Did your company receive funds from the Human Health Services (HHS) Cares Act stimulus? If so, you may be required to submit supporting documentation for how the funds were used.
The Human Health Services department calculated relief payments based on 2019 Fee for Services (FFS) Medicare payments and direct deposited them into hospital and medical provider accounts. Any payments of more than $10,000 require additional reporting by the deadline specified in the chart below, per the Terms and Conditions of the payments.
||Payment Received Period (Payments Exceeding $10,000 in Aggregate Received)
||Deadline to Use Funds
||Reporting Time Period
||From April 10, 2020 to June 30, 2020
||June 30, 2021
||July 1 to Sept. 30, 2021
||From July 1, 2020 to Dec. 31, 2020
||Dec. 31, 2021
||Jan. 1 to March 31, 2022
||From Jan. 1, 2021 to June 30, 2021
||June 30, 2022
||July 1 to Sept. 30, 2022
||From July 1, 2021 to Dec. 31, 2021
||Dec. 31, 2022
||Jan. 1 to March 31, 2023
These funds provided by the stimulus payments must be used for eligible expenses and lost revenues to allow hospitals and medical practices to prevent, prepare for, and respond to COVID-19. To provide the necessary reports, Health and Human Services has launched a Provider Relief Fund (PRF) reporting portal.
Before getting started, you may want to gather the following types of information:
- Reporting Entity Business Information
- Subsidiary Questionnaire
- Acquired/Divested Subsidiaries
- Interest Earned on PRF Payment(s)
- Tax and Single Audit Information
- Other Assistance Received
- Use of General and Targeted Distribution (including Skilled Nursing Facility and Nursing Home Infection Control Distribution) Payment(s)
- Unreimbursed Expenses Attributable to Coronavirus
- Los Revenues Attributable to Coronavirus (and additional revenue information depending upon the option selected to calculate lost revenues)
- Personnel, Patient, and Facility Metrics
- Survey Questions
You can learn more about the system and reporting requirements here. Our team of professionals is also available to help you sort through the necessary reporting requirements.
The Employee Retention Tax Credit (ERTC) is a valuable tax break that was extended and modified by the American Rescue Plan Act (ARPA), enacted in March of 2021. Here’s a rundown of the rules.
Back in March of 2020, Congress originally enacted the ERTC in the CARES Act to encourage employers to hire and retain employees during the pandemic. At that time, the ERTC applied to wages paid after March 12, 2020, and before January 1, 2021. However, Congress later modified and extended the ERTC to apply to wages paid before July 1, 2021.
The ARPA again extended and modified the ERTC to apply to wages paid after June 30, 2021, and before January 1, 2022. Thus, an eligible employer can claim the refundable ERTC against “applicable employment taxes” equal to 70% of the qualified wages it pays to employees in the third and fourth quarters of 2021. Except as discussed below, qualified wages are generally limited to $10,000 per employee per 2021 calendar quarter. Thus, the maximum ERTC amount available is generally $7,000 per employee per calendar quarter or $28,000 per employee in 2021.
For purposes of the ERTC, a qualified employer is eligible if it experiences a significant decline in gross receipts or a full or partial suspension of business due to a government order. Employers with up to 500 full-time employees can claim the credit without regard to whether the employees for whom the credit is claimed actually perform services. But, except as explained below, employers with more than 500 full-time employees can only claim the ERTC with respect to employees that don’t perform services.
Employers who got a Payroll Protection Program loan in 2020 can still claim the ERTC. But the same wages can’t be used both for seeking loan forgiveness or satisfying conditions of other COVID relief programs (such as the Restaurant Revitalization Fund program) in calculating the ERTC.
Beginning in the third quarter of 2021, the following modifications apply to the ERTC:
- Applicable employment taxes are the Medicare hospital taxes (1.45% of the wages) and the Railroad Retirement payroll tax that’s attributable to the Medicare hospital tax rate. For the first and second quarters of 2021, “applicable employment taxes” were defined as the employer’s share of Social Security or FICA tax (6.2% of the wages) and the Railroad Retirement Tax Act payroll tax that was attributable to the Social Security tax rate.
