Dec 23 The Current Status of the New Stimulus Package – The Consolidated Appropriations Act, 2021
After months of negotiations, Congress reached an agreement for a new round of relief for the ongoing COVID-19 pandemic. In addition to the enhancements made to the Paycheck Protection Program (PPP) and Economic Injury Disaster Loans (EIDLs), the Consolidated Appropriations Act, 2021 (CAA) includes funding for various hard-hit industries, as well as funding related to vaccine distribution and virus testing. Additionally, the CAA provides for an extension of some tax relief provided by the CARES Act, as well as new tax benefits for those impacted by the pandemic.
At this time, President Trump has pushed back the bill to Congress to add more stimulus payments in the range of $2,000 to $4,000 per person and the bill may not be signed in its current form.
While we await the final bill, here are the significant inclusions and tax provisions of the CAA to be aware of:
- Additional stimulus payments of $600 per person (plus $600 per qualifying child) for those with adjusted gross income (AGI) of up to $75,000 for single filers and $150,000 for married filing jointly.
- Unemployed individuals will receive an additional $300 per week from December 26, 2020 to March 14. Both the Pandemic Emergency Unemployment Compensation (PEUC) and Pandemic Unemployment Assistance (PUA) were also extended through April 5, 2021, providing up to 11 additional weeks of jobless benefits to those who had exhausted their regular state benefits.
- The $300 above-the-line charitable contribution ($600 for married filing jointly) for non-itemizing individuals and the charitable contribution deduction limitation of 100% have been extended through 2021.
- 100% deduction for certain business meals paid or incurred in 2021 and 2022.
- The 7.5% floor on itemizing unreimbursed medical expenses is made permanent.
- For eligible educators, the $250 educator expense now includes personal protective equipment (PPE), disinfectant and other supplies for expenses paid or incurred after March 12, 2020.
- Employer Retention Credit (ERC) is modified and extended by:
- Increasing the credit rate from 50% to 70% of eligible wages;
- Expanding the $10,000 credit for all quarters to $10,000 for any calendar quarter per employee;
- Increasing the 100-employee delineation for determining qualified wage base to employers with 500 or fewer employees;
- Extending the period where credit can be claimed from December 31, 2020 to June 30, 2021;
- Changing the year over year reduction of gross receipt test from 50% to 20%.
- In addition, wages that are not forgiven via a PPP loan can be used as qualified wages for ERC purposes.
- Employer Credit for Paid Family and Medical Leave is modified and extended:
- For tax years beginning before Jan. 1, 2021, eligible employers may claim an elective general business credit based on wages paid to qualifying employees with respect to family and medical leave.
- The credit is equal to 12.5% of eligible wages if the rate of payment is 50% of such wages and is increased by .25 percentage points (limited to 25%) for each percentage point that the rate of payment exceeds 50%.
- The maximum amount of family and medical leave that may be taken into account with respect to any qualifying employee is 12 weeks per tax year.
- CAA extends this credit through 2025, applying to wages paid in tax years beginning after Dec. 31, 2020.
- Deferred Payroll Taxes extended:
- Employers were allowed to defer their employees’ share of payroll taxes from the period beginning September 1, 2020 through December 31, 2020, paying them ratably after the deferral period through April 30, 2021. CAA extends the “payback period” to December 31, 2021.
- CAA also extended some provisions through 2021 including:
- Families First Coronavirus Response Act refundable payroll tax credits for paid sick leave and paid family leave (extended through March 2021)
- Exclusion from gross income of the discharge of qualified residence debt
- Deduction for mortgage insurance premiums
- Several energy credits
- Flexibility for taxpayers to rollover unused amounts in their health and dependent care flexible spending arrangements from 2020 to 2021 and from 2021 to 2022.
For information on provisions related to PPP Loan and EIDL Provisions, please reference our recent alert here. You may also register for our webinar on Tuesday, December 29th, where we will do an in-depth dive into these new provisions and much, much, more.
Sax will continue to update you as further details are made available. Reach out to your Sax advisor or email [email protected] with questions. For more and on-going information relative to your state and business, visit Sax’s COVID-19 Resource Center.