Form 941 – added clarification

The note added and attached to Form 941 and its instructions clarifies that, to claim the employee retention credit, employers that paid qualified wages during the period from March 13, 2020, through March 31, 2020, are to include 50% of those wages together with 50% of any qualified wages paid during the second quarter of 2020 on the employer’s second quarter Form 941, Form 941-SS or Form 941-PR.* The release explicitly states that employers are not to include the credit on the first quarter Form 941, Form 941-SS or Form 941-PR.

_{*Form 941-SS is used to report social security and Medicare taxes for workers in American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands. Form 941-PR is used by employers in Puerto Rico to report income taxes, social security tax, or Medicare tax withheld from employees’ paychecks and to pay the employer’s portion of social security or Medicare tax.}
 

CARES Act – Employee retention credit

The employee retention credit was established as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. No. 116-136) signed into law by the president on March 27, 2020.

The employee retention credit allows a refundable tax credit equal to 50% of qualified wages (including qualified health plan expenses) paid

corresponding taxes imposed on railroad employers.

• Eligible employers: The credit is generally available to employers that carry on a trade or business during calendar year 2020 that either: (1) is fully or partially suspended due to orders from a governmental authority limiting commerce, travel, or group meetings due to COVID-19; or (2) has a significant decline in gross receipts (i.e., gross receipts for a calendar quarter are less than 50% of gross receipts for the same quarter in the prior year).
• Qualified wages: For employers that averaged more than 100 full-time employees in 2019, qualified wages includes wages paid to employees for time that they are not providing services due to one of the two reasons described above—full or partial suspension, or significant decline in gross receipts. For eligible employers with an average of 100 or fewer full-time employees in 2019, qualified wages includes wages paid to any employee during one of these periods.
• Effective dates: The credit applies with respect to qualified wages paid from March 13, 2020, through December 31, 2020.

Observation

Additional considerations and limitations on the ability to claim the employee retention credit may apply. Employers that may be eligible to claim the employee retention credit need to consider the criteria for eligibility and measuring qualified wages, as well as how to properly report and claim the credit.

By KPMG

SBA Economic Injury Disaster Loan is now based on a two step application process.
Phase 1 (Grant Application)

• Most small businesses can apply with SBA for a grant of up to $10,000, which is supposed to be directly deposited to the bank account in 3 business days.
• However, due to the massive amount of demand (950,000 applications and counting, as of 3/31/2020), SBA staff is saying it might take 7-10 business days.
• This grant will most likely be counted towards the Payroll Protection Program (PPP) and will reduce the amount available under PPP (please see below). Basically, SBA is trying to prevent “double dipping” on funds received from the government.
• However, the grant is much faster to obtain vs. PPP since the latter is not live yet. Also, whether you receive the grant through EIDL or PPP, it serves the same purpose of covering payroll.
• Once SBA releases the up to $10,000 grant, SBA will contact you for further information and to proceed to Phase 2 of the EIDL process.

Phase 2 (Disaster Loan Application)

• Here is where SBA will request for additional documentation in order to qualify for the full EIDL, such as:
• Signed EIDL Application (Form 5)
• Personal Financial Statement (Form 159D)
• Schedule of Liabilities (Form 2202)
• Request for Tax Return Transcript (Form 4506-T)
• EIDL Supporting Information (P-019)
• This process is normally 1-2 weeks but SBA now says it might take up to 3-4 weeks.
• There is a small chance that SBA may streamline this process but it is unclear at the moment.
• This loan, if approved, allows for the following terms:
• Length of the loan can be up to 30 years
• APR will be 3.75% for small businesses
• Amount allowed will be up to $2 million

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