|The American Rescue Plan (ARP) Act:
On Thursday, President Biden signed the second largest economic relief package in U.S. history – The American Rescue Plan Act (ARP). This is just slightly smaller than the April 2020 Coronavirus Aid, Relief, and Economic Security Act, or CARES Act. Here are the highlights:
If you earn less than $75,000 as a Single taxpayer or $150,000 as Married Filing Jointly taxpayers, you can receive $1,400 per person including all dependents as a direct payment.
Expansion of the child tax credit along with advance payments of the credit.
The ARP Act: What’s in the Coronavirus Stimulus Package:
Note: The following information is based on our initial understanding of the bill that was signed into law March 11, 2021. It is therefore subject to amendment.
The $1.9 trillion relief package known as the ARP Act has massive implications for individuals and businesses. While not exhaustive, our analysis highlights the main categories of relief included in the legislation:
HELP FOR INDIVIDUALS
Immediate Payments to Taxpayers
- How Much: $1,400/taxpayer or $2,800/married couple filing jointly plus $1,400/qualifying dependent.
- Who is Eligible: All taxpayers whose 2019 adjusted gross income is less than $80,000 (Single) or $160,000 (Married Filing Jointly). Note that payments are phased out for taxpayers making over $75,000 (Single) or $150,000 (Married Filing Jointly). If your 2020 return has been processed the 2020 tax return will be taken into consideration.
- Other Considerations: These rebates are not likely to be taxed as income.
Unemployment Benefits (2020 Tax Returns)
- How Much: $10,200/individual who received unemployment
- Who is Eligible: All taxpayers whose 2020 adjusted gross income is less than $150,000.
Premium Tax Credit (Health Insurance Tax Credit)(2020 Tax Returns)
- How Much: No repayment of Premium Tax Credits if you were overpaid in 2020
- Who is Eligible: All taxpayers.
Increased Child Tax Credit (2021 only)
- How Much: $3,600/child under the age of 6 or $3,000/child between 6 – 17
- Who is Eligible: All taxpayers whose 2021 adjusted gross income is less than $75,000 (Single) or $150,000 (Married Filing Jointly).
- Other Considerations: The IRS is directed to estimate taxpayers’ child tax credit amounts and pay monthly in advance one-twelfth of the annual estimated amount. Payments will run from July through December 2021. Keep in mind that if you are overpaid on this credit it will be considered taxable income. The IRS is going to setup an online portal for Taxpayers to adjust their earnings so that they are paid the appropriate amount starting in July.
Increased Dependent Care Credit (2021 only)
- How Much: $4,000 if one child or $8,000 for 2 or more children (50% of dependent care expenses)
- Who is Eligible: All taxpayers whose 2021 adjusted gross income is less than $125,000 for the household. Phases out to 20% of dependent care expenses once the household income is at $400,000.
- Other Considerations: The act also increases the exclusion for employer-provided dependent care assistance to $10,500 for 2021.
Student Loan Debt Forgiveness (2021 – 2025)
- How Much: All student loan debt forgiveness will be considered tax free from 2021 through 2025.
- Who is Eligible: All taxpayers unless loans are discharged in exchange for services.
HELP FOR SMALL BUSINESSES
Employer Retention Credit (ERC): the Act has extended the ERC through the end of 2021
- Who is Eligible: Businesses that had the following:
- A full or partial suspension of the operation of their trade or business during this period because of governmental orders limiting commerce, travel or group meetings due to COVID-19; OR
- Experience a decline of at least 20% in gross receipts for a 2021 calendar year quarter compared to the same quarter in 2019.
- Note: Nonprofits must be experiencing a partial shutdown due to government orders to qualify.
- Amount of Credit: Up to 50% of “qualified wages” of each employee
- Qualified wages are capped at $10,000 per employee.
- Applies to wages paid between January 1, 2021 through December 31, 2021.
- Credit is applied against employment taxes.
Support for Restaurants
- Who Can Apply: Businesses in the food business sector
- Amount of Grant: The act allows for grants equal to the pandemic-related revenue loss (2020 revenue compared to 2019) of the eligible entity, up to $10 million per entity, or $5 million per physical location.
- When You Can Apply: Once the Small Business Administration opens up applications.
- Other Considerations: During the first 21 days of the grants, the SBA will prioritize applications from restaurants owned and operated or controlled by women, veterans, or socially and economically disadvantaged individuals.
Paycheck Protection Program (PPP) – no extension of deadline (3/31/21)
- Who Can Apply: Small businesses and nonprofits with fewer than 500 employees
- When You Can Apply: Need to apply by March 31, 2021
Note that there are additional provisions in the bill for relief for individuals and businesses. Please reach out if you have any specific questions about your facts.