The unprecedented $1.9 trillion American Rescue Plan (ARP) was signed into law on March 11 to provide a new round of financial relief, money for vaccines and testing, benefits for states, and several additional projects. So, what does the massive spending bill mean for you?
Here’s what you need to know.
Under the ARP, the first $10,200 in unemployment benefits are now non-taxable for taxpayers who made less than $150,000 in 2020. If you qualify for the exclusion and have already filed your tax return reporting this as income, there is no need to amend. The IRS will automatically determine the correct taxable amount and any resulting overpayment will be automatically refunded or applied against any taxes owed.
Unemployment benefits that were set to expire on March 14 are now extended through September 6, 2021. The additional $300 per week of unemployment assistance has also been extended.
The FFCRA, the bill that provides tax credits to employers who pay employees affected by COVID-19, has been extended until September 30, 2021.
Employees who have already used the allowable 10 days of sick leave or 12 weeks of family leave will be able to start the count again on April 1, 2021. This means they will be able to claim sick leave credits as if they had taken 0 days.
If you are self-employed, you can take advantage of these credits. If you have been unable to work due to COVID-19 regulations, symptoms, quarantine, or caring for a child who is out of school/ daycare because of anything COVID-19 related, you are eligible to claim them.
The Employee Retention Credit has been extended once again through December 31, 2021.
A large facet of ARC is a third round of stimulus payments. This time, the checks will be based off $1,400 per taxpayer and dependent. There are some differences between these payments and the other two that we will learn as further guidance is released.
The third round of stimulus payments are expected to go out in two phases, and some have already been received. The first phase is based on the data the IRS already has so anyone who hasn’t filed a 2019 or 2020 tax return won’t receive a payment in the first phase. The second phase of payments will go out to taxpayers who should have received a larger stimulus based on 2020 filings. These payments will be going out either 90 days after the tax deadline OR September 1 (whichever is earlier).
Taxpayers with a child under 17 typically receive a $2,000 Child Tax Credit. The ARP extends the credit to $3,600 for each child under 6 years old and $3,000 for each child between 6-17 years old. Like the stimulus payments, this credit is only available to qualifying taxpayers who earn less than $75,000 (single) or $150,000 (married). This change will not be in effect for 2020 tax returns but will go into effect for the 2021 tax year only.
There will also be a monthly payment for half of the extended Child Tax Credit from July to December 2021. Qualifying taxpayers will receive $300 per month for each child under 6 years old or $250 per month for each child between the ages of 6-17.
It is worth noting that taxpayers who make too much money in 2021 to qualify will be required to repay the credit.
More funds have been allocated for PPP loans, but there are not other significant changes. Funding has been extended to May 31, 2021. If you are planning to apply for another round of PPP, you need to act quickly.
The ARP also allocated new grants to help assist with huge revenue losses for the restaurant industry due to COVID-19. We are still awaiting guidance from the Small Business Association (SBA) and we will provide updates as soon as they become available.
With the constantly changing COVID legislation, there are many factors to consider. It is a good idea to seek the advice of a tax advisor who can help you plan for your unique circumstances. The team at BSB is monitoring the latest developments and guidance and will provide updates as they become available. If you have questions about the American Rescue Plan Act and how it may affect your situation, please contact your BSB advisor.