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The House of Representatives approved another coronavirus relief bill on March 10, 2021, the American Rescue Plan Act of 2021. The passing of the $1.9 trillion bill comes on the heels of a long and close vote in the Senate last week. The new bill, expected to be signed into law by President Biden before week’s end, includes provisions for stimulus payments, extended employment benefits, additional small business funding and much more.
Here are the key provisions directly impacting businesses and individuals.
Paycheck Protection Program (PPP) Funding: More than an additional $7 billion in PPP funding will be made available for small businesses. Non-profits with less than 500 employees per physical location are now eligible for the program’s loans, where previously they only qualified with less than 300 employees per physical location.
COVID-19 Tax Relief Treatment: Under the bill, Targeted Economic Injury Disaster Loans (EIDL) and Restaurant Revitalization Grants received will not be subject to the income tax. Furthermore, the exclusion will not result in the denial of a deduction reduction of tax attributes or denial of increase in basis.
Employee Retention Credit: The refundable tax credit against an employer’s share of Social Security tax equal to 70% of qualified wages will now be available through Dec. 31, 2021. Originally, this credit was extended by the Consolidated Appropriations Act until June 30, 2021.
Paid Sick and Family Leave Credits: Under the new bill, employers can now claim this credit through Sept. 30, 2021. Furthermore, applicable wages paid between April 1, 2021, and Sept. 30, 2021, can be claimed up to $12,000. Applicable wages up to only $10,000 can be claimed by employers through March 31, 2021.
Until now, employers were only allowed to claim a total of 10 days of paid sick and family leave for each employee. After March 31, 2021, a new 10-day period will be available per employee.
Retirement Funding: Multiple provisions were included to help employers meet funding obligations of plans, such as the delay of funding changes on endangered multiemployer plans, longer amortization periods of up to 15 years for funding shortfalls of single-employer plans and a freeze on inflation adjusted increases to annual contribution limits of defined contribution plans.
Restaurant Grants: Eligible restaurants impacted by the pandemic will have access to $5 billion in funding through the U.S. Small Business Administration. Eligible entities, such as restaurants, food trucks, bars and caterers will have access to the funding if their gross receipts in 2019 were less than $500,000. Prioritization will be given to qualifying entities owned by women, veterans or other socially and economically disadvantaged individuals for the first 21 days of funding availability.
Direct Stimulus Payments: A third round of stimulus payments for eligible individuals will be deployed. Single filers with adjusted gross income of $75,000 or less will receive $1,400, while married couples filing jointing with adjusted gross income of $150,000 or less will receive $2,800. Phase-out thresholds are $80,000 and $160,000, respectively. Adult dependents, along with all children, are also eligible for $1,400 payments.
Similar to the two previous stimulus payments, these payments are fully refundable credits against 2021 taxes. However, unique to this bill is the allowance of residents married to undocumented residents being able to receive the direct stimulus payment.
Unemployment Benefits: Weekly federal unemployment supplemental benefits will be extended through Sept. 6, 2021, at the current $300 per week rate, inclusive of self-employed individuals. Originally, this benefit was slated to expire this coming Sun., March 14, 2021.
A provision in the bill also calls for the first $10,200 in unemployment insurance benefits to be tax-free for households with up to $150,000 in income.
Child Tax Credits: The child tax credit, which is fully refundable for 2021, will allow families to receive a $3,000 credit, up from $2,000, for each child over the age of 6 and $3,600 for each child under the age of 5.
Earned Income Tax Credit: Increases to the credit amount ($1,502, up from $543), income amount at which the credit is maximized ($9,820, up from $7,100) and phaseout threshold for non-joint filers ($11,610, up from $8,880) in 2021 will benefit childless filers.
Student Loan Forgiveness: Student loans discharged in 2021 through 2025 will be excluded from taxable income. Exclusions do not apply to loans discharged by private lenders.
Wondering how this American Rescue Plan Act of 2021 will impact you and your business once signed into law? Contact Doeren Mayhew’s tax advisors to discuss its impact on your unique situation.
This publication is distributed for informational purposes only, with the understanding that Doeren Mayhew is not rendering legal, accounting, or other professional opinions on specific facts for matters, and, accordingly, assumes no liability whatsoever in connection with its use. Should the reader have any questions regarding any of the news articles, it is recommended that a Doeren Mayhew representative be contacted.
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