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The federal stimulus extensions for PPP, unemployment and FFCRA tax credits

President Donald J. Trump signed a $900 billion coronavirus relief and spending bill into law on Dec. 27, 2020. The legislation extends funding to programs to help Americans, and includes additional stimulus checks for those who qualify. Additionally, the stimulus extended several laws from earlier in the year, including the Paycheck Protection Program, federal unemployment benefits, and Family First Coronavirus Response Act tax credits for family and medical leave.

PPP extension and tax impact

The additional relief legislation includes more funding for PPP while expanding eligibility. Businesses that have not applied for the loan before now may do so, including businesses that previously had not been eligible, such as 501(c)(6) nonprofit groups. First-time applicants must meet the same requirements in the original Coronavirus Aid, Relief and Economic Security Act. Businesses may apply for a second loan if they have 300 or fewer employees, and if they experienced a decline of at least 25% in any complete quarter of 2020, compared to 2019.

The legislation also expands eligible uses of the funds while still qualifying for forgiveness. Qualifying expenses now include the costs of cloud computing and business software; payment processing; payroll costs; accounting; property damage from public disturbances not covered by insurance; supplier costs; and costs for adapting to guidance from the Centers for Disease Control and Prevention and the Occupational Safety and Health Administration. The requirement that no less than 60% of the funds must go toward payroll costs remains in place.

Loan forgiveness has been simplified for small businesses. Any borrower who received less than $150,000 may apply for forgiveness with a one-sheet form from the Small Business Association—a form that the association will be required to issue..  Businesses must retain relevant records for at least three years.

After some confusion, the legislation clarifies that the loan money will not qualify as gross income for tax purposes. Businesses still may claim deductions for eligible expenses, even if loan money was used toward the expense. This overrides recent guidance from the Internal Revenue Service.

Unemployment

The law extends federal unemployment benefits at a reduced rate. Eligible unemployed workers may receive up to $300 per week, for an additional 11 weeks. Freelancers and independent contractors also may be eligible for $100 per week for the same period.

FFCRA paid family and medical leave extension

The paid family and medical leave—as part of the FFCRA—was extended through Wednesday, March 31, 2021. The extension allows employers with 500 or fewer employees to claim a tax credit to fully cover employee wages when the employee takes leave for specified, COVID-related reasons.

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