Posted By Valerie C. Middlebrooks, CPA, Jonathan A. Patterson, CPA, CVA, and Jordon N. Rosen, CPA, AEP
On March 11, President Biden signed into law the American Rescue Plan Act of 2021 (ARPA). The $1.9 trillion bill is extensive and we have outlined important details for our clients and friends to be aware of. The full legislative text can be reviewed here: H.R.1319 – American Rescue Plan Act of 2021. Our team is looking over each section carefully and has provided highlights of significant sections of the bill below:
Business and Nonprofit Provisions of the ARPA COVID-19 Relief Bill
- Extension of the Employee Retention Tax Credit (ERC)
- Extended through December 31, 2021.
- Extension of the Families First Coronavirus Response Act (FFCRA)
- Extends the rules for sick leave pay and family medical leave pay through September 30, 2021.
- Family medical leave pay cap is increased from $10,000 to $12,000.
- Restaurant Revitalization Fund
- An additional $28.6 billion has been set aside for restaurants and bars.
- Relief received will be based on pandemic related revenue loss and must be used for specified costs.
- Any amount received will not be included in gross income.
Individual Provisions of the ARPA COVID-19 Relief Bill
- Stimulus Payments
- A third round of stimulus checks has been approved for individuals, consisting of a $1,400 check for eligible individuals and each eligible dependent claimed. All individuals must have a social security number.
- Stimulus checks are based on the taxpayer’s 2019 income tax return or their 2020 return, if it has been processed by the IRS.
- The benefit phases out for individuals when adjusted gross income (AGI) is between $75,000 and $80,000 ($150,000 – $160,000 for joint returns) with no payment if AGI is above those limits.
- Unemployment Benefits
- Taxability: The first $10,200 of unemployment payments for each individual for 2020 will not be taxable for households with AGI of less than $150,000. This threshold applies to both single and married taxpayers.
- Benefits: An extension of an additional $300 per week through September 6, 2021.
- Taxpayers who already filed a return and included unemployment benefits in gross income should wait for additional IRS guidance.
- Child and Dependent Care Credit
- The amount of allowable expenses increases to $8,000 for one child and to $16,000 for two or more children, subject to the 50% credit limit giving a credit of $4,000 and $8,000.
- The maximum credit rate increase of 50% now starts to phase out at the higher AGI level of $125,000.
- For 2021, the credit will be refundable.
- The exclusion for employer-provided dependent care assistance is increased from $5,000 to $10,500 ($5,250 for married filing separate) for 2021.
- Child Tax Credit and Advance Payments
- For 2021, the credit increases to $3,000 per child ($3,600 for a child under age 6) and increases the eligibility age for a qualifying child to 17.
- The additional $1,000 or $1,600 credit over the standard $2,000 credit begins to phase out when modified AGI exceeds $150,000.
- These provisions do not modify the existing child tax credit of $2,000 per child and those related rules.
- Treasury will begin making advance payments of the child credit based on 2019 or 2020 tax return information in periodic installments beginning July 1, 2021, equal to 50% of what the taxpayer would be entitled to for 2021.
As additional information and clarification is provided by the Treasury, BLS will prepare detailed summaries of certain sections. We also invite you to visit our COVID-19 Resource Center for additional information. Please don’t hesitate to contact your BLS Team Member via our contact form to see how the American Rescue Plan Act affects you or your organization.