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:
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.
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).
- 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.
Dec 30, 2020
Tuesday afternoon, U.S Treasury Secretary Steven Mnuchin took to social media announcing the disbursement timeline for the second round of stimulus checks. He noted the following:
- Direct Deposit – Individuals who have direct deposit set up with the IRS can start looking for their second stimulus payments as early as last evening (12/29) and continue into next week.
- Paper Checks – The IRS will begin sending out paper checks today, Wednesday (12/30/20), which means people should begin receiving those checks within the next two weeks.*
- Status of Payment – Mnuchin also stated later this week, you can check the status of your payment here
*To speed up delivery, a limited number of people will receive their second stimulus payment by debit card. But the form of payment for your second stimulus check may be different than your first payment. Some people who received a paper check last time might receive a debit card this time, and some people who received a debit card last time could receive a paper check. The pre-paid cards will come in white envelopes that “prominently displays the U.S. Department of the Treasury seal,” the IRS said. The card will bear the Visa name on the front and the name of the issuing bank, MetaBank, will be on the card’s back. The information included with the card will explain that this is your Economic Impact Payment. There’s more information on the pre-paid cards here.
While Congress remains in discussion about an increase to a $2,000 stimulus amount, what we know for now is:
- As it currently stands, the checks will be for $600 for eligible adults, and $600 per dependent, meaning a family of four could receive $2,400.
- Individuals who earned less than $75,000 and those married filing jointly who earned less than $150,000 in 2019 are eligible for the full amount.
- Those who made more are eligible for reduced stimulus checks at a rate of $5 per $100 of additional income.
- The checks phase out completely for individuals that earned $87,000 and couples that made $174,000 in 2019.
If you have questions regarding your stimulus check, please contact your William Vaughan Company advisor or contact us at 419.891.1040. We’d be happy to help!
Dec 28, 2020
The recent bill passed by Congress (Consolidated Appropriations Act [CAA]) finally became law after being signed by President Trump on Sunday, December 27th. It was feared disagreements over individual stimulus amounts and other various provisions deemed “wasteful spending” by the President would lead to a stalemate and ultimately to a pocket veto and subsequent death of the bill. Cooler heads prevailed, however, with businesses and individuals getting another financial shot in the arm. Below is a summary of the major highlights from the 5,600+ page law and the tax implications therein.
Individual Taxpayer Provisions
First and foremost, on the mind of most individuals impacted by COVID-19 are the second wave of stimulus payments and the unemployment benefits extension. Individuals will each be receiving a stimulus check in the amount of $600* ($1,200 per couple) as well as $600 per dependent child, e.g., a family of four will receive $2,400. These benefits will begin to phase-out when AGI reaches $75,000 ($150,000 for couples filing jointly) at a rate of $5 per $100 in excess of AGI thresholds. As with the first round of stimulus, these checks will be tax-free and will likely be reported as advance payment of credits on each taxpayer’s 1040.
*President Trump pushed back on this bill and advocated for stimulus checks of $2,000 per individual but staunch opposition from the Senate tabled these suggestions for what could be yet another stimulus under the next administration.
In addition to the $600 stimulus checks, Congress voted to extend the federal unemployment supplement albeit at a reduced rate of $300 per week (down from $600 under the CARES Act) through March 14, 2021. Along with the unemployment subsidy comes extensions of the Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) programs as well.
Further notable tax provisions as they relate to individuals are as follows:
- Special charitable contribution deductions for non-itemizers of $300 ($600 for married filing joint returns) for the 2021 tax year
- Extended suspension of the 60% charitable contribution limitation through 2021
- Extended deferral period for employee’s share of Social Security tax to December 31, 2021
- Permanent extension of the reduced medical expense deduction floor (7.5% of AGI)
- Ability for lower-income individuals to use 2019 earned income to calculate earned income tax credit and a refundable portion of the child tax credit (helps those who had lower earned income in 2020 due to COVID-19 receive potentially larger refunds)
- Permits rollover of unused amounts in health and dependent care flexible spending arrangements
Business Taxpayer Provisions
The biggest provision of the Consolidated Appropriations Act, 2021 in the business arena was the decision to reverse the IRS position regarding the deductibility of expenses used for PPP loan forgiveness as well as a second wave of PPP loans. Details of these provisions can be found in our recent blog post here. For the purpose of this post, we will address the other main tax provisions for businesses found in the CAA.
The existing Employee Retention Tax Credit (ERTC) was modified retroactive to the beginning of the CARES Act. Before the passage of the CAA, businesses had to choose whether they would take advantage of PPP loan forgiveness OR claim the ERTC. Now, for 2020, businesses can request forgiveness of their PPP loans AND claim the ERTC. Provisions in the law state wages paid for with PPP loan proceeds cannot be used in calculating the ERTC in order to prevent double-dipping but for businesses with enough wages and other expenses to qualify for both, that option now exists. For 2020, the ERTC calculation is the same. The credit is capped at 50% of $10,000 of wages per employee for the year.
The law also provides for an extension of the ERTC into 2021 which increases the credit available to 70% of wages up to $10,000 per employee per calendar quarter. In addition, it raises the number of employees counted when determining relevant qualified wages from 100 to 500, reduces required year-over-year decrease in gross receipts from 50% to 20%, and clarifies that group health plan costs can be considered qualified wages EVEN WHEN no other wages are paid.
Other notable business provisions include:
- Extension of Families First Coronavirus Response Act (FFCRA) paid sick leave and expanded FMLA sick leave tax credits through March 31, 2021
- Full expensing of “restaurant” meals purchased in 2021 and 2022 provided other requirements for deductibility are met
- Five-year extension of the Work Opportunity Tax Credit (WOTC)
- Five-year extension of the employer credit for paid family and medical leave
- Extended suspension of the corporate 60% charitable contribution limitation through 2021
Due to the sheer volume of text in the Consolidated Appropriations Act, 2021, it is impossible to capture everything in this post. As always, please contact your William Vaughan adviser to discuss how we can help you navigate the myriad of provisions provided for by this law to best serve you and your business.
By: Jon Floering, CPA