Payroll Protection Program – Round 2
The second round of the Paycheck Protection Program is offering new benefits that will help all qualifying businesses but contain additional relief for the restaurant and food service industry. Be advised this legislation is still pending and subject to change, but below is what we understand are provisions contained within the act.
- For businesses outside the restaurant/food service industry the amount of the PPP will be the same as before (2.5 months of eligible payroll). There are limitations such as the highest loan amount has been reduced from $10 million to $2 million, businesses cannot have more than 300 employees (restaurants its per location) and must have had at least a 25% reduction in gross receipts from Q1, 2 or3 2019 versus the same period 2020.
- For restaurants and food service providers the amount of the PPP will be 3.5 months of eligible payroll. This means those in the food service industry can qualify for up to 40% more funding.
- For funds to be forgiven, 60% must be used for payroll – same as the first round. The remaining 40% now has much wider latitude in what is considered qualifying expenses. It now includes certain supplier expenses (i.e. food purchases under a contract), cost of personal protection expenses
- If you haven’t sought forgiveness with your first PPP loan you are entitled to use the new rules.
- Business meals will be fully deductible. This is meant to directly encourage business to utilize restaurants and bring back the business lunch.
- Expenses related to PPP loans which are forgiven will be tax deductible. The legislation clarifies that expenses incurred using forgiven PPP funds are tax deductible. This is in direct opposition to guidance previously issued by the IRS and will result lower taxable income for all businesses with forgivable loans.
- Loan forgiveness applications have been simplified. Borrowers who received less than $150,000 in PPP loans during the first round will now only have to submit a one-page application for forgiveness. However, all of the same rules still apply.Proper documentation must be maintained internally. The key difference is this documentation will not have to be submitted to the lender. Borrowers who received between $150,000-$2,000,000 are subject to additional documentation and submission requirements but far less than had been previously required.
- Extension of the Employee Retention Tax Credit (ERTC).
- Extension of the Work Opportunity Tax Credit (WOTC).
Do not hesitate to give us a call if you have any questions or need assistance. Premier Payroll is here for you!