likely qualify for the ERTC if your business operated under a full or partial government mandated shutdown in 2020/2021 or if your sales dropped significantly vs the same quarter in 2019 (sales drops must be 50% for 2020 quarters, but only 20% in 2021).
It is incredibly important to emphasize that claiming the ERTC results in immediate cash back into your bank account each time you run payroll. These are refundable payroll tax credits - they are not credits taken against your annual tax return. This makes them very valuable as immediate stimulus if you qualify for them. If you are qualified, you should begin to claim them immediately with each payroll you run.
More details on the original ERTC are available from the IRS. Eligibility for the ERTC program is subject to a number of rules and it’s important to maximize claims for retroactive credits - if you need our team’s assistance with the process, reach out to brittany.m@harmonycpa.com.
Matt Hetrick, CPA
President & Owner
New Pandemic Relief Legislation Is Here At Last
Congress has finally finished bringing the next pandemic relief legislation to completion, and I wanted to share our first analysis of the bill so you have a general understanding of what it means for yourselves and our nation.
The text of the legislation can be found here, as well as on our website, but we expect the actual rules for implementing the law to be promulgated over the next few weeks. We must emphasize that the primary commonality of relief legislation during 2020 has been that no matter what the text of the law states, we should expect material changes as the law is implemented. You are all certainly aware of how many times the Treasury, IRS, and SBA changed the rules related to PPP Loans, Economic Injury Disaster Loans, and Main Street Lending Program loans this year. As always, we will keep you up to date with the rules as they change, we will be standing by to help you get the stimulus money and forgiveness, and we will help clients plan for best utilization of any provisions of the law that might benefit you.
With all of that said, the set of provisions that seem most relevant to our clients are as follows:
DIVISION N, SECTION 201- PANDEMIC UNEMPLOYMENT ASSISTANCE - Pandemic unemployment compensation support has been extended for another 11 weeks (through March 14th), with a $300 Federal supplement to any state level benefits. I am disappointed that the length of time for this extension was cut to such a short amount of time in order to fund direct checks to individuals, however any extension of the Federal unemployment support remains welcome.
DIVISION N, SECTION 221 /286- FFCRA and FFCRA CREDIT EXTENSION - The FFCRA Pandemic leave program and credits for payments made under it are extended through March 31. We remain convinced that this program is an important tool for financially supporting employees when they are quarantining for Covid tests and remind businesses that this support is fully paid for up front by the Federal Government. We can help you if you have questions on how to use it.
DIVISION N, SECTION 301 (et al) - PPP, Second Draw - A targeted 2nd round of the Payroll Protection Program loans is included in this bill and will help our most vulnerable clients survive this winter. Eligibility will be along the following lines:
Who (Section 311) - Any business that has experienced a quarter of sales in 2020 that is more than 25% below sales during the same quarter in the prior year. Example: if your Q2 2020 sales were 74% of your Q2 2019 sales, you will qualify for another round of PPP. This will apply for Q1, Q2, Q3, and Q4 comparisons between 2020 and 2019. The law contains alternative measurement periods for businesses that started in 2020, seasonal employers, and various other options. We expect the actual implementation of this section of the law to matter immensely...to this end, we expect to communicate extensively about the question of ‘who’ is eligible once rules come out.
What (Section 311) - Businesses with NAICS codes starting with 72 (i.e. restaurants, bars, etc.) will be at a multiple of 3.5x 2019 average monthly payroll. Other businesses will be at 2.5x average monthly payroll.
When - Based on the implementation timeline from the first round of PPP loans, we think the applications will be accepted in January and the funds will arrive in February. It is easy to imagine ways for this round of PPP funds to be more efficient (e.g. simply certifying to your lender that your sales have been down by 25% or more and a loan of the same size being issued), but we will communicate further as this is decided. Our team will be ready to assist you as soon as applications are being accepted.
Where - We expect the second round of PPP will come from the same sources that you received loans from during the first round.
How - These funds can be spent on more types of expenses than the first PPP loans. Operating expenses and suppliers can be paid from these loans, as well as payroll, rent, utilities, etc. like before. There is also the ability to spend funds on ‘‘(IV) an expansion of additional indoor, outdoor, or combined business space,” which will certainly garner additional attention. This expansion is now applied retroactively, as well, for anyone who hasn’t received forgiveness. The law is written broadly, so we will see what Treasury allows.
Major Takeaway - If your business has experienced a quarter this year with a sales drop of 25%+ vs last year, you will likely qualify for another loan from the PPP program.
