The Families First Coronavirus Relief Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act had profound effects on payroll professionals. Now, as companies begin to close out their 2020 fiscal year and structure their finances for 2021, there is new legislation of which to be aware. The Consolidated Appropriations Act, 2021 (CAA, 2021) that was signed into law by Donald Trump in late December included several payroll-related items, including laws to extend and expand FFCRA and CARES Act provisions. Below are a few ways in which the payroll industry will be impacted by these regulatory changes, according to Thomson Reuters.
FFCRA Family and Medical Leave Credits
In Section 286 of the ACRR (Additional Coronavirus Response and Relief,) the CAA, 2021 extends refundable tax credits to employers who paid leave for employees affected by COVID-19 through March 31, 2021. Previously, this provision was set to expire at the end of 2020.
Section 287 enables self-employed individuals to use their reported 2019 wages to calculate the credit for which they may be eligible this year.
Payroll Tax Deferral Extended
The employee retention credit that we detailed in our previous post here has been extended through December 31, 2021 under Section 274 of the Taxpayer Certainty and Disaster Tax Relief (TCDTR) section of CAA, 2021. The document further clarified that no penalty fees or interest will be assessed for these amounts until January 1, 2022.
Employee Retention Credit Extended and Expanded
The Employee Retention Credit (ERC) have also been extended through June 30, 2021. Additionally, the TCDTR increased the ERC rate from 50% to 70% and lowered the amount of 2019 to 2020 gross receipt decline that was necessary for businesses to qualify. While this was previously set at 50%, the new percentage is only 20%, making many more companies eligible.
Also included were an increase in the creditable wages per employee, which were previously $10,000 per year but are now $10,000 per quarter. It also removed the 30-day wage limitation.
Finally, it allows small businesses (those with fewer than 500 employees) to advance the credit in a quarter based on wages from the corresponding quarter of 2019 and extends eligibility to businesses that were not in operation for part of 2019.
The ACRR reinstated weekly unemployment benefits at the amount of $300 per week until March 14, 2021. Individuals who are receiving benefits at the March 14th deadline may continue to claim them until April 5th as long as they have not already received funds for 50 weeks (the new maximum.) It has also extended the waived waiting period of one week for new claims. Governmental entities and nonprofits will also receive 50% of the costs of unemployment benefits from the federal government.
Also extended were temporary assistance for states with advances, short-term compensation laws, and return to work reporting guidelines.
Paycheck Protection Loans also received some attention in the CAA, 2021, including guidelines for the second PPP loan draw, and confirmation that the second round of loans is forgivable under certain conditions. For more information on all the PPP provisions included, read the Thomson Reuters article here.