New Federal Stimulus Package Brings Significant Tax Changes and Extensions for Small Businesses
The latest round of federal stimulus introduces a variety of tax changes and extensions, many of which are poised to significantly impact small businesses. This new legislation aims to provide additional financial relief and support to businesses still recovering from the economic effects of the COVID-19 pandemic. Key provisions include clarity on the deductibility of PPP loans, increased deductibility of business meal expenses, and the expansion of the employee retention tax credit.
Key Tax Changes and Extensions:
1. Clarity on PPP Deductibility:
One of the most anticipated clarifications in the new stimulus package concerns the deductibility of expenses paid with PPP loan proceeds. Under the latest provisions, businesses can now deduct expenses paid for with PPP funds, even if the loan is forgiven. This update resolves previous uncertainties and aligns with the overall intent of the PPP to provide comprehensive financial support to small businesses.
2. Increased Deductibility of Business Meal Expenses in Federal Stimulus:
To further support businesses, the new legislation increases the deductibility of business meal expenses from 50% to 100% for expenses incurred in 2021 and 2022. This change is designed to help the restaurant industry, which has been particularly hard hit by the pandemic, by encouraging businesses to increase spending on meals and entertainment.
3. Expansion of the Employee Retention Tax Credit (ERTC):
The employee retention tax credit has been expanded to provide more substantial support to businesses retaining their employees during the pandemic. The new provisions increase the credit rate from 50% to 70% of qualified wages and raise the limit on per-employee creditable wages from $10,000 per year to $10,000 per quarter. Additionally, the eligibility criteria have been broadened, allowing more businesses to benefit from this tax credit.
These tax changes and extensions are part of the broader effort to provide sustained financial relief and stimulate economic recovery for small businesses across the country. By offering greater clarity and enhanced benefits, the latest stimulus package aims to help businesses manage their expenses more effectively and retain their workforce during these challenging times.
For more detailed information on these important tax changes and how they may affect your business, please see our latest Client Alert. At Gesmer Updegrove LLP, we are dedicated to keeping our clients informed about significant legislative developments and providing expert guidance to navigate these evolving challenges. Do not hesitate to contact our team for personalized advice and support tailored to your business needs.