COVID-19 Relief Bill - Consolidated Appropriations Act
The coronavirus relief bill passed by Congress includes many tax provisions, including the extension of various expiring provisions, extensions and expansions of certain earlier pandemic tax relief provisions, and much more. The Consolidated Appropriations Act, 2021, H.R. 133, passed both houses of Congress on December 21, 2020, and President Donald Trump signed the bill into law on December 27, 2020.
Below are highlights for a few topics covered under the new COVID relief bill.
Pandemic Relief 2nd Stimulus Payment
The bill provides a refundable tax credit in the amount of $600 per eligible family member. The credit is $600 per taxpayer ($1,200 for married taxpayers filing jointly), in addition to $600 per qualifying child. The credit phases out depending on your modified adjusted gross income as filed on your 2019 tax return. To check your status of the second stimulus payment, please visit irs.gov/coronavirus/get-my-payment.
Employee Retention Credit Expansion and Extension
Under the CARES Act, the employee retention credit (ERC) provides a refundable payroll tax credit for 50% of qualified wages of up to $10,000 per employee for a maximum credit of $5,000 per employee. To be eligible for this credit, you must have retained your employees and not laid them off.
The Consolidated Appropriations Act extends and expands this credit from January 1, 2021 through June 30, 2021. The new Act increases the ERC rate from 50% to 70% of qualified wages, expands the eligibility for the credit by reducing the required year-over-year gross receipts decline from 50% to 20%, and increases the limit of a per-employee creditable wages from $10,000 annually to $10,000 for each quarter.
Unemployment Extensions
The bill restores the Federal Pandemic Unemployment Compensation (FPUC) supplement to all state and federal unemployment benefits at $300 per week, starting after December 26, 2020 and ending March 14, 2021.
If you own a business, Section 201 of the bill extends Pandemic Unemployment Assistance (PUA) to March 14, 2021 and allows individuals receiving benefits as of March 14, 2021 to continue through April 5, 2021, as long as the individual has not reached the maximum number of weeks. It also increases the number of weeks of benefits an individual may claim from 39 to 50.
Paycheck Protection Program Second Draw Loans and Continuation
The bill allows certain small businesses who received a Paycheck Protection Program (PPP) loan and experienced a 25% reduction in gross receipts to take a second PPP loan. These prior PPP borrowers must meet the following conditions to be eligible: (1) employ no more than 300 employees per physical location, (2) have or will use the full amount of their first PPP loan; and (3) show at least a 25% reduction in 2020 gross relative to the same 2019 quarter.
As with the first PPP loan, the second loan can be 100% forgivable if it is used for payroll costs (with some exceptions) of up to 60% and nonpayroll costs (i.e., rent, mortgage, interest and utilities) of up to 40%.
Eligible Paycheck Protection Program expenses now deductible
This new relief bill reflects changes to the law which now allows businesses to deduct expenses paid for with PPP funds. In addition, if you received the PPP loan it is not included in income.
Temporary allowance of full deduction for business meals
The new relief bill allows for the full deduction of expenses for food and beverages paid or incurred to a restaurant after December 31, 2020 and prior to January 1, 2023. The credit was limited to 50% under the 2018 tax law changes but is now 100% for tax years 2021 and 2022.
Charitable Contributions deductible by nonitemizers
The bill extends and modifies the $300 charitable deduction for nonitemizers for 2021 and increases the maximum amount that may be deducted to $600 for married couples filing jointly.
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