Business Preparation for Stimulus #2 What you should do IMMEDIATELY to be prepared

Business Preparation for Stimulus #2

What you should do IMMEDIATELY to be prepared

The new COVID Relief bill was signed by the President on December 28th. We covered the highlights of the law in an article you can find HERE.  This Relief Act includes two significant programs that are available to closely-held businesses that are in need of financial assistance.

The two primary programs available to small business are:

  1. Payroll Protection Program – Second Round (PPP-2). We expect applications for this second round to open up within the first couple weeks in January. This second round has been allocated $284 billion, which is less than the initial PPP funding level and may get claimed quickly. As a result, we recommend those in need determine their eligibility now so that prompt application can be made once available.
  2. Employee Retention Tax Credit (ERTC). These credits were originally only available for businesses that did NOT also claim the PPP loan. But, the new Relief Act changed that. You can now qualify for the ERTC and the PPP loan.

To qualify for the PPP-2 loan, your business must show a 25% reduction in revenue in ANY QUARTER of 2020 – compared to the same quarter in 2019.

To qualify for the ERTC: You must show a 50% reduction in revenue in ANY QUARTER of 2020 – compared to the same quarter in 2019. (Then in 2021, this credit only requires a 20% reduction).

As you can see, both of these extended programs are available for qualified businesses that meet quarterly reductions in Gross Receipts. Therefore, we recommend that clients prepare a schedule of gross receipts from each quarter in 2019 vs 2020 to determine their eligibility for either of these programs while we await final application forms.

Here’s an example of what this schedule might look like:

We currently interpret the term “Gross Receipts” to mean cash basis revenues. So, if your business maintains accounting records on an accrual method of accounting (or some other method that is not cash basis), then you’ll need to either calculate your gross receipts from bank statements or by doing a conversion within your accounting system.

Of course, BiggsKofford is available to help, answer your questions, and assist with applications and forms necessary to claim these programs.

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