The US Congress has recently passed a new tax relief bill that aims to help small businesses recover from the economic impact of the Covid-19 pandemic. The bill, which is expected to be signed by President Biden soon, includes several provisions that could benefit small business owners and entrepreneurs. Here are some of the key features of the bill and how they could affect your business.
Expanded Employee Retention Credit
The Employee Retention Credit (ERC) is a refundable tax credit that allows eligible employers to claim a percentage of the wages paid to their employees during the pandemic. The new bill extends the ERC until December 31, 2023, and increases the credit rate from 50% to 70% of qualified wages. The bill also raises the limit of qualified wages per employee from $10,000 per year to $10,000 per quarter, and expands the eligibility criteria to include more businesses.
The ERC could help you retain your workers and reduce your payroll tax liability. To claim the credit, you need to file Form 941 with the IRS and report your qualified wages and health plan expenses. You can also request an advance payment of the credit by filing Form 7200.
Enhanced Paycheck Protection Program
The Paycheck Protection Program (PPP) is a loan program that provides forgivable loans to small businesses that use the funds for payroll and other eligible expenses. The new bill allocates an additional $284 billion for the PPP and extends the application deadline until March 31, 2023. The bill also simplifies the forgiveness process for loans under $150,000 and allows borrowers to choose their own covered period between 8 and 24 weeks.
The PPP could help you cover your operating costs and keep your business afloat. To apply for a PPP loan, you need to contact a participating lender and submit the required documentation. You can find more information about the PPP on the Small Business Administration website.
Increased Deduction For Business Meals
The new bill also provides a temporary boost for the restaurant industry by allowing businesses to deduct 100% of their food and beverage expenses incurred at restaurants in 2023 and 2024. The current law only allows a 50% deduction for such expenses. The bill defines a restaurant as a business that prepares and sells food or beverages to retail customers for immediate consumption, regardless of whether the food or beverages are consumed on the premises.
The increased deduction could help you save money on your taxes and support your local restaurants. To claim the deduction, you need to keep records of your business meals, such as receipts, invoices, or credit card statements, and show that they are ordinary and necessary for your business.
Other Benefits For Small Businesses
The new tax relief bill also includes other benefits for small businesses, such as:
- A second round of Economic Injury Disaster Loans (EIDL) grants of up to $10,000 for businesses in low-income communities that have suffered a revenue loss of more than 30%.
- A new grant program of up to $15 billion for live venues, theaters, museums, and other cultural institutions that have been severely affected by the pandemic.
- An extension of the paid sick and family leave credits under the Families First Coronavirus Response Act until March 31, 2023.
- A clarification that forgiven PPP loans and EIDL grants are not taxable income and that expenses paid with these funds are deductible.
The new tax relief bill could provide a much-needed lifeline for small businesses that are struggling to survive amid the pandemic. If you are a small business owner or entrepreneur, you should consult with your tax advisor or accountant to understand how the bill could affect your specific situation and take advantage of the available opportunities.
