Learn About the New Consolidated Appropriations Act
As we enter the new year, the COVID-19 pandemic continues to challenge us globally. People and businesses need help. After much delay, the U.S. government has responded with the Consolidated Appropriations Act, 2021. Our takeaways on financial assistance made available under this new law can be found below.
Another Round of Stimulus Payments
Stimulus payments of $600 per person will soon be heading into the pockets of eligible individuals. Like the first round of stimulus payments, this second round will be a prepayment of a refundable tax credit. Also like the previous stimulus payment, there is a phaseout of the payment, although the phaseout this time around is more compressed.
For a single taxpayer, phase out starts at $75,000 and gets fully phased out at $87,000.
For married filing joint taxpayers, phase out starts at $150,000 and gets fully phased out at $174,000.
For a head of household taxpayer, phase out starts at $112,500 and gets fully phased out at $124,500.
The payment will be based on adjusted gross income reported on an individual’s 2019 tax returns.
A couple filing jointly will receive a payment of $1,200 (or $600 per spouse). An additional $600 would be included for each qualifying dependent child.
The IRS will be mailing out notices to last known addresses identifying the amount of stimulus payment one can expect, as well as the method they will be receiving the payment (e.g. via mail or direct deposit). If you want to find out sooner how much in stimulus monies may be coming your way, feel free to utilize the following calculator put out by Kiplinger. You can also check on the status of your EIP via the IRS website.
Another Round of Paycheck Protection Loans
Eligible businesses will have an opportunity to participate in another round of the Small Business Administration’s (SBA) Paycheck Protection Program (PPP), which provided loans to assist small businesses affected by the COVID-19 pandemic. These loans have the potential to be fully or partially forgiven, provided they are used for specific purposes.
The qualifications this time around are more stringent (e.g. a business must have at least a 25% reduction in revenues in at least one quarter in 2020 when compared to the same quarter in a previous year), and the list of allowable expenses has been expanded (e.g. certain PPP costs are now eligible for forgiveness). More information on the PPP, including new qualifications, can be found on the SBA’s website.
An important clarification included in this new Act is the fact that expenses used for PPP forgiveness are tax deductible. This overturns the IRS’ previous position that such expenses are NOT tax deductible.
Extension of SBA Loan Payments
Certain borrowers of SBA loans were eligible to have six months’ worth of loan payments to be paid on their behalf. Under the new Act, eligible borrowers may have an additional three months’ of loan payments paid on their behalf starting February 2021. Certain hard-hit industries are eligible for an additional five months’ of loan payments to be covered.
Further Deferral of Deferred Payroll Taxes
In August, the President issued a memorandum allowing employers to defer their employees’ share of social security tax from September 1, 2020 through December 31, 2020. The repayment of these taxes was to occur beginning January 1, 2021. This new Act defers the repayment of these deferred payroll taxes to January 1, 2022.
Employer Tax Credit Extensions and Expansion
Previous Acts had created certain employer tax credits, such as a credit for sick and family leave and the employee retention credit. These credits were set to expire at the end of 2020, however this new Act extends these tax credits into 2021.
Also important to note is the expansion of the employee retention tax credit to businesses who have or will obtain PPP loans. Previous to this new Act, businesses who took out PPP loans were ineligible to claim the employee retention tax credit.
Extension of Unemployment Benefits
The new Act extends the enhanced federal unemployment benefits for up to an additional 11 weeks The enhanced benefits are for $300 per week (in addition to state benefits), which is down from the previous $600 per week enhanced payments.
Conclusion
We hope the above helps those in need find resources currently available to survive the pandemic. Please note that the above is a very general overview of some of the provisions of the Consolidated Appropriations Act, 2021. If you would like further consultations regarding any of the above, please feel free to contact your tax professional (or us, if you’re looking for a new tax professional!).
While the information in this post is considered to be true at the date of publication, changes in tax laws and other circumstances after the time of publication may impact its accuracy. Please consult a professional for the latest information.