The closing of one year and the beginning of the next is always challenging for payroll and HR professionals. It requires a flurry of processing and reporting as well as careful planning to ensure readiness to meet new compliance requirements. This year brings all of that and more, with significant relief available to employers under the recently passed Consolidated Appropriations Act (CAA).
This legislation offers opportunities for employers to take advantage of relief measures created under the Families First Coronavirus Response Act (FFCRA) and CARES Act and requires analysis from key decision-makers to choose the right options for their business. Here are the top three opportunities worth considering:
1. Was your business covered by the sick and family leave requirements created by FFCRA?
If so, CAA authorizes your organization to continue allowing employee use of remaining sick and family leave hours and benefit from the corresponding tax credit against those wages. It is no longer mandatory for employers to offer, but if you’d like to extend the option for employees to use remaining leave balances, you may claim the corresponding credit on any wages paid between now and March 31.
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2. Did your business take advantage of the Employee Retention Credit (ERC) created by CARES?
If so, you may be able to continue to take that credit for the first two quarters of 2021. However, the eligibility rules are a bit different during 2021. Employers are eligible if their business was either fully or partially suspended due to a COVID-19-related governmental order, or if their business experienced a significant reduction in gross receipts. If you meet these requirements and have fewer than 500 employees, you may be able to take a 70% credit against $10,000 in wages per employee, per quarter paid during the first two quarters of 2021 which equates to a total potential credit of $14,000 per employee. If your business has more than 500 employees you can still take this credit, but it is limited to employees to whom you continue to pay wages but are no longer providing services to your organization.If you didn’t take the Employee Retention Credit because you took a Paycheck Protection Program (PPP) loan but were otherwise eligible for the credit, CAA removes the prohibition against taking both types of relief. This change is also retroactive to 2020. This does not mean that employers can “double-dip” as any wages included as payroll expenses in a PPP loan forgiveness application can’t also be eligible for the ERC. However, if you already used your PPP funding and are continuing to pay wages that will not be included in your forgiveness application, you may now apply the ERC against those wages.
3. Are you a small business that already took a Payroll Protection Program loan?
If your organization has 300 employees or fewer, you may be eligible for a second forgivable PPP loan. In order to qualify, you’ll need to demonstrate a significant reduction in gross receipts. Additionally, the CAA expands the list of forgivable expenses to include some operations expenditures, supplier costs, property damage costs and worker protection costs. PPP loans of $150,000 or less may qualify for a simplified forgiveness application.This legislation passed during an already busy time of year, but the relief available may be critical for your business. I encourage you to take a close look at what has changed within your organization to gain the most benefit from the options available to you. Business leaders should also seek guidance from their legal or tax advisors to best understand the resources available.