- Recovery startup businesses are qualified employers. These are generally defined as businesses that began operating after February 15, 2020, and that meet certain gross receipts requirements. These recovery startup businesses will be eligible for an increased maximum credit of $50,000 per quarter, even if they haven’t experienced a significant decline in gross receipts or been subject to a full or partial suspension under a government order.
- A “severely financially distressed” employer that has suffered a decline in quarterly gross receipts of 90% or more compared to the same quarter in 2019 can treat wages (up to $10,000) paid during those quarters as qualified wages. This allows an employer with over 500 employees under severe financial distress to treat those wages as qualified wages whether or not employees actually provide services.
- The statute of limitations for assessments relating to the ERTC won’t expire until five years after the date the original return claiming the credit is filed (or treated as filed).
Contact us if you have any questions related to your business claiming the ERTC.
Earlier this year, the American Rescue Plan (ARP) was announced, including some temporary updates to the child tax credits available for many parents. Under the ARP, eligible parents of dependent children can take a tax deduction of up to $3,600 per child, depending on the child’s age and household income.
Part of this tax deduction is currently planned to be distributed to parents in the form of monthly payments from the IRS. For every child under the age of 6, parents will receive $300 per month starting on July 15 and ending on December 15. For children age 6 to 17, parents will receive $250 per month. Any remaining amount on the child tax credits will be eligible to be taken during the regular tax filing season.
The child tax credit update portal
The IRS has released a website where parents, including eligible non-filer parents, may make their designations concerning the child tax credits and scheduled deposits. This includes updating bank account information for direct deposits, even if previous economic stimulus payments were sent via check.
For parents that want to forego the advance payments and take their child tax credit in one lump sum during their tax filings, you may opt-out using this portal. The deadline to opt-out for the first payment was June 28. If you opt-out after that deadline, you will still receive the first payment if you qualify. In addition to personal preference, filers may want to opt-out of these payments because:
- Your 2021 income will be higher, and you suspect you will no longer be eligible to claim the full child tax credit.
- A spouse or family member qualifies to claim the child or children as dependents for the 2021 tax year.
- You resided outside of the United States for greater than six months in 2021.
Now would be a good time to discuss with a tax professional any benefits or drawbacks to accepting the monthly advance payments to the child tax credit.
Note: Parents who are married couples filing jointly must BOTH opt-out of receiving the payments, or you may still receive a partial payment.
Who will receive monthly payments?
Payments will be received by eligible parties starting around July 15, 2021. You can check your eligibility using this tool created by the IRS. Currently, the IRS is using 2019 and 2020 tax filings to decide who may be eligible. If you are a non-filer and have registered for the Economic Impact Payments online previously, you should not need to register for the child tax credit advance payments at this time. If you have not previously registered, you may do so at the Non-filer Sign Up Tool here.
You can also find more about the temporary increase for the child tax credit and the upcoming advance payments here.
Be sure to speak with your tax professional to determine the best course of action moving forward with these advance tax credit payments. Our team of experts is available to assist you.
The IRS and Treasury Department provided new information regarding the tax credits available through the American Rescue Plan (ARP). The ARP was created to help small businesses through the pandemic. This new guidance provides information on how eligible businesses can claim the credit for providing paid time off to employees receiving or recovering from the vaccine. Below, we’ve outlined which employers are eligible for the credits and when and how the credits can be taken.
Who is eligible?
Any business with fewer than 500 employees is eligible to take the tax credit. This includes tax-exempt organizations and governmental employers who are not the federal government or not outlined in section 501(c)(1) of the Internal Revenue Code. Self-employed individuals are eligible for similar credits.
What are the paid leave qualifications?
In order to qualify for the tax credit, employers/employees must meet the following guidelines:
- The leave must be paid between April 1, 2021 to Sep. 30, 2021.
- Employers must pay the wages for the sick or family leave.
- Employees must qualify as not being able to work or telework due to reasons related to COVID-19, including the time taken to receive a COVID-19 vaccine or to recover from side effects from the vaccine.
For more information on the credits, including how they’re calculated, view the IRS Fact Sheet or reach out to our team of professionals.
A measure to extend the Paycheck Protection Program (PPP) application deadline from March 31, 2021, to May 31, 2021, has passed the U.S. House of Representatives and the Senate. It now heads to President Biden’s desk for signature which he is expected to do promptly.
Small businesses will have until May 31, 2021, to continue submitting first and second-draw PPP loan applications to the Small Business Administration (SBA). The SBA was also granted an additional 30 days past May 31 to finish processing applications. The measure does not include any funding increases for the program.
Contact us for assistance with your PPP loan or forgiveness applications.
President Biden signed the $1.9 trillion American Rescue Plan Act (ARPA) on March 11. While the new law is best known for the provisions providing relief to individuals, there are also several tax breaks and financial benefits for businesses.
Here are some of the tax highlights of the ARPA.
The Employee Retention Credit (ERC). This valuable tax credit is extended from June 30 until December 31, 2021. The ARPA continues the ERC rate of credit at 70% for this extended period of time. It also continues to allow for up to $10,000 in qualified wages for any calendar quarter. Taking into account the Consolidated Appropriations Act extension and the ARPA extension, this means an employer can potentially have up to $40,000 in qualified wages per employee through 2021.
Employer-Provided Dependent Care Assistance. In general, an eligible employee’s gross income doesn’t include amounts paid or incurred by an employer for dependent care assistance provided to the employee under a qualified dependent care assistance program (DCAP).
Previously, the amount that could be excluded from an employee’s gross income under a DCAP during a tax year wasn’t more than $5,000 ($2,500 for married individuals filing separately), subject to certain limitations. However, any contribution made by an employer to a DCAP can’t exceed the employee’s earned income or, if married, the lesser of employee’s or spouse’s earned income.
Under the ARPA, for 2021 only, the exclusion for employer-provided dependent care assistance is increased from $5,000 to $10,500 (from $2,500 to $5,250 for married individuals filing separately).
This provision is effective for tax years beginning after December 31, 2020.
Paid Sick and Family Leave Credits. Changes under the ARPA apply to amounts paid with respect to calendar quarters beginning after March 31, 2021. Among other changes, the law extends the paid sick time and paid family leave credits under the Families First Coronavirus Response Act from March 31, 2021, through September 30, 2021. It also provides that paid sick and paid family leave credits may each be increased by the employer’s share of Social Security tax (6.2%) and employer’s share of Medicare tax (1.45%) on qualified leave wages.
Grants to restaurants. Under the ARPA, eligible restaurants, food trucks, and similar businesses that provide food and drinks may receive restaurant revitalization grants from the Small Business Administration. For tax purposes, amounts received as restaurant revitalization grants aren’t included in the gross income of the person who receives the money.
These are only some of the provisions in the ARPA. There are many others that may be beneficial to your business. Contact us for more information about your situation.
The American Rescue Plan Act (ARPA) has been signed into law by President Biden and makes significant updates to several tax provisions to alleviate some of the pandemic’s financial burdens for individual taxpayers and businesses. Updates include expansions and extensions of various tax credits such as the employee retention credit (ERC), COBRA continuation coverage, Affordable Care Act (ACA) subsidies, and more. The bill also includes $1.46 billion for the IRS to manage the additional responsibilities on top of the annual tax filing season. Here are the critical tax updates.
Individual tax provisions in ARPA
Significant updates were made for individual taxpayers to deal with the financial ramifications of the pandemic.
COBRA continuation coverage credit expanded – Health care premiums will be subsidized at 100% for those who are eligible for COBRA from the date of enactment to Sep. 21, 2021.
- Employers can receive a refundable credit for COBRA continuation coverage premium assistance and is taken against Medicare tax. Advance payments are available and apply to wages paid after Apr. 1, 2021.
- Taxpayers who receive this credit are not eligible for the health coverage tax credit (Sec. 35). This coverage premium assistance is not includable in gross income.
ACA marketplace subsidies expanded – Health insurance premium cost savings for all marketplace exchange users are included in the bill.
- The income cap for premium subsidies in the health insurance marketplace is eliminated for 2021 and 2022 coverage for individuals at 150% of the federal poverty line (FPL) or less.
- Premium costs for households at 400% of FPL would be capped at 8.5% of their household income for benchmark plans (second-lowest-cost Silver plans), which may mean significant health insurance premium savings for many households. Currently, households in this category can spend as much as 50% of their income on health insurance, according to healthinsurance.org.
- Subsidies will phase out as income increases, and subsidies are not available for benchmark plans that cost less than 8.5% of household income.
- Subsidies will increase for those who already qualify for subsidies as the plan reduces the percentage of income expected for benchmark plans.
- Taxpayers receiving unemployment compensation in 2021 whose income is between 100% and 400% of the FPL qualify for reduced cost-sharing on silver plans.
Applicable extra subsidies can be claimed immediately or on the 2021 tax return. A special enrollment period is available until May 15, 2021, for most states.
Child tax credit increased – The child tax credit can now be claimed in advance of filing your return and increases to $3,000 per child (now including 17-year-olds) and $3,600 for children under six years of age. It phases out for married-filing-joint taxpayers with incomes over $150,000, $112,500 for heads of household, and $75,000 for all others. The credit will be paid monthly in cash up to $300 per month by the IRS from July through December.
Earned income credit expanded – The bill introduces rules for individual taxpayers with no children for 2021:
- The maximum credit is now $1,502, up from $543.
- The minimum age is now 19, except for students (24) and former foster youth (18). The maximum age is eliminated.
- The phase-out amount is increased to 15.3%.
- Certain separated spouses are now eligible.
- The threshold for disqualifying income rises to $10,000 from $2,200.
- Taxpayers may temporarily use 2019 income instead of 2021 for calculation.
Student loan forgiveness – Any student loan forgiveness passed between Dec. 31, 2020, and Jan. 1, 2026, would be tax-free rather than the forgiven debt treated as taxable income.
Business tax provisions in ARPA
Business tax provisions were also extended and expanded to help businesses with the financial challenges of the pandemic.
ERC extended – The ERC is extended through Dec. 31, 2021, and expands the eligibility to new startups established after Feb. 15, 2020 (capped at $50,000 per calendar quarter), and companies with a 90% revenue decline compared to the same calendar quarter of the previous year.
Child and dependent care credit expanded – The credit is refundable for 2021. It increases the employer-provided dependent care assistance exclusion to $10,500. The maximum allowable expenses increase to $8,000 (from $3,000) for one dependent and $16,000 (from $6,000) for two or more and allow the credit to cover 50% of expenses.
Family and sick leave credit extended – The Families First Coronavirus Response Act (FFCRA) credits are extended to Sept. 30, 2021, and include:
- Limit increase to $12,000.
- The number of days for calculation increase from 50 to 60 and resets after Mar. 31, 2021.
- Eligibility extended for leave due to COVID-19 vaccination.
- Eligibility extended to 501(c)(1) government organizations.
Executive compensation deduction expanded – The executive compensation deduction for publicly traded employers expands to include the 8 highest compensated employees other than the CEO and CFO by 2027. Currently, a deduction is available on the first $1 million paid to the CEO, CFO, and next three highest compensated officers.
For questions and assistance with any of the programs related to ARPA, contact us.
The American Rescue Plan Act (ARPA) of 2021 passed Congress and President Biden signed the bill into law on March 12, 2021. The ARPA approves $1.9 trillion in spending for individuals, businesses, governments, and certain industries impacted by the COVID-19 pandemic. The third Act in a year, the ARPA approves additional economic impact payments for individuals; the extension of federal unemployment benefits; additional funds for Paycheck Protection Program (PPP) Loans, and Economic Injury Disaster Loans (EIDL) for hard-hit small businesses; and grants for food and beverage establishments. Here are the key individual and business provisions in the bill.
Individual provisions in ARPA
The bill extends and slightly alters two key benefits many individuals have been relying upon through the pandemic.
Unemployment – Federal benefits of $300 per week (in addition to state benefits) are extended through Sep. 6, 2021. The first $10,200 in federal unemployment benefits is tax-free for households making less than $150,000 per year in 2020. Taxpayers who received unemployment income may need to update 2020 tax returns if already filed.
Economic impact (stimulus) payments (EIPs) – The IRS will issue another round of EIPs at $1,400 per individual, $2,800 per married filing joint (MFJ), plus $1,400 per dependent. Income phase-out limits reduce from previous EIPs to $80,000 for individuals and $150,000 for MFJ. Full-time students under the age of 24 are now eligible for economic impact payments (EIP), unlike previous rounds. Your 2019 or 2020 adjusted gross income (AGI) is the basis for EIPs, so taxpayers will want to consider when to file their 2020 tax return to ensure a maximum EIP benefit.
Small business funding provisions in ARPA
The bill includes additional funding for small business relief programs, including the PPP, EIDLs, and industry-specific relief.
PPP – The Act allocates an additional 7.25 billion in additional funds, and the eligibility expands to include:
- Nonprofits listed under Sec. 5019(c) that are not (c)(3), (4), (6), or (19)s with 300 or fewer employees can now apply. To be eligible, you must not receive more than 15% of receipts from lobbying, and lobbying cannot comprise more than 15% of activities. The cost of lobbying cannot exceed $1 million.
- Larger 501(c)(3)s and veterans’ organizations with up to 500 employees.
- Larger 501(c)(6)s, domestic marketing organizations, and additional covered nonprofits with up to 300 employees per physical location.
- Internet-only news and periodical publishers with more than one location and no more than 500 employees per location as eligible as long as the organization supports locally-focused or emergency information.
The deadline is still Mar. 31, 2021, to apply, so don’t delay.
EIDL advance payments – The Act allocates $15 billion for EIDL advance payments, and eligibility requirements state:
- Businesses must be in low-income communities with no more than 300 employees.
- The economic loss of more than 30% must be shown through gross receipts decline in an 8-week period between Mar. 2, 2020, and Dec. 31, 2021, compared to a comparable 8-week period immediately preceding Mar. 2, 2020.
- The timeline for issuing advances is as follows:
- First 28 days – Reserved for those who applied for Targeted EIDL Advances under the EAA and did not receive one due to lack of funds.
- Next 14 days – Reserved for severely impacted small businesses to receive grants of up to $5,000. Eligible entities must have a loss of more than 50% and ten or fewer employees.
- Next 14 days – Reserved for substantially impacted businesses to receive grants of up to $5,000 if they had a loss between 30-50% and 10 or fewer employees.
- Funds from Restaurant Revitalization Fund (RRF) and targeted EIDL advances are not included in gross income. No tax deductions will be denied, no tax attributes reduced, and no basis increase denied due to this exclusion from gross income.
Restaurants, bars, and other eligible food and beverage providers – The Act allocates $28.6 billion for grants, and $5 billion is set aside for applicants with 2019 gross receipts of $500,000 or less.
- Eligibility expands to food stands, food trucks, food carts, caterers, saloons, inns, taverns, lounges, brewpubs, tasting rooms, taprooms, and any licensed facility of a beverage alcohol producer that provides tasting, sampling, or purchasing.
- Grants are equal to the pandemic-related revenue loss of up to $10 million per entity or $5 million per physical location, limited to 20 locations.
- The grant revenue loss is calculated by subtracting 2020 revenue from 2019 revenue.
- Grant funds may cover payroll, principal and interest on mortgage, rent payments (not prepayments), utilities, maintenance for outdoor seating, PPE supplies, food and beverage expenses within the scope of normal business, covered supplier costs, operational expenses, and paid sick leave.
- Good-faith certification is required.
- Applicants cannot also apply for or receive a Shuttered Venue Operator grant.
- There is a 21-day preference period for minority-owned and operated businesses, including women, veterans, and the socially and economically disadvantaged.
- The SBA must distribute grants in an “equitable manner to eligible entities of different sizes and annual receipts.”
Shuttered venue operators – The program is extended from the Consolidated Appropriations Act (CAA) with $1.25 billion allocated.
Community navigator pilot programs – $175 million is allocated for programs that increase awareness of and participation in COVID-19 relief programs for socially and economically disadvantaged business owners.
Other provisions of ARPA
- State, local, and Tribal support – An allocation of $350 billion for costs incurred by the end of 2024. You cannot use funds to offset tax cuts or create a pension fund. Small states should receive at least the same amount of funding as the Coronavirus Aid, Relief and Economic Security (CARES) Act.
- $750 million is allocated to communities with revenue hits due to declining tourism, travel, and outdoor recreation.
- K-12 schools – $130 billion.
- Colleges and universities – $40 billion.
- COVID-19 testing, vaccine support, hospital funding, public health emergencies, biomedical research – $92 billion.
- Airline industry and airports – $23 billion.
- Emergency rental and housing assistance – $30 billion.
For assistance with any of these provisions, please contact us.
The IRS has released additional guidance in Notice 2021-20 on the Employee Retention Tax Credit (ERC) with clarifications on the retroactive changes for expanded eligibility applicable to 2020. Employers who received a Paycheck Protection Program (PPP) loan have been waiting on guidance on claiming the credit in combination with forgiveness of their loan. The provisions outlined here apply to retroactive claims for 2020 as well as providing a plan for those yet to seek forgiveness.
Summary of ERC
As a reminder, eligibility to claim the 2020 ERC requires a business to have experienced a significant decline in revenues during 2020. Specifically, gross receipts for a calendar quarter during 2020 must have declined by 50% or more when compared to the same calendar quarter in 2019. Additionally, a company is eligible during any period where operations were suspended due to a government order.
- Employers with more than 100 FTEs can only claim the ERC on employees that are being paid qualified wages and not providing services.
- For 2020, the credit is available on 50% of qualified wages up to $10,000. The maximum credit amount per employee is $5,000.
- Health care costs are included when determining qualified wages.
- Wages paid as a result of the Families First Coronavirus Response Act (FFCRA) do not qualify.
Clarification on how to apply ERC with a PPP loan
The notice clarifies when and how PPP borrowers can claim the ERC on 2020 wages.
- Wages elected to be covered by the PPP forgiveness application but not granted.
- Wages in excess of the amount of their PPP loan – Example: An employer receives a $200,000 loan for wages but pays $230,000 in wages. Apply the $30,000 wages to ERC.
- The difference in wages and nonpayroll costs that are in excess of their PPP loan – Example: If a PPP loan equals $200,000 and the employer has $200,000 in forgivable wages and $70,000 in forgivable nonpayroll costs, reserve $70,000 in wages for ERC.
- Those that have already applied for forgiveness cannot amend their application to claim nonpayroll costs.
- For those yet to apply for forgiveness and eligible for the ERC, you will want to accumulate and submit nonpayroll costs to maximize eligible wages for the ERC.
The ERC requires specific documentation and support of facts and circumstances in order to qualify and receive the credit. For assistance with claiming the ERC, contact us.
Form 1040, Schedule C taxpayers received an updated interim final rule (IFR) on the Paycheck Protection Program (PPP) from the Small Business Association (SBA). The IFR clarifies guidance released on Feb. 22 that made changes to how self-employed and sole proprietors could calculate their maximum loan amount to help expand the program for these groups. Approximately 2.6 million sole proprietors have applied for PPP loans, and it is estimated there are about 25 million sole proprietors across the country.
The biggest adjustment made by the IFR is that these borrowers may calculate their maximum loan amount using their gross income. Previously, the calculation was done by using payroll costs plus net profits. This excluded many sole proprietors who had little or negative net profit.
Determining how much you can borrow
For sole proprietors with no employees the calculation is as follows:
- Use either line 31 net profit or line 7 gross income (up to $100,000)
- Divide by 12 and then multiply that amount by 2.5
First-draw and second-draw owner compensation is capped at $20,833; however, for accommodations and food services, second-draw owner compensation is capped at $29,167
For sole proprietors with employees, the calculation is as follows: Use either line 31 net profit or calculate the following using gross receipts:
- Line 7 gross income minus employee payroll costs (lines 14, 19, 26)
- Divide by 12 to get monthly total (cannot exceed $100,00 annually or $8,333 monthly)
- Add average monthly payroll costs
- Multiply by 2.5 months
The same owner compensation limits apply as for those with no employees.
Limited liability companies with only one member do qualify for these updated calculations, but single member S-corporations do not.
The calculation is only for loans submitted after the rule’s effective date of Mar. 3, 2021, meaning loans submitted between Jan. 1 and Mar. 2, 2021, would not be eligible for this new calculation. You can access the new forms here:
Additionally, the IFR states that first-draw PPP loans with $150,000 or less in gross income on a Schedule C will be eligible for the economic necessity safe harbor, but loans above will not and could receive additional SBA review.
The current PPP application period expires Mar. 31, 2021, and lenders are experiencing delays in implementing these new calculations. It is anticipated they will begin accepting applications the week of Mar. 8. We are continuously monitoring the situation for additional clarifications and updates.