The Employee Retention Credit (ERC) was extended and expanded in March to go through Dec. 31, 2021, as part of the American Rescue Plan Act of 2021(ARPA). Originally, the ERC was enacted in March 2020 as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act).
Originally, the ERC was a refundable payroll tax credit granted for full-time employees who were retained from March 13, 2020, to Dec. 31, 2020, during the temporary business shutdowns. The Consolidated Appropriations Act of 2021 (CAA) then expanded the ERC, by retroactively allowing employers (even those who had received a PPP loan) to claim the ERC. ARPA then extended the ERC further. Under the CARES Act, the amount of credit was 50 percent of qualified wages paid to the employee plus the cost to provide health benefits.
The ERC and the American Rescue Plan Act
The enhanced ERC under ARPA follows the more favorable 2021 rules originally enacted as part of the CAA. These rules include:
As a result, the maximum ERC per employee for 2021 is now $28,000, compared to $5,000 for the 2020 version of the ERC.
Expanded benefits under the new relief legislation
In addition, ARPA provides additional expanded benefits for the ERC—these two changes are only applicable to the third and fourth calendar quarters of 2021.
If you have questions, please contact our team. We can help to determine if you qualify and then work with you to apply for the ERC.
Department of Health and Human Services (HHS) Provider Relief Funds (PRF) Reporting Requirements
On June 11, 2021, HHS announced reporting requirements for providers who received $10,000 or more in any of the four rounds that PRF were granted. There are key categories of information that will be required along with timelines to report the information needed. Reporting will be done via a secure portal through HHS. HHS also plans to release a worksheet to help gather the information.
Each of the four rounds of PRF have specific dates that the funds need to be used by, as well as the corresponding timeframe to fulfill your reporting requirements. The below chart has the applicable due dates:
Qualified Expenses or Uses for Funds
It is important to have accurate records and receipts on file for the use of funds received from the PRF. If all funds were not used by the deadline for using those qualified funds, funds can be returned to HHS. The qualified uses for the funds are listed below.
Other Important Information Needed
Aside from showing proper use of funds, HHS is requiring additional information be gathered for each reporting period you received more than $10,000 in Provider Relief Funds.
In March 2021, the American Rescue Plan Act of 2021 (ARPA) was signed into law. The ARPA included changes to how families can receive their Child Tax Credit. Traditionally, the Child Tax Credit was a tax credit up to $2000 per qualifying child that was included on your annual tax return. The change made with ARPA is that qualified families can now receive half of the normal credit via monthly payments before filing their tax return. The intent of this change was to provide families with more income monthly instead of waiting until filing their tax return. The Child Tax Credit was also increased for 2021 to $3600 for children under 6 and $3000 for children between ages 6 and 17.
On March 30, 2021, President Biden signed HR 1799—the PPP Extension Act of 2021. This bill extends the timeframe to apply for PPP Round 1 and PPP Round 2 loans from the original deadline of March 31 to May 31, 2021. Lenders have until June 30, 2021 to approve loans. However, applications need to be submitted to approved lenders by May 31, 2021.
Below is a summary of the American Rescue Plan Act of 2021 (H.R. 1319) for businesses. The bill was signed into law on 3/11/2021.
Grants for restaurants and other food businesses (Restaurant Revitalization Grants)
Grants will be available in the near future for restaurants and other food and beverage businesses that are impacted by current economic conditions. These grants will be processed through the Small Business Administration (SBA).
Extension and expansion of the Families First Coronavirus Response Act (FFCRA) Sick/Leave Pay
Extension and adjustments to the Employee Retention Credit (ERC)
Taxation clarification on Restaurant Revitalization Grants or EIDL Advance
HR 1319 clarifies that Restaurant Revitalization Grants and the EIDL Advance are generally excluded from gross income and other tax-related calculations.
