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HFA Reports: PPP Tax Implications

Furniture World Magazine
Volume 151 NO.2 March/April


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Content about HFA member-retailers contributed by HFA.

The 100 percent forgivable Paycheck Protection Program (PPP) loans established by Congress in the CARES Act back in March 2020 have received high fanfare and subscription rates among furniture retailers. These PPP funds have been life-saving for many furniture retailers and other businesses across the country. In addition to loan/grant programs, Congress has enacted several tax policy changes that could benefit furniture retailers.

Employee Retention & Rehiring Tax Credit

The tax implications for the Employee Retention and Rehiring Tax Credit could have the most potential for furniture retailers. Originally created by the CARES Act, the Employee Retention Tax Credit (renamed in December 2020) was attractive but put businesses in a position to choose between either the tax credit or a PPP loan. Most borrowers chose the PPP given the forgivable component.

The revisions to the credit in December 2020 make it even more flexible and promising while also allowing businesses to take BOTH a PPP loan and this tax credit.

Revisions to the credit in December 2020 made it even more flexible and promising while also allowing businesses to take BOTH a PPP loan and this tax credit. The credit has been extended through June 30, 2021. To qualify for it, your business must have fewer than 500 employees (it was 100 in 2020). You also must have been forced to at least partially suspend business operations due to COVID-19 or had a 20 percent revenue decline in any quarter compared with the same quarter of 2019. The business closure requirement is likely more difficult to meet in 2021, but the revenue decline test is more ‘generous’ as the threshold in 2020 was a 50 percent revenue decline compared to the similar quarter in 2019. If you meet the criteria above, you are entitled to a tax credit equal to 70 percent of each employee’s wages, including health insurance, up to $10,000 per quarter (total value of the credit per employee through June 30, 2021, would be $14,000).

While you are eligible to receive the credit and a PPP loan, the credit does not apply to any wages covered by PPP loan proceeds (no double-dipping). We suggest speaking with your accountant or tax specialist about these changes because this has become another viable tax credit for furniture retailers as we recover from COVID-19.

Coronavirus Response Act

The Families First Coronavirus Response Act required employers with less than 500 employees to pay employees forced to miss work due to COVID-19. Joined with the requirement was a refundable tax credit from the federal government to offset the cost. While the requirement expired on December 31, 2020, Congress did extend the refundable tax credit for those employers still paying employees not working due to COVID-19. This credit was extended through March 31, 2021.

Employers who elected this provision will need to repay those taxes in two installments— half due by December 31, 2021, the other half due by December 31, 2022.

Employee Payroll Tax Deferral

There was a robust debate throughout the pandemic on the merits of a payroll tax deferral for the employee portion of Social Security taxes—something pushed by President Trump but not embraced in Congress. Ultimately, an Executive Order allowed employers to withhold this tax with a window in early 2021 to pay back into that withholding. While the broader payroll tax deferral policies have not been extended, Congress did extend the period for the withholding to be paid back from April 30, 2021, to December 31, 2021.

The employer side of the payroll tax deferral, granted by Congress in the CARES Act, was not extended. Employers who elected to take advantage of this provision will need to repay those taxes in two installments—half due by December 31, 2021, the other half due by December 31, 2022.

HFA will continue to advocate for reliable and flexible funding options for furniture retailers as we confront the ongoing challenges from COVID-19.

About Chris Anderssen: Chris Anderssen, Sr. VP, Dutko GR, is the Home Furnishings Association's Government Relations Liaison. For more information on what HFA is doing to empower furniture retailers for continued success, join the community https://myhfa.org/.

A  feature about Home Furnishings Association's retail members, legislation affecting the furniture industry and other retail news from HFA.

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