Everything You Need to Consider About the Advance Child Tax Credit Payments

Jul 16, 2021

As we are heading into the second half of 2021, individuals are now starting to receive their advance Child Tax Credits payments as a result of President Biden’s American Rescue Plan. The law, signed in March, increases the overall child tax credit, expands it to include children turning 17 this year, and adds another annual $600 benefit per child under six years old. While the advance payment on the credit may be a welcomed windfall, there are some important aspects of this tax credit individuals should be aware of when receiving these payments.

Receiving Payments
Individuals with dependent children started receiving monthly payments on July 15th which are estimated to total half of the amount of their estimated 2021 Child Tax Credit. The other half of the Child Tax Credit will be received when the 2021 Tax Return is filed in 2022. Individuals are required to reconcile the payments received on their 2021 Tax Return so they should keep track of the payments received throughout the year and include that information with their tax documents.

Overpayment
If an individual receives more than what is due to them, they will be required to pay back the difference. This differs from the stimulus payments, where individuals were allowed to keep the additional funds. This primarily applies to those with a dramatic increase in income during 2021. An example of this scenario:

  • If your income level qualified you to receive additional Child Tax Credits in 2020, and your new income level in 2021 does not, you will have to pay back the money received in regards to the additional Child Tax Credit you no longer qualify for.

Increase in Tax Due
The advance child tax credit received will be in lieu of claiming the tax credit on the 2021 income tax return. Since half of this credit will be received by the time the 2021 income tax return will be due, the amount of the child tax credit will be halved on the 2021 Return. This means that there will be fewer credits to offset against the tax due, which may cause a higher-than-normal tax due, or decrease the potential refund some are used to receiving. This holds especially true for those with a dramatic increase in income for 2021.

Opting Out of Advanced Payments
If taxpayers do not wish to receive the advanced payments of the Child Tax Credit, they can elect out of them. Typical reasons for opting out of the advanced payment are as follows:

  • An individual normally has a balance due to the IRS after filing their taxes
  • An individual doesn’t claim a dependent every year due to shared custody arrangements
  • An individual’s dependent(s) is(are) aging out of the range of the credit
  • An individual prefers having a large tax refund

Anyone wishing to elect out of the advanced payments, you may do so by clicking this link and following the instructions provided.

Changing Bank Account Information
If taxpayers would like to learn how to change/update their banking or direct deposit information, click here.

New IRS Portal
The IRS is currently developing a portal in which a user can enter updated information impacting the amount of payment an individual will receive. A user can do all of the following in this portal:

  • Update marital status
  • Enter in children born in 2021
  • Re-enrollment into the Child Tax Credit if you were previously unenrolled
  • Adjust your income for the calculation of the Child Tax Credit

As previously stated, this portal is still in development but the IRS is looking to release this portal in the coming months. Reach out to your WVC professional for questions on your specific situation.

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Categories: Tax Planning

Restaurant Revitalization Fund – Updated 4/1/21

Apr 01, 2021

The Restaurant Revitalization Fund (RRF) which provides federal grants to the hardest hit sector of the economy during COVID-19 is about to become a reality. President Biden is expected to sign a $1.9 trillion relief package, the American Rescue Plan today. As part of this plan $28.6 billion has been allocated to small and mid-sized restaurants for The Restaurant Revitalization Fund.

What is this new program?

The Restaurant Revitalization Fund allows eligible businesses to receive grants equal to their pandemic-related revenue loss, with a maximum of $10 million per business entity, or $5 million per physical location. How much you receive depends on the revenue your business lost due to the pandemic and if it received a PPP loan.

Businesses that were established before January 1, 2019, can calculate their grant amount by subtracting your 2020 gross receipts from your 2019 gross receipts. Businesses that were established during 2019 can receive a grant equal to the difference between:

  • Average monthly 2019 gross receipts, multiplied by 12
  • Average monthly 2020 gross receipts, multiplied by 12

Businesses that were established on or after January 1, 2020, can receive a grant equal to eligible payroll expenses, minus gross receipts from that year.

