How the $1.9 trillion stimulus bill impacts employers

A lot has been said about the $1.9 trillion stimulus bill. Some love the so-called “American Rescue Plan,” while others mock it as a “Blue State Bailout.”

The $1.9 trillion stimulus bill, also known as the American Rescue Plan has passed into law. But if you're a small business owner, you don't have the time (nor the patience) for political posturing. All you want to know is how the bill impacts your business and employees.

The bill, to be sure, is massive and complex, but we’re here to help you understand its implications on your business. 

Employee Retention Credit

Included in the bill is the expansion of the Employee Retention Credit through the end of 2021. The retention credit is essentially a refundable tax credit to encourage businesses to keep employees on the payroll. The measure grants a refund on 50% of qualified wages, up to $10,000, to employers financially impacted by COVID-19 and government-ordered shutdowns.

As part of the expansion of the credit, businesses started after February 15, 2020 are now eligible, as well as companies that had a revenue decline of 90% year over year. 

The bottom line is that if you saw a reduction in finances but kept your employees, you may be eligible for a substantial tax credit.

Paid sick leave credits

The new bill also extends tax credits for paid sick and family leave provided by employers. Now the paid sick leave credit continues to Sept 30, 2021.

The paid leave credit also increases wages covered from $10,000 to $12,000 per worker, covers up to 60 days of paid family leave for self-employed individuals and expands paid leave credits to cover lost time for COVID-19 vaccines and test result waiting time.

The bottom line is that if you pay for family leave, your potential tax credits have increased. 

EIDL small business loans

Under the bill, funds provided through the SBA and restaurant grants are now excluded from a business's gross income. 

The measure provides $15 billion for advanced payments to eligible groups under the SBA’s Economic Injury Disaster Loan program. The $15 billion would be set aside for various groups, including businesses with 300 or fewer employees.

Essentially, come tax season, you will not claim funds provided through a few different sources as income, which should reduce your tax burden.

The Paycheck Protection Program

The Paycheck Protection Program, a popular option for many businesses, has also been extended and enlarged. Lending totals have increased, more tax-exempt groups are eligible, and larger non-profits are eligible as well. Certain news publishers are now eligible, and loan forgiveness has expanded.

These changes maintain PPP loans, used by many businesses throughout the past year, allowing them to maintain operations while keeping people employed.

Restaurant Relief

One of the most important additions to the new stimulus bill is the Restaurant Revitalization Fund.

Because of COVID-19 restrictions, the restaurant business has been one of the hardest-hit industries over the past year. But the new bill hopes to improve the industry by providing $28.6 billion in relief funds.

This money will be issued as grants and aims to get restaurants back on their feet. Eligible businesses include restaurants, bars, caterers, food trucks, tribal-owned entities, and other types of food-service establishments. 

The grant amounts will cover the differences between 2019 revenues compared to 2020. For example, if a restaurant earned $500,000 in 2019 and only $200,000 in 2020, that business may be eligible for $200,000 in grant funds. This amount will be reduced, however, by the amount received through PPP loans. So, in the scenario above, if you received $100,000 through the PPP, you would only be eligible for another $100,000.

We encourage you to learn as much as you can about what's included in the new bill and be sure to take full advantage of all credits and loans you may qualify for. 

Note: This article is for entertainment and general information only, and should not be taken as financial or tax advice. This article represents our best analysis of the new bill, but we are NOT tax or financial professionals. Always check with a qualified expert before making any decisions.