DIVISION N, SECTION 272 - $600 Stimulus Checks - At a projected cost of nearly $168,000,000,000 (that’s right - enough money to build brand new hospitals around the country full of more than 100,000 ICU beds...), Congress included an round of additional $600 stimulus checks to most Americans, regardless of need. You can expect a whole host of sardonic Instagram posts about the practical utility of $600 stimulus checks.
DIVISION N, SECTION 276- Taxability of PPP Forgiveness - Congress has overridden the IRS and made it explicit that the expenses used to generate PPP forgiveness WILL be tax deductible. This is a huge win for taxpayers. If you end up with a tax loss this year, we will conduct tax planning with you to determine whether amendments to prior tax years can help us get you additional funds.
DIVISION N, SECTION 325 - SBA Loan Payments - The Federal government will pay for another 6 payments on existing SBA loans.
Targeted Economic Injury Disaster Loans (EIDLs) - Another round of EIDL loans will be released for entities that meet certain criteria.
SUBTITLE C, SECTION 206- Employee Retention Tax Credit (ERTC) Expansion - In a bill full of headlines, the expansion of the ERTC program will get overlooked, but make no mistake: this sleeper provision is one of the single most important stimulus items contained in this legislation. The Federal government will pay for 70% of your first $10,000 of wages per employee during periods when your business is operating under either partial or full shutdowns through June 30, 2021. The ERTC provides immediate relief - it’s a credit each time you run payroll, not at the end of the year, meaning you get money back up front - and will be accessible immediately. We will coordinate with you as soon as the rules are updated by the IRS and expect this to be a huge help to our clients - especially those who do not qualify for a PPP loan.
We will continue to monitor developments with this law as it goes through the implementation process and you can expect significant further communication over the next couple of weeks. We are standing by to help you apply for the next round of PPP as soon as applications are available and look forward to using this round of Covid relief to help our clients survive the winter and thrive once we exit this wave of the pandemic. Stay safe, keep your heads up, and we look forward to a great 2021.
Matt Hetrick, CPA
President & Owner
The Bridge Fund Will Help DC Businesses Through Winter
As we've long advised, the winter months and the second wave of the pandemic will pose tremendous challenges to the restaurant community here in DC. Today, though, CPA Eats clients have a big reason to celebrate in the form of the Business Support Grants Amendment Act's Bridge Fund, a $100 million grant hugely aimed at hospitality businesses in the city.
Applications for the funds will come available in December, and we'll be actively monitoring Bridge Fund progress to make applications for all clients as soon as they're available. We're thankful to our partners at RAMW for their diligent work advocating for DC's restaurant community - find their full breakdown of the initial news below. If you have any questions, please don't hesitate to reach out. We'll continue to update you as the process unfolds.
Dear DC Operator,
We had a HUGE WIN in DC today, and want to share the good news immediately with you. Today, Mayor Bowser funded the Business Support Grants Amendment Act, which creates a $100 million grant program for small businesses impacted by COVID-19 and the Public Health Emergency. Named The Bridge Fund, this grant is specifically created to support the industries that have been the hardest hit by the economic effects of the pandemic, which include restaurants, hotels, entertainment and retail. Restaurants are the largest portion of the grant awards, with $35 million going to support our industry. Of this 35%, 15% is specifically set aside for small businesses owned by women and minorities.
We should all thank Councilmember McDuffie (kmcduffie@dccouncil.us) who introduced this legislation and worked with us closely throughout the process to ensure our industry was supported in a meaningful way. He has been a huge champion of restaurants, bars and the small business community and consistently listens to what is most needed. And a huge thank you to Mayor Bowser for taking the important steps to fund this legislation to provide additional support for our community, especially now as we go through a very difficult time the next 4-5 months.
The Bridge FundClick here to see the details of the Fund breakdown. Below is a summary of the key points for restaurants:- $35 Million of the grant is dedicated to restaurants, which is the largest portion of the $100 million at 35%.
- Grants for restaurants will be awarded in amounts ranging from $10,000 to $50,000.
- Grants will be awarded to roughly 700 businesses.
- Hotels will be the first industry application to open next week as a portion of the Hotel $30M is funded by DC’s CARES Act funds and must be used before the end of the calendar year.
- Restaurants and other sector applications will open over the next 5 weeks.
- Businesses should use this time to gather documents to streamline their application process. The District will be looking for the same documents that were required for previous grants administered this year.
We are awaiting further details on the eligibility requirements as they will differ from industry to industry, and we will update you as soon as we have further information. For now, we applaud this great effort which we know will immensely help DC operators and will be much needed financial relief as you head into these uncertain winter months. Click here to read more in the Washington Business Journal’s coverage of this announcement.
