Here’s everything you need to know about changes to the EIDL program including tax benefits for businesses who already received EIDL funds:
The EIDL Advance is a grant program created by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) that allows employers to receive a cash advance of $1,000 per employee up to $10,000. All available funds for the EIDL advance were quickly allocated and many small business owners were crowded out of the program when appropriated funds were expended.
Business owners who missed out on the first round of EIDL advances or who did not qualify for the full $10,000 may now have a second chance at receiving this funding. However, not all business owners will qualify for the EIDL grant due to targeted guidelines directed at getting cash in the hands of small business owners with the greatest need.
Business owners who are located in a low-income community, have suffered an economic loss of greater than 30 percent and employ less than 301 employees are considered eligible for up to the full grant of $10,000.
For purposes of the EIDL program, a low-income community is one that meets the eligibility requirements of the New Market Tax Credit – a program designed to attract private capital into low-income communities through federal income tax credits. There are online tools and maps available that you can use to see if your business falls within these census tracts.
To determine if you have an economic loss of 30 percent or more you have to compare your gross receipts during an 8-week period between March 2, 2020 and December 31, 2021 relative to a comparable 8-week period before March 2, 2020, or during 2019. For example, if you run a restaurant and your sales during October through November 2020 are more than 30% less than October through November 2019, due to restrictions on indoor dining you would have been considered to have sustained an economic loss.
If you meet all the above requirements but already received a partial EIDL grant then you may be eligible to receive additional funds for the difference between $10,000 and the previous amount you received. Applications will be processed on a first come first served basis with business owners who didn’t receive any funds receiving the highest priority.
If you’re a business owner who already received your $10,000 EIDL grant then you’re not eligible for additional EIDL grant money. However, there are a few goodies in the new legislation that will save you some money come tax time.
For starters, the proposed legislation repeals the EIDL advance deduction from PPP loan forgiveness amounts. Previously, borrowers who received PPP loan forgiveness were required to deduct any EIDL Advances from their PPP forgiveness application. Additionally, the proposed changes would make the EIDL grants non-taxable and the expenses paid with such funds tax deductible. These changes are applicable for current and previous recipients of EIDL grants.
You must apply directly with the Small Business Administration (SBA) through their on-line website. You will be asked various questions to determine if you qualify.
If you’re looking to apply for an EIDL grant or want to make sure your EIDL grant is not mistakenly reported as income then you want to speak with your tax advisor before the new year. Here at Withum we specialize in COVID related tax relief from payroll tax credits to PPP Loan forgiveness.
Authors: Jeremias Ramos | firstname.lastname@example.org