![]() SB 113 also allows the deduction of expenses, basis adjustments, and tax attribution adjustments for qualifying taxpayers for SVO and RRF grants. On February 9, 2022, Senate Bill (SB) 113 (Economic Relief) was enacted to allow an income exclusion for Shuttered Venue Operator (SVO) grants provided under CAA for tax years beginning on or after Januand for Restaurant Revitalization Fund (RRF) grants provided under ARPA for taxable years beginning on or after January 1, 2020. California law does not conform to this expansion of PPP eligibility. The ARPA expanded the PPP to include certain nonprofit entities and certain internet publishing organizations. The American Rescue Plan Act (ARPA) (Public Law 117-2) was enacted on March 11, 2021. On April 29, 2021, AB 80 (Consolidated Appropriations Act (CAA) Conformity) was enacted which allowed the additional income exclusion for second draw PPP loans and Economic Injury Disaster Loan (EIDL) advance grants and allowed the deduction of expenses, basis adjustments, and tax attribution adjustments for qualifying taxpayers, for tax years beginning on or after January 1, 2019. Businesses seeking to maximize their tax savings should consult with qualified tax advisors.On September 9, 2020, Assembly Bill (AB) 1577 (Coronavirus Aid, Relief, and Economic Security (CARES) Act Conformity) was enacted which allowed an income exclusion for tax years beginning on or after January 1, 2020, for forgiven PPP loans. Plus, there are many nuances to how the applicable provisions can be applied. The laws and regulations governing PPP loan forgiveness and the ERC are complex. Recovery startup businesses may claim the ERC for all four quarters of 2021. 15, 2020, and (b) had under $1 million in average annual gross receipts. These types of businesses are defined as businesses that (a) continued any and all trades or businesses after Feb. The Infrastructure Investment and Jobs Act eliminated the availability of the ERC for the fourth quarter of 2021 for all eligible employers other than recovery startup businesses.However, there are dollar limits on other measures, including a maximum deduction per employee and a maximum amount of qualified wages that may be deducted. ![]() For purposes of the ERC, there is no cap on the number of employees that are paid in any given quarter.Taxpayers may not claim the ERC unless their business was affected by a mandated full or partial suspension of business or the business’ gross receipts were down 50% in 2020 and 20% in 2021 compared to the same quarter of 2019.Businesses may be able to deduct expenses on their 2021 return to the extent they either could not deduct them in 2020 or did not receive confirmation of forgiveness until 2021.PPP loan forgiveness may be considered as received or accrued when (a) eligible expenses were paid or incurred, (b) the PPP forgiveness application was filed, or (c) the forgiveness occurred.Certain adjustments may be required regarding amended returns, information returns, and instances in which a PPP loan is only partly forgiven.Forgiven PPP loans may be treated as received or accrued when either (a) expenses eligible for forgiveness are paid or incurred, (b) an application for PPP loan forgiveness is filed, or (c) PPP loan forgiveness is granted.While forgiven PPP loans are excluded from taxpayers’ gross incomes, they must be included in gross receipts for certain other purposes, such as the gross receipts test and certain filing requirement thresholds for tax-exempt organizations.Taxpayers cannot claim the ERC on PPP wages used for PPP loan forgiveness.Taxpayers may qualify for the ERC retroactively by filing an amended Form 941 within three years.The implications of these complications include the following: ![]() When these programs were first enacted, businesses had to choose between one or the other, but that changed once the Consolidated Appropriations Act of 2021 was passed.Īlong with the relief the CAA provided by allowing businesses to receive a PPP loan and claim the ERC, the CAA also added a level of complexity for businesses seeking to maximize their tax savings under these programs. The PPP provided forgivable loans to businesses, and the ERC was intended to prevent layoffs. Both were enacted to help businesses stay in operation during the lockdowns caused by the COVID-19 pandemic. Posted by Laura Carter Last updated on April 08, 2022īusiness owners need to make choices on their 2021 taxes regarding the PPP (Paycheck Protection Program) and the Employee Retention Credit.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |