On March 11th, the president signed into law the American Rescue Plan Act. Also called the COVID-19 Stimulus Package, the purpose of the bill is to speed up the nation’s recovery from the economic and health effects of the pandemic.
The following summary of key provisions highlights what’s new for businesses and individuals, adjustments to current programs, extensions, and available tax credits.
Aid to businesses and self-employed:
- Employee Retention Credit has been extended from quarters ending June 30, 2021, through quarters ending December 31, 2021. Qualifying businesses are eligible to receive up to a maximum $7,000 credit per quarter per employee for all quarters ending in 2021.
- Restaurant Revitalization Fund (RRF) through the SBA will award grants to eligible businesses defined as a place where “the public or patrons assemble for the primary purpose of being served food or drinks”. These include restaurants, food trucks, taverns, and similar businesses. Those eligible can apply for an equivalent amount equal to the gross receipts lost in 2020 compared to 2019 less what has previously been received through PPP. For more information visit https://restaurantsact.com/rrf/
- A COBRA Premium Subsidy has been established where assistance-eligible individuals (AEI’s) may receive a 100% subsidy for COBRA premiums for any period of coverage during the period beginning on April 1, 2021, and ending on September 30, 2021. An AEI is a qualified beneficiary who is eligible for and elects COBRA for a period of coverage within the subsidy period due to a qualifying event of involuntary termination of employment or reduction of hours. Employers would be allowed a quarterly tax credit against the Medicare payroll tax equal to the premiums not paid by the AEI.
- Paid sick and family leave credit has been extended from quarters ending on March 31, 2021, to quarters ending September 30, 2021. Employers who pay employees while they have COVID or are being vaccinated are eligible for the credit. The credit is available to self-employed workers also.
Changes that aid individuals are:
- Extension of the federal unemployment subsidy of $300 per week through September 6, 2021.
- The first $10,200 of unemployment compensation received by taxpayers in 2020 will not be taxed provided their adjusted gross income is below $150,000.
- Expansion of earned income credit for the year ended December 31, 2021, where eligible taxpayers would receive double the amount normally received.
- Third stimulus payment of up to $1,400 per individual. The payments do phase-out for those making $80,000 at the individual level and $160,000 for married filing jointly.
- For 2021, the amount of child tax credit for children under the age of 17 increases to $3,000 and to $3,600 for children under the age of 6 subject to adjusted gross income phase-outs. An online portal -will be established to allow for advance payment of credits.
- For 2021, the dependent care credit has been made refundable and increased to a maximum of $4,000 for one child and $8,000 for two or more qualifying children.
- Employees can exclude from income up to $10,200 of dependent care assistance for 2021, up from $5,000.
- Allows for student loans forgiven from 2021 through 2025 to be nontaxable.
As the year progresses, policymakers will review the effectiveness of the American Rescue Plan Act to determine the next steps, whether it be the expiration of the bill or further refinement and extension.
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