At Spark we know your time is precious. That’s why we’ve written a condensed version of our larger article on the American Rescue Plan Act just for business owners. We’ve included the pieces of information that may apply specifically to business owners with links to resources that you can click on if you have more questions/interest.
Additional Financial Support for Small Business
The SBA announced the following provisions in additional small business support under the American Rescue Plan Act, this is take directly from their website:
- $7.25 billion additional for the Paycheck Protection Program, including to expand eligibility to additional nonprofits and digital news services
- Additional funds are allocated for the Shuttered Venue Operators Grant program, and now allows businesses to apply for both a PPP loan after Dec. 27, 2020, and the SVOG
- $15 billion additional for Targeted Economic Injury Disaster Loan Advance (EIDL) payments, including NEW $5 billion for Supplemental Targeted EIDL Advance payments for those hardest hit
- NEW: $28.6 billion for the Restaurant Revitalization Fund for industry-focused grants
- NEW: $100 million to establish a Community Navigator pilot program; grants will go to eligible organizations supporting efforts to improve access to COVID–19 pandemic assistance programs and resources.
A note on the PPP, even though additional funds were added the program is still set to expire on March 31, 2021 so if you are going to apply you need to do it immediately as many banks are slammed with applications.
Expanded Child Tax Credit & Clawback
Business owners with children and AGI that hovered around $150,000 in 2020- pay close attention to the child tax credit clawback provision. If your income in 2020 qualifies you for the expanded child tax credit you will receive advance monthly payments for the 2021 Child Tax Credit starting in the second half of 2020.
The expanded child tax credit ($3,600 for ages 0-6, $3,000 for ages 6-17)) will be partially prepaid in advance during the second half of 2021.
However, if 2020 was an anomaly for you from an income perspective, and your 2021 income will be higher, you may not actually qualify for those payments and will have to pay them back when you file your 2021 tax return
Set aside those payments in your tax account during 2021, otherwise you may be (unpleasantly) surprised when you file your 2021 tax returns.
COBRA Subsidies Paid by Employer
If you have a terminated employee on COBRA from April – September of 2021 you (as the employer) are responsible for paying the full insurance premium but will be reimbursed by the Federal government via a refundable payroll tax credit. (Refundable means that if the cost exceeds the payroll taxes you pay you will still get the full amount.
Employee Retention Credit (ERC) Changes
The ERC was previously scheduled to expire at the end of June (2021) but it will now be available through the end of the year. Business established after Feb. 15, 2020 with annual receipts up to $1 million will now also qualify for the credit.
Extension of Limitation on Excess Business Losses for Noncorporate Taxpayers
Currently individual taxpayers can offset up to $500,000 for a joint filer ($250,000 for a single filer) in nonbusiness income with certain business losses. This was set to expire in 2025 but has been extended to 2026.
No Minimum Wage Hike
Don’t skip this section.
The much talked about $15/hour minimum wage hike (to be phased in by 2025) was not included in the American Rescue Plan. However, we encourage business owners to model their finances in conjunction with their CPA should a significant rise in the minimum wage pass in the future. If you are currently paying employees around $15/hour, would you need to increase your wages to stay competitive? Do you need to start pricing your bids higher in preparation for higher future wages? Should you offer a 401(k) plan to employees to help stand out from the competition and increase employee retention?
Looking for a financial planner that understands business owners and entrepreneurs? We know the struggles and joys of business ownership because we’ve lived it. Schedule a call that suits your hectic schedule and find out how we can help you build wealth inside and outside of your business.