Who is eligible?

Eligible businesses include any location where patrons gather for the purposes of being served food and beverages: restaurants, bars, caterers, lounges, inns, taverns, saloons, brew pups, taprooms, tasting rooms, food trucks, food carts, or food stands.

Who is not eligible?

  • Restaurant chains that, together with affiliated businesses, own or operate more than 20 locations as of March 13, 2020
  • Restaurants that have a pending application for or have received a grant for shuttered venue operations
  • Publicly-traded companies, or
  • State or local government-operated businesses.

What can the grant funds be used for?

  • Payroll costs
  • Rent payments (excluding pre-payments)
  • Utilities
  • Principal and interest payments on a mortgage (excluding pre-payments)
  • Maintenance expenses including construction to accommodate outdoor seating and walls, floods, deck surfaces, furniture and fixtures, and equipment
  • Supplies (including PPE)
  • Food and beverage expenses
  • Covered supplier costs
  • Operational expenses
  • Paid sick leave
  • Any other expenses that the SBA deems essential to maintaining the eligible business

How and when can you apply for the grant?

Much like the Paycheck Protection Program, the Restaurant Revitalization Fund grants will be distributed by the Small Business Administration. Applications will be available on their website in the coming days. During the first 21 days of the fund launching, the SBA will give priority to restaurants owned and operated by veterans, women, or socially and economically disadvantaged individuals. If after 60 days, the funds have been exhausted, the SBA will have the discretion to administer grants to eligible businesses without regard to annual gross receipts.

Updates:

4/1/2021

During a Senate Small Business Committee hearing, senior SBA official Patrick Kelley confirmed the U.S. Small Business Administration (SBA) is targeting early April to launch a phased rollout of the $28.6 billion Restaurant Revitalization Fund (RRF). In addition, state restaurant associations have been meeting with Congressional leaders to learn more about details regarding applications, etc.

Key updates resulting from these  meetings include:

  • SBA will likely start posting relevant qualifications, instructions, and other information for restaurant operators over the next 7-10 days and give guidance on supporting documents needed to apply
  • SBA will open applications in April
  • SBA is currently planning the whole process will take place over the next 30-45 days
  • SBA also confirmed applicants for the  Fund program will not need to register for a DUNS number or on SAM.gov.
  • The process is slow on account that the SBA has to build a technology platform from scratch with the capability of dealing with the crush of applications and likely automating the process so it’s as efficient as possible. Once it’s up and running, the grants will function like direct payments to the applicants. The SBA is also in talks with third-party POS vendors to discuss accessing relevant sales data needed for application processing

We will continue to provide updates as the SBA releases additional guidance. Please check back periodically as we will post updates here.

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Kristin Metzger, CPA

Restaurant Practice Leader

kristin.metzger@wvco.com | 419.891.1040

Categories: COVID-19, Restaurant & Hospitality

How to Prepare For the Restaurant Revitalization Fund Opening

Mar 24, 2021

This story was updated on 4/1/21 to reflect a potential change in SBA requirements for the Restaurant Revitalization Fund (RRF). Restaurants will not be required to acquire a System of Award Management (SAM) number nor a D-U-N-S number as previously thought.

In a previous post, we examined the Restaurant Revitalization Fund (RRF) under the American Rescue Plan and outlined the program details, eligibility, and the qualifying uses for the funds. With more than $20 billion available for restaurant businesses of different sizes, we anticipate a high demand for RRF grants.

As the restaurant industry patiently awaits further guidance from the Small Business Administration (SBA), there are steps restaurant owners can take now to best prepare for the opening of the fund. We encourage you to take action now by:

Gathering your paperwork – Finally, you should begin compiling your receipts and financial statements to show your 2019 and 2020 revenues.

Unfortunately, as of the date of this advisory, the SBA’s application process is not yet open. Nonetheless, we expect the application to be available on the SBA’s website, and, once available, applications will be submitted directly through the SBA. It is important to keep in mind not everyone who applies for an RRF grant will receive funds. Much like the first round of PPP, funds will go fast. We highly recommend you take the steps above to best position your restaurant. If you have questions or need help, we are here!

