Are you a business owner that applied for round one of the paycheck protection program, but didn’t use the tax credit from the employee retention tax credit due to the fact that you had to choose one or the other?
Well, now you have the capability to go back and determine if you qualify for the employee retention tax credit and apply that to your tax return.
If you had a 50% reduction in your income, or you were mandated to shut down either partially or completely, you can go back and determine the credit amount that you would be due. Up to $10,000 of wages for any employee paid after March 12th through December 31st would qualify at a 50% credit of the amount that they were paid. This would be up to $5,000 per employee.
The extension has taken that credit now through the second quarter of 2021, but there are some differences.
Rather than $10,000 total compensation for the year, you can have total compensation of $10,000 per quarter, and you only need to have a 20% reduction of income over what you had in 2019 to qualify.
There’s also round two of the PPP, the Paycheck Protection Program, funding. Round two requires you to have a 25% reduction in your income of the same quarter of 2019 compared to 2020. To do so, you would go ahead and apply with the same banking institution that you had before, and then use your payroll figures to determine that two and a half months of compensation, or if you’re in the hospitality or restaurant industry, those with NAICS code starting with 72, you can calculate 3.5 months.
The great news is that if you are a small business owner with less than 20 employees, you have the capability to apply through March 9th for the PPP while other businesses have to wait their turn. So, it’s time to get your information together and apply for the PPP loan if you qualify.
If you have questions, give us a call at (310) 534-5577, or email us at [email protected].
