December 28, 2020

Business Tax Opportunities in COVID-19 Relief Bill

Businesses in Atlanta and across Georgia breathed a collective sigh of relief when it was announced yesterday afternoon President Trump signed the COVID-19 Relief Bill. It had been over 9 months since the last round of economic stimulus had been passed by Congress despite several failed attempts during the summer and fall. Significant differences in the amount of relief, which incentives and benefits to extend, and the introduction of new programs kept sides apart. The Continuing Appropriations Act, 2021 and Other Extensions (the Act) provide relief for businesses through an expanded PPP (known as PPP2), modifications to Economic Injury Disaster Loans (EIDLs), and changes to several COVID-19 business tax provisions. Given the breadth of changes, the focus of this post will be on business tax opportunities. To help clients, prospects, and others, Wilson Lewis has provided a summary of key details below.

• Business Meal Deductions – The Tax Cuts and Jobs Act limited the deduction for business meals over the past few years to 50%, with several exceptions. The Act has increased the deduction to 100% for qualifying meals purchased in restaurants for 2021 and 2022.
• Repayment of Deferred Payroll Taxes – On August 8^th President Trump issued a Memorandum which allowed employers to defer the withholding, deposit, and payment of an employee’s 6.2% Social Security taxes between September 30, 2020, and December 31, 2020. Originally, participating employers were required to make repayment between January 1^st and April 30^th, 2021. However, the deadline has been extended to December 31, 2021, giving an extension of eight months. Interest and penalties will begin to accrue on January 1, 2022.
• Employee Retention Tax Credit – When passed as part of the CARES Act, employers adversely impacted by COVID-19 received a refundable credit for up to 50% of qualified wages, including health benefits, paid to eligible employees. The Act increases the credit percentage to 70%, changes the annual cap to $10,000 per quarter, extends the credit through June 2021 and allows employers with less than 500 employees to claim an advance credit payment. These changes are effective starting on January 1, 2021, and are not retroactive.
• Section 45S Payroll Tax Credit – The Act also extends through March 31, 2021, the payroll tax credits available to employers that provide paid family and medical leave. Originally designed to help alleviate the cost of leave, employers receive a 100% refundable tax credit against the employer’s portion of Social Security taxes. However, the Act does not mandate employers to provide leave which is currently the case. The expiration date for the original mandate is December 31, 2020, which has not been changed.
• Section 45S Employer Income Tax Credit – The Act also extends the employer income tax credit, which is based on a percentage of wages paid to employees while on leave, has been extended for five years. It was scheduled to expire at the end of this year but is now extended through December 31, 2025.

Tax Extenders

In addition to the COVID-19 related tax changes outlined above, there were also several existing tax credits, deductions, and incentives that were extended or made permanent. The New Markets Tax Credit, Work Opportunity Tax Credit, special expensing rules for certain film, television, and theater productions, and Empowerment Zone tax incentives were extended through 2025. In addition, the deduction for energy-efficient commercial buildings, railroad track maintenance credit, and the tax favorable treatment of benefits provided to volunteer EMT/firefighters were made permanent.

Contact Us

The changes made in the Consolidated Appropriations Act provide an extension and enhancement of essential tax incentive programs. As the COVID-19 pandemic continues into 2021, it is essential to review your situation and determine where additional savings can be claimed. If you have questions about the information outlined above or need assistance with a tax or accounting issue, Wilson Lewis can help. For additional information call us at 770-476-1004 or click here to contact us. We look forward to speaking with you soon.