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Kristin Metzger, CPA
Restaurant Practice Leader
kristin.metzger@wvco.com | 419.891.1040

Categories: COVID-19, Restaurant & Hospitality

$1.9 trillion American Rescue Plan Relief Bill Signed Into Law

Mar 11, 2021

Today, President Biden signed into law the American Rescue Plan, a $1.9 trillion stimulus package that allocates federal funding to a variety of matters, including aid for vaccinations and testing, state and local governments, schools, rental assistance, restaurants, and the airline industry. It also includes several tax-related provisions and additional business relief.

Here are some of the key individuals and businesses provisions:

Individuals

Stimulus Checks – Funding has been allocated for a third round of stimulus checks. Notable changes include the income cutoff at which payments phase out from $100,000 to $80,000 for individuals and $200,000 to $160,000 for couples filing jointly. Those who qualify will receive the full direct payment of $1,400 per person. Individuals will also receive an additional $1,400 payment for each dependent claimed on their tax returns. Dependents over the age of 17 and qualifying relatives who are claimed as dependents also now qualify.

Unemployment Benefits – Unemployment benefits previously set to expire on March 14 have now been extended almost 6 months to September 6, 2021. In addition, recipients will receive an extra $300 per week through the fall deadline along with making the first $10,200 of benefit payment nontaxable for households with incomed below $150,000. The 10,200 exclusion only applies to benefits received last year, 2020.

Child Tax Credit – A temporary expansion of the existing child tax credit with significant adjustments including those noted below.

  • 17-year-old- children are now able to qualify.
  • Increase of the credit to $3,000 per child ages 6 to 17 or $3,600 per child under the age of 6
  • Removal of the $2,500 earning floor
  • Credit is now fully refundable
  • A 50% credit advancement by the IRS paid in periodic payment from July 2021 to December 2021

Low-Income Support – In an effort to target low-income families afflicted by the pandemic, $4.5 billion has been set aside for the Low Income Home Energy Assistance Program, or LIHEAP, to help families with home heating and cooling costs.

Businesses

Employee Retention Tax Credit (ERTC) – The expanded ERTC provisions under the Consolidated Appropriations Act (CAA) were set to expire on July 1 which has now been extended through December 31, 2021, for eligible employers. In addition, eligibility has been expanded to include start-up businesses established after February 15, 2020, with annual gross receipts of up to $1 million.

Paycheck Protection Program (PPP) – Provides an additional $7.25 billion for the Paycheck Protection Program (PPP) and expands eligibility to include nonprofit entities. Importantly, eligible nonprofit organizations would now qualify for a PPP loan as long as they employ not more than 500 employees per physical location (300 per physical location for Second Draw loans) and meet all other criteria.

Economic Injury Disaster Loan (EIDL) – The new law also includes an additional $15 billion in funding for targeted EIDL advances. One-third of this EIDL funding is earmarked for businesses that suffered a revenue loss of greater than 50 percent and employ fewer than 10 people.

Families First Coronavirus Response Act (FFCRA) Paid Leave Credits – The new law also extends these tax credit provisions through September 30, 2021. However, adjustments have been made for wages paid between April 1, 2021, and September 30, 2021, including increasing eligible wages to $12,000 per employee (up from $10,000 in 2020), expanding types of leave to include vaccination, and covering as many as 60 days of paid family leave for self-employed individuals (instead of 50 days under previous law).

Industry-Specific Funding

  • Restaurants – A $25 billion Restaurant Revitalization Fund has been established for 2021. Grant amounts will be limited to a restaurant’s pandemic-related revenue loss (measured as the difference in gross receipts in 2020 compared to 2019) up to $10 million and limited to $5 million per physical location. For more details on this U.S. Small Business Administration (SBA) administered program, check out our blog.

Categories: COVID-19