Over two years ago, the first round of economic relief became available to employers and employees suffering from the consequences of the COVID-19 pandemic.  In the twenty-four months that followed, multiple laws were enacted and much regulatory guidance was published.  Questions remain unanswered, and businesses are trying to navigate what relief may still be available, as well as what reporting and audit requirements still remain.

Payroll dollars used to compensate employees in 2020 and 2021 are the key to unlocking savings and enhancing value in these programs. Look at payroll as a commodity, along with the investment in your workforce and accounting of that money, to drive the total benefit.

Amend your tax return to claim FFCRA credits

The Families First Coronavirus Response Act (FFCRA) required employers with fewer than 500 employees to pay wages to employees who were quarantining under doctor’s orders or who were caring for a dependent or a member of their household that was impacted by COVID-19.

For employers who paid emergency paid sick leave and emergency family medical leave wages to eligible employees, a dollar-for-dollar credit was provided, with some limits, through the end of 2020. Legislation that followed, including the Consolidated Appropriations Act, 2021 (CAA) and the American Rescue Plan Act of 2021, extended the availability of the credit without extending the obligation for employers to pay.

Employers who paid these wages from March 2020 through the third quarter of 2021 may still amend their payroll tax returns to claim the credit. The deadline to file the claim is three years from the original due date of the return. These credits must be claimed as income in the year for which the credit was generated.

Reconsider eligible expenses for PPP loans

The CARES Act provided a low-interest, potentially forgivable payroll loan to employers who met certain criteria, and the CAA provided a second round of payroll funding to employers who retained employees and incurred certain costs to remain in business. The Small Business Administration regulated this program heavily, from the application for funds and borrower eligibility criteria to the forgiveness considerations.

Although the funds allocated to this program are exhausted, several employers who have not yet completed the forgiveness application and process should consider the expanded list of eligible expenses outside of payroll. To enhance other economic relief programs created by the legislation, include all possible non-payroll costs in the forgiveness application.

Amend your return to claim ERC and watch for future expansion

In 2020, businesses could qualify for the Employee Retention Credit (ERC) with a significant decline in gross receipts, or a full or partial suspension of operations due to a government order. By the end of 2021, businesses could qualify as a recovery start-up business, if the business was started subsequent to February 15, 2020, and had less than an average $1 million in receipts in each of the prior three years (considering aggregation with certain related parties). In the last instance, the credit was capped at $50,000 per quarter.

Similar to FFCRA credits, employers have three years from the deadline of the quarterly returns to amend their payroll tax returns to claim the ERC. If you claim these credits, you must reduce the income tax deduction for payroll expenses by the amount of the credit in the year for which the credit was generated.

Employers are still watching for legislation that would call for the reinstatement of the credit for the fourth quarter of 2021. Should such legislation be enacted, working with your tax advisor to file Forms 941-X may allow you to claim the credit to the extent that eligibility applies.

As of now, many employers are waiting to receive their requested refunds. The IRS has stated that the waiting period can be as long as a year and has asked for patience.

What is the status of RRF, SVOG, and EIDL?

The extra relief provided by the Restaurant Revitalization Fund (RRF), Shuttered Venue Operators Grant (SVOG), and Economic Injury and Disaster Loan (EIDL) programs is no longer available. However, in many cases, EIDL applications are still being processed.

Keep in mind that the funding from these programs do not need to be included in the gross receipts calculation for eligibility determinations for the ERC program. That said, they are still required to be accounted for in the financial statements and tax return filings.

How we can help

As economic relief programs wind down and begin to be reviewed by administrative agencies, new rules will apply to eligibility and reporting situations.  Our professionals can help you evaluate your options and help you make informed decisions.

This article first appeared on CLAconnect.com as “Outstanding FAQs: Economic Relief in 2022.”  Excellent work as always by our Business Incentives Consulting Practice Leader Jennifer Rohen !