The clock is ticking on the massive tax benefit extensions that can help manufacturers save big thanks to The Consolidated Appropriations Act (CAA). Want to learn about the savings your business is eligible for? Let’s review some of the time-sensitive highlights you can take advantage of before time runs out.
PPP Round Two
As RBT has mentioned in previous thought leadership pieces, the CAA expanded and revised the PPP, providing $284 billion for the second round. The “second-draw” opportunity allows eligible businesses with fewer than 300 employees to apply. The maximum second-draw loan amount is $2 million, through March 31, 2021, or until funding is exhausted. Plus according to the new law, expenses paid for with forgiven PPP loans are tax-deductible.
Employee Retention Credit
Under the CARES Act, eligible employers could claim the refundable employee retention credit (ERC) for 50% of the first $10,000 of wages paid to eligible employees from March through December of 2020. The CAA extends the ERC through June 30, 2021, and indicates that employers that receive PPP loans can qualify for the ERC. As of 2021, the new law:
- Increases the maximum credit to $14,000 based on a 70% credit rate for the first $10,000 of qualified wages per quarter, for the first two quarters of 2021
- Increases the number of employees allowed for eligible employer status from 100 to 500
- Makes employers that didn’t exist for all or part of 2019 eligible to claim the credit
Work Opportunity Tax Credit
Hiring workers who fall into certain disadvantaged groups? Be sure to claim the Work Opportunity Tax Credit (WOTC), which offers a maximum of $2,400 per employee (or $9,600 for a disabled veteran). This tax break was scheduled to end after 2020. The CAA extends the WOTC to cover first-year wages paid to qualifying employees who are hired in 2021 through 2025. Here is a list of target groups that qualify you for the WOTC credit.
Employer Credit for Sick and Family Leave Payments to Employees
The Families First Coronavirus Response Act (FFCRA) created an employer tax credit to cover the cost of paying for mandatory paid sick and family leave related to COVID-19. Eligible employers can claim a federal payroll tax credit for 100% of qualified leave payments which offsets the employer’s 6.2% Social Security tax component of the federal payroll (FICA) tax. Initially, it was available from April through December of 2020. As the pandemic continues, the CAA extended the credit through March 31, 2021.
Payroll Tax Deferral
You may remember that because of a 2020 presidential executive order, an employer could choose to postpone payment of the 6.2% Social Security tax component of FICA tax withheld from qualified employee wages of less than $4,000 for a biweekly pay period. Previously, the employer had to deposit the deferred tax amount with the IRS by April 30, 2021, but the CAA now extends the payment deadline for employers to December 31, 2021.
The CAA also creates various other incentives, like extending the increased deduction limit for corporate charitable cash contributions from 10% of taxable income to 25% of taxable income through 2021 and temporarily allowing taxpayers to deduct 100% of the cost of business-related food and/or beverages provided by restaurants in 2021 and 2022. The “provided by” language means this break is available for take-out and sit-down meals. The CAA also includes a provision regarding the H-2B visa program, which permits employers to temporarily hire nonimmigrants to perform non-agricultural labor or services in the United States. There are likely untapped opportunities for your manufacturing company to generate valuable saving if you only know where to look. Need help navigating the complexities of the CAA? It’s what our experts love to do. Contact our team today for a free consultation.