The American Rescue Plan Act of 2021 (ARPA) was signed by President Biden on March 11, 2021. This $1.9 trillion stimulus package contains extensions to unemployment, direct stimulus payments, and other important provisions for individuals and businesses. Below is a snapshot of some of the provisions that may affect you.
You may notice some of the provisions summarized below may impact your 2020 tax return. If you have already filed your return for 2020 we will be more than happy to work with you to adjust your 2020 return to account for any legislative change that impacts you.
Individual Tax Provisions
Under the previous stimulus bill, expanded unemployment benefits were slated to expire on March 14, 2021. ARPA will extend unemployment benefits through September 6, 2021 and maintains payments at $300 per week.
Additionally, ARPA included a provision to exclude up to $10,200 of unemployment compensation received in 2020 for any taxpayer, regardless of filing status, with an adjusted gross income of $150,000 or less that same year.
The ARPA includes provisions for another round of economic impact payments. New payments are worth up to $1,400 per individual and dependent. This round of payments will expand eligibility to adult dependents for the first time and benefits phase out for individuals earning over $75,000 and married couples earning over $150,000. Once an individual meets an AGI of more than $80,000 the payments completely phase out.
Child Tax Credit
Before ARPA, the child tax Credit (CTC) was $2,000 per “qualifying child.” A qualifying child was defined as an under-age-17 child, whom the taxpayer could claim as a dependent, lived with the taxpayer for at least six months, and who was a US citizen or nation, or a US resident. For 2021 only, ARPA has broadened the definition of a qualifying child to include a child who hasn’t turned 18 by the end of 2021.
Excess Premium Tax Credit Payments Do Not Have To Be Repaid
Under ARPA, for those taxpayers enrolled in an exchange-purchased qualified health plan no additional income tax is imposed for tax years beginning in 2020 where the advance credit payments received exceeds the taxpayer’s premium tax credit.
Business Tax Provisions
Employee Retention Credit
The CARES Act of 2020 included an Employee Retention Credit. This credit was a refundable credit against employment taxes paid by employers experiencing full or partial government-mandated shutdowns, or significant reductions in gross receipts. It was expanded under the Consolidated Appropriations Act and was scheduled to expire at the end of the second quarter of 2021. The ARPA will extend the credit through the end of 2021.
Payroll Protection Program (PPP) Changes
With the ARPA bill, the Paycheck Protection Program will be expanded to additional not-for-profit organizations and creates a category of “additional covered nonprofit entity”. While there are still eligibility limitations, funding to a significant number of organizations may be available.
These changes go along with recent changes to the program by the Biden administration which opened the PPP funding for self-employed and gig workers. Please note that the PPP program was not extended beyond the March 31, 2021 application date.
Restaurant revitalization grants.
ARPA appropriates $28.6B for fiscal year 2021 to struggling restaurants to be administered by the SBA. The money will be available until expended. Eligible entities include restaurants, or other specified food businesses, and includes businesses operating in an airport terminal. It does not include a state or local government-operated business, or a company that as of March 13, 2020 operates in more than 20 locations, whether or not the locations do businesses under the same name. It also does not include any business that has a pending application for, or has received, and grant under the Economic Aid to Hard-Hit Small Businesses, Non-Profits and Venues Act. The amount given to any business who fulfills the eligibility and certification requirements is $10,000,000 and limited to $5,000,000 per physical location of the business. Grants may be used for: (1) payroll costs; (2) mortgage payments; (3) rent; (4) utilities; (5) maintenance expenses; (6) supplies; (7) food and beverage expenses; (8) covered supplier costs; (9) operational expenses; (10) paid sick leave; and (11) any other expense determined to be essential to maintaining the business.