The latest economic stimulus bill was recently signed by President Biden, with stimulus payments hitting bank accounts as soon as this weekend. Called the American Rescue Plan Act of 2021 (ARPA), the bill extends many provisions of earlier coronavirus legislation and creates some new measures. Here are the tax and financial highlights of the bill:
For Businesses and Employers
Additional Funding for PPP and EIDL. The Paycheck Protection Program (PPP) received an influx of an additional $7.25 billion, however, the current PPP application deadline remains March 31, 2021. Economic Injury Disaster Loans (EIDL) received additional funding of $15 billion and clarification that amounts received for EIDL advances are not includible in gross income.
Employee Retention Credit Extended. The ERTC was set to expire June 30, 2021 but has been extended to December 31, 2021 at the rate of 70% for up to $10,000 in qualified wages for any calendar quarter. The credit limit is the amount of applicable employment taxes on the wages paid to all the employees of an eligible employer for the calendar quarter. Eligible employers include those whose trade or business is fully or partially suspended due to a governmental order or whose gross receipts for the applicable quarter are less than 80% of the gross receipts for the same calendar quarter in 2019.
Paid Sick and Family Leave Enhancements. Businesses who choose to offer coronavirus-related paid sick and family leave benefits can continue to receive a tax credit for such leave through September 30, 2021, continuing the provisions of the Families First Coronavirus Relief Act (FFCRA) with a few modifications:
- The credit limit is increased to $12,000 rather than $10,000
- FFCRA credits after March 31, 2021 can only be recovered through the employer’s portion of Medicare (1.45%)
- The number of days allowed for FFCRA leave will reset after March 31, 2021 (10 days/80 hours are allowed for paid sick leave and 10 weeks for family leave)
- Paid leave will be allowed for time off due to a COVID-19 vaccination and recovery. The paid family leave has also been expanded to cover the reasons included under the previous employer mandate for paid sick leave.
Providing paid leave is optional and not required. Employers can claim FFCRA credits as an offset against payroll tax deposits made throughout the year and reconciled on quarterly payroll tax reports.
The ARPA also expands paid sick leave provisions to include self-employed individuals beginning January 1, 2021.
Restaurant Revitalization Fund. This newly-created program awards nontaxable grants to restaurants experiencing pandemic-related revenue losses. Organizations with up to 20 locations are eligible. Grants will be awarded based on the difference between 2020 and 2019 revenue amounts, up to $5 million per location and $10 million per company. In the first 21 days of the program, grants will be prioritized for restaurants owned and controlled by women, veterans, or socially and economically disadvantaged individuals.
Third Round of Economic Stimulus Payments. Depending on income limitations, each taxpayer will receive up to $1,400 per person, with an additional $1,400 per dependent. This means a family of 4 can expect to receive up to $5,600. Payments are phased out at the following income levels:
- Single – Full amount up to AGI of $75,000, completely phased out at AGI of $80,000
- Married Filing Jointly – Full amount up to AGI of $150,000, completely phased out at $160,000
- Head of Household – Full amount up to AGI of $112,500, completely phased out at $120,000
Increased Child Tax Credit. Eligible taxpayers can receive a child tax credit of up to $3,600 for each child under age 6 and $3,000 for each child age 6-17. The credit is fully refundable and will be paid out monthly between July and December 2021, with the remaining half of the credit to be claimed on the taxpayer’s 2021 tax filing. The credit is reduced for single taxpayers with AGI over $75,000, joint filers with AGI over $150,000 and head of household filers with AGI over $112,500.
Dependent Care Assistance Amount Increased. For the 2021 tax year, the amount of wages that can be excluded for dependent care benefits is increased from $5,000 to $10,500 for married couples filing jointly ($5,250 for married couples filing separately).
Expanded Unemployment Compensation. The biggest news here is that the first $10,200 in unemployment payments is now nontaxable for individuals with AGI less than $150,000, which may affect 2020 tax returns for those who received unemployment last year. If that’s your situation and you’ve already filed your 2020 tax return, you’ll want to amend it to take advantage of this new provision.
The current $300/week enhanced unemployment compensation has now been extended until September 6, 2021.
As new details emerge about the provisions in this legislation, we’ll continue to keep you updated. Please contact us to discuss questions related to your personal or business situation.