American Rescue Plan Act of 2021 Archives

Understanding the American Rescue Plan Act of 2021

By Office Staff|2021-04-29T15:44:47-07:00April 29, 2021|Categories: COVID-19|Tags: American Rescue Plan Act of 2021, Child Tax Credits, Dependent Care Tax Credits, Paid Sick and Family Leave, Student Loan Debt, Unemployment Insurance|0 Comments

On March 11, 2021, the President signed into law the American Rescue Plan Act of 2021 (ARPA) — a $1.9 trillion stimulus package aimed at helping the nation rebound from the economic impact of the COVID-19 pandemic. The Act itself contains more than 600 pages and includes provisions addressing stimulus payments, unemployment benefits, healthcare, state and local funding, along with several tax law changes.

Most of the tax changes are geared toward individual taxpayers, but some affect businesses. In this post, we cover some of the highlights to help you gain a better understanding of the major tax provisions and answer questions you may have.

Getting the Maximum Qualified Stimulus Payment

The big news is the third round of stimulus payments — tax-free money from the federal government. Eligible taxpayers and their qualifying dependents may receive up to $1,400 each. Married couples could receive up to $2,800.

Fewer of us are likely to qualify for the stimulus payment this time around. That’s because the adjusted gross income (AGI) thresholds start at the same amounts, but the phase-out range is much narrower than with prior stimulus payments:

$150,000 to $160,000 AGI for joint filers, meaning stimulus payments are gradually reduced for joint filers earning a combined $150,000 AGI or more and are not granted to those earning more than $160,000.
$112,500 to $120,000 AGI for head of household.
$75,000 to $80,000 AGI for everyone else.

Unlike the prior two stimulus payments, eligible recipients may receive up to $1,400 for all qualifying dependents, including those age 17 and older at year-end.

Tip: The IRS will use the most recently filed tax return to determine these amounts, so do the following to increase your odds of getting a stimulus payment:

If your 2020 income decreased (from 2019) and is below or within one of the ranges above, file your 2020 return as soon as possible, so that your lower 2020 income will be used to determine whether you get a stimulus payment and how much it will be.

If your 2020 income increased (from 2019) to a point that disqualifies you from receiving a stimulus check or reduces the amount, consider waiting to file your 2020 tax return until you receive your stimulus payment.

Taking Advantage of the Extension to Unemployment Insurance

The American Rescue Plan Act of 2021 extends federal supplemental unemployment benefits that were set to expire on March 14, 2021. The new law extends the period eligible individuals may receive an additional Continue reading… Continue reading… Continue reading…

Maximizing Your PPP Benefits and Employer Tax Credits

By Office Staff|2021-03-04T11:04:33-08:00March 4, 2021|Categories: Business Taxes, COVID-19|Tags: American Rescue Plan Act of 2021, CAA Act, CARES Act, COVID-19, Employer tax credits, Paycheck Protection Program, Sick Leave|0 Comments

In 2020, Congress passed a flurry of COVID-19 related legislation designed to help employers retain and pay their employees and stay in business. This relief has been offered primarily in two forms:

Paycheck Protection Program (PPP): PPP loans have been made available to qualifying small businesses to help them stay afloat and retain and pay as many of their employees as possible. A business receiving a PPP loan can then apply to have the loan forgiven; that is, whatever portion of the loan was used for qualifying payroll and expenses.
Employer tax credits: Additional employer tax credits have been made available to help employers cover the cost of sick and family leave for employees, employees who need to care for someone with coronavirus (including a child whose school or daycare is closed due to the coronavirus), and retaining employees when operations have been partially or fully suspended due to government orders during the pandemic.

Understanding and taking full advantage of these benefits within the parameters stipulated in the legislation can be challenging for small-business owners. At SWC, we’re here to help.

In this post, we provide an overview of the COVID-19 pandemic relief programs for which your business may be eligible. When preparing your business tax returns this year, your accountant or CPA should be asking you for copies of payroll tax returns and should be initiating additional consultations with you to see if you are eligible for any of the new employer tax credits. We say should because that’s how we handle this at SWC.

Wait! Before You File Your 2020 Tax Return, Read This

Don’t rush to file your 2020 tax returns. Consult with us first for three important reasons:

Both the PPP and the new employer tax credits provide potentially significant benefits for your business, and we want to make sure you reap the maximum benefit.
The new employer tax credits cannot be claimed on the same payroll being used for the PPP loan forgiveness. When completing your tax return and submitting documents for PPP loan forgiveness, you need to be sure you’re not confusing the two benefits.
Your state may not follow all the federal guidelines. We can help ensure that your state taxes account for any differences.

If you feel pressured to file your 2020 tax returns and are uncertain about any of the details related to the PPP or new employer tax credits, we strongly encourage you to file for an extension. With that recommendation in mind, it’s important that you take the time to consult with your tax advisor.

Sorting Out PPP Rounds 1 and 2

Congress provided two rounds of PPP loans — one in the spring of 2020 and another near the end of 2020. If you have taken advantage of the PPP, you should understand the rules and the differences between the two rounds (or “draws.”)

Important: The Coronavirus Aid, Relief and Economic Security (CARES) Act, enacted in March 2020, was silent on whether expenses paid with the proceeds of first draw PPP loans could be deducted. The IRS took the position that these expenses were nondeductible. However, the Consolidated Appropriations Act, 2021 (CAA, 2021), enacted at the end of 2020, provides that expenses paid from the proceeds of both first and second draw PPP loans are Continue reading… Continue reading… Continue reading…