Finally, we all owe a big thank you to Andrew Kline and his team at Veritas who have been working tirelessly alongside RAMW on all relief we have had to push our leaders to consider thus far for our DC operators.
Anne Arundel County Restaurant & Food Service Grant
To Harmony Group Clients in Anne Arundel County:
For Harmony Group restaurant clients in Anne Arundel County, I wanted to share the following new program that will be coming in November:
County Executive Pittman Launches Restaurant and Food Service Grant Program
County also expands Humanitarian Relief Fund for lost wages and tips for workers
Today, Anne Arundel County Executive Steuart Pittman announced a new program to provide grants of up to $10,000 to restaurants and food service businesses in the county. The county is committing $5 million of its federal CARES Act funding to the grant program, which is designed to help restaurants and other businesses that are experiencing reduced revenue because of COVID-related restrictions and loss of consumer confidence. County Executive Pittman also announced an expansion of the humanitarian relief fund to include food service workers who have lost wages and tip income due to the pandemic.
The Restaurant and Food Service Grant Program is specifically targeted to food trucks, catering businesses, bed and breakfast establishments and dine-in, non-drive-through restaurants. Restaurants and food service businesses will be able to use the grants to cover operating expenses such as rent, payroll and utilities, and costs associated with the purchase of personal protective equipment, ensuring sanitary physical spaces and implementing online customer engagement and transactions. The grant cannot be used for any expenses previously covered by another federal, state or local government COVID-19 related program, losses covered by an insurance policy or capital improvements to the business property.
The grant will be disbursed in the following amounts to qualified and approved businesses:
- $10,000 for catering businesses, bed and breakfast establishments and dine-in, non-drive through restaurants; and
- $5,000 for food trucks.
A qualified business must:
- Be located in Anne Arundel County;
- Have been open and operating prior to March 13, 2020;
- Be in good standing with the State of Maryland Department of Assessments and Taxation; and
- Submit a copy of an active food service license issued Anne Arundel County Department of Health, a signed W-9 form.
Applicants also will be required to upload a voided company check to facilitate an ACH deposit of the grant amount to the business bank account.
Anne Arundel Economic Development Corporation is currently developing a portal on its website where businesses can create an account and complete the entire application process. The application period is expected to open in mid November. For additional information, inquiries can be sent to grants@aaedc.org.
To prep for this, please send us a copy of your active food service license issued by Anne Arundel County Department of Health.
We will also gather, on our end, a signed W-9 and a voided company check.
We'll monitor the development of the portal closely and be ready to apply when it goes live.
Best,
Matt Hetrick, CPA
President
Maryland's Layoff Aversion Grant
To Harmony Group Clients in Maryland:
Just a quick reminder to our Maryland business clients that Maryland will begin accepting Layoff Aversion Grant applications on Wednesday morning. We believe the applications will start being accepted for new applicants around 0900 on Wednesday.
The new application will be posted here: https://www.dllr.state.md.us/employment/covidlafund.shtml
The application is not posted yet, but a copy of the prior form as well as the full text of the announcement can be found at the buttons below this email to give you a sample of what information you need, as well as a copy of Maryland's instructions regarding the program.
You will need to get a Certificate of Good Standing from Maryland at the following website: https://egov.maryland.gov/BusinessExpress/EntitySearch
You should feel free to complete these applications quickly on your own, as you know your own business spend needs best. We are also happy to assist clients with these applications if you need help - just email your normal team member or email admin@harmonycpa.com.
- Matt Hetrick
President
Maryland Strong Announcement
Valued Harmony Group Clients in Maryland:
As many of you are aware, Governor Hogan announced a $250M relief program today called the Maryland Strong: Economic Recovery Initiative.
Of these funds, the most immediately accessible will be the $20M offered through the Layoff Aversion Fund and $50M to be offered to restaurants via local jurisdictions to pay for winter supply grants. Most of the other funds are earmarked for smaller programs, a backlog of grants we've already applied for, and a $100M fund for the winter challenges yet-to-come.
We encourage you to review these programs, as well as contact your local Main Street Maryland organization, if you are in one, re: the support they can provide, and work together with us to get grant and relief applications submitted.
These applications will be coming online over the next 30 days (the Layoff Aversion Fund applications reopen on October 28th, for example) and we will be standing by to help you successfully apply to the various programs these funds ultimately funnel through.
Click here for the full text of the announcement.
- Matt Hetrick
President