New Legislation Expands Financial, Tax, and Other COVID-19 Relief for Businesses and Individuals

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By Pooja Srivastava

On March 10, 2021, Congress passed the American Rescue Plan Act of 2021 (ARP) to help individuals and businesses cope with the impact of the COVID-19 pandemic. ARP will provide stimulus payments, child and dependent payments, employee retention credits, and other tax benefits to many Americans.

Unemployment Benefits expanded

ARP will extend enhanced unemployment benefits through September 6, 2021 and provide an additional $300 per week from March 14, 2021 to September 6, 2021. It will also continue the Pandemic Unemployment Assistance (PUA) for independent contractors, part-time workers, and gig workers through September 6, 2021 with a 79-week cap. Individuals may turn down employment that would jeopardize their health and still qualify for unemployment benefits in some states.

The legislation also waives federal taxes on the first $10,200 of unemployment benefits collected in 2020 per individual. Taxpayers qualify if they earned less than $150,000 for their adjusted gross household income in 2020.

stimulus payment

Under ARP, approximately 89% of taxpayers will be eligible for a third round of stimulus checks in the amount of $1,400 per eligible individual. The legislation provides stimulus payments for all dependents in a household, instead of only children under the age of 17 like in previous stimulus rounds.

Taxpayers are eligible for full stimulus payments when they earn less than:

  • $75,000 for single filers.
  • $112,500 for head of household filers.
  • $150,000 for joint filers.

Stimulus payments reduce at those income thresholds, phasing out entirely at $80,000 for single filers, $120,000 for head of household filers, and $160,000 for married filing jointly.

tax credit extension for family and sick leave

The ARP has not reinstated the requirement for certain small businesses to provide paid family and sick leave related to COVID-19, as it originally appeared in the Families First Coronavirus Response Act (FFCRA). However, employers who voluntarily provide FFCRA leave to their employees will be eligible for tax credits for that leave from April 1, 2021 through September 30, 2021.

The Act allows employers to claim tax credits for FFCRA leave for additional reasons that were not covered before, including:

  • Getting a COVID-19 immunization or recovering from one.
  • Obtaining or awaiting the results of a COVID-19 test or diagnosis when the individual has been exposed to COVID-19 or their employer has requested the test or diagnosis.

Additionally, if an employee has already taken 10 days of paid emergency sick leave, the ARP allows employers to claim tax credits for an additional 10 days of paid sick leave for that employee starting March 31, 2021.

Employers can claim tax credits on eligible paid family leave up to 60 days, up from 50 days previously. This means that the total wages eligible for the tax credit per individual are $12,000, plus health expenses allocated to the leave.

expansion of the employee retention credit 

Under the ARP, the Employee Retention Credit (ERC) will be available for all wages paid in 2021, not just through June 30, 2021. This means that the credit will be available for two additional calendar quarters.

 The ARP also expands eligibility for the ERC to include “recovery startup businesses.” These are businesses that started after February 15, 2020. There may be additional eligibility requirements. Recovery startup businesses can claim $50,000 or less in the ERC for any calendar quarter.

conclusion 

The American Rescue Plan Act of 2021 contains many benefits for individual and business taxpayers. For help understanding how to maximize your benefits and tax savings under ARP, please contact your trusted Chugh CPAs, LLP professional.