The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 is a $900B relief package to deliver a second round of economic stimulus for individuals, families, and businesses. The package provides relief through multiple measures and expands many of the provisions already put into place under the CARES Act.
We are still awaiting guidance from the SBA and tax authorities, but here are some of the tax provisions in the law that was signed on December 27, 2020 that are likely to impact our clients.
Additional Round of Economic Impact Payments (EIP)
- Direct payments
- $600 per eligible family member
- $1,200 for married filing joint returns
- $600 per dependent child under 17 years’ old
- Credit phase-out starting at $75,000 of modified adjusted gross income ($112,500 for head of household and $150,000 for married filing joint).
- Advance payments are based on information on 2019 tax returns.
- Taxpayers without a social security number are not eligible.
- If the credit determined on the taxpayer’s 2020 tax return exceeds the amount of the advance payment, the taxpayer will receive the difference as a refundable tax credit. Taxpayers who receive an advance payment that exceeds the credit do not need to repay the amount.
- Additional $300 per week for all workers receiving unemployment benefits, from December 26, 2020 to March 14, 2021.
- Extends and phases out PUA, a temporary federal program covering self-employed and gig workers, to March 14 (after which no new applicants) through April 5, 2021.
- Provides additional weeks for those who would otherwise exhaust benefits by extending PUA from 39 to 50 weeks — with all benefits ending April 5, 2021.
- The bill also provides an extra benefit of $100 per week for certain workers who have both wage and self-employment income but whose base UI benefit calculation doesn’t take their self-employment into account.
Paycheck Protection Program Loans
- Businesses are now allowed to deduct expenses associated with their forgiven PPP loans.
- The new law provides $284.45 billion to reopen and strengthen PPP for first- and second-time borrowers and reauthorizes the program through March 31, 2021.
- Develops a process for a small business to receive a second PPP if the small business has less than 300 employees and can demonstrate a revenue reduction of 25 percent.
- Creates a simplified PPP loan forgiveness application for loans under $150,000 whereby the borrower signs and submits a one-page certification that requires the borrower to list the loan amount, the number of employees retained, and the estimated total amount of the loan spent on payroll costs.
- Expands the list of eligible expenses to include covered operations (software, cloud computing and other human resources and accounting needs), PPE, covered supplier costs and damage costs due to public disturbances.
- Repeals the CARES Act provision that requires borrowers to deduct their EIDL Advance from their PPP loan forgiveness amount.
Economic Injury Disaster Loan (EIDL) Advance Program
- The new law provides $25 billion to restart and extend the EIDL Advance Grant for small businesses in low-income communities.
- Creates a process for existing EIDL Advance grantees that received less than $10,000 to reapply for the difference between what they received and the maximum EIDL Advance Grant of $10,000.
Extension of the Employee Retention Credit
- Beginning on January 1, 2021 and through June 30, 2021, the provision:
- Increases the payroll tax credit rate from 50 percent to 70 percent of qualified wages.
- Expands eligibility for the credit by reducing the required year-over-year gross receipts decline from 50% to 20% and provides a safe harbor allowing employers to use prior quarter gross receipts to determine eligibility.
- Increases the limit on per-employee creditable wages from $10,000 for the year to $10,000 for each quarter.
- Increases the 100-employee delineation for determining the relevant qualified wage base to employers with 500 or fewer employees.
- Employers who receive Paycheck Protection Program (PPP) loans may still qualify for the ERTC with respect to wages that are not paid for with forgiven PPP proceeds.
This $900B relief package delivers a second round of economic stimulus, expands on CARES Act provisions, and provides additional relief through multiple different measures. To are here to help our clients stay on top of these changes, and to take advantage of the right provisions offered, please call us if you need any clarifications.