Shuttered Venue Operators Grant (SVOG)
HR 1319 includes an additional $1.25 billion for the Shuttered Venue Operators Grant (SVOG) program. It also allows eligible entities that receive a first or second draw PPP loan after December 27, 2020 to receive a grant. Previously, receiving or having open applications for both programs had been prohibited. With the passage of the new law, it is possible for venue operators to receive both a PPP loan and an SVOG, as long as the amount of the SVOG is reduced by the amount of PPP funds approved. SVOG eligibility requirements can be found through the SBA’s website.
Below is a summary of the American Rescue Plan Act of 2021 (H.R. 1319) for individuals. The bill was signed into law on 3/11/2021.
Special information that may impact individuals who received unemployment in 2020:
For taxpayers who received unemployment in 2020 and have an Adjusted Gross Income of $150,000 or less, the first $10,200 of unemployment received is considered non-taxable. Adjusted Gross Income determination is made without including the unemployment received.
Many of these tax provisions are for Tax Year 2021 only. Continuation of these items will require congress to extend these provisions.
2021 Recovery Rebates
As many individuals received Economic Impact Payments (stimulus checks) in 2020 and early 2021, another round of rebates will be distributed in the coming weeks. The eligible credit is $1,400 for single taxpayers and $2,800 for married filing joint filers. A credit of $1,400 is also available for eligible dependents. The income limits and phaseout for the recovery rebates will be determined by your 2020 tax return (if it has been filed), otherwise will default to income on your 2019 tax return.
There are a number of online calculators that can be used to determine the projected amount of the third stimulus check. If your 2020 return has been filed, you will need your Adjusted Gross Income amount, which can be found online 11 of Form 1040. Otherwise, you will need your 2019 Adjusted Gross Income, which can be found online 8b of Form 1040.
Here is a link to a calculator to calculate your recovery rebate: https://www.forbes.com/advisor/personal-finance/third-stimulus-check-calculator/
Child Tax Credit (currently in place for 2021 only)
The Child Tax Credit has been increased to $3,000 per child ($3,600 for certain children under 6). The child tax credit is now applicable to children under 18. The child tax credit in 2020 was $2,000 and applicable for children under 17.
Advance Payments of the Child Tax Credit
Along with changes increasing the Child Tax Credit, the Department of Treasury will also begin sending advance payments of the credit. This means you will get a monthly amount during the year instead of getting the full credit when doing your tax return.
Dependent Care Benefits (currently in place for 2021 only)
The Dependent Care Credit has multiple changes in place for 2021.
Example of how this impacts an individual. The credit now goes from a max of $1,050 for one qualifying child (35 percent of $3,000) or $2,100 for two or more qualifying children (35 percent of $6,000) to $4,000 for one qualifying child (50 percent of $8,000) and $8,000 (50 percent of $16,000).
Employer Provided Dependent Care Benefits (currently in place for 2021 only)
Dependent care benefits offered through an employer (reducing taxable income) have been increased for 2021. The amount of dependent care benefits that can be excluded has been increased from $5,000 to $10,500 per family.
Earned Income Tax Credit Expanded (currently in place for 2021 only)
The Earned Income Tax Credit has been expanded to most individuals 19 and over instead of 25 and older and will no longer have a maximum age of 65.
The credit income limits and phaseout have also been increased. The credit has also been expanded to certain married filing separate filers.
Student Loan Forgiveness (for Tax Years 2021-2025 currently)
Certain student loan debt forgiven between in 2021 through 2025 can be excluded from gross income. Currently, the amount of student loan forgiveness is considered taxable income.
Premium Tax Credit
The premium tax credit increases credits for individuals eligible for health insurance premium assistance under current law and provides credits for taxpayers with income below 400% of the federal poverty line. It removes restrictions for taxpayers receiving unemployment compensation anytime in 2021. Under these changes, no additional income tax is imposed for tax years beginning in 2020 where the advance credit payments exceed the taxpayer’s Premium Tax Credit (PTC).
Below is a summary of the stimulus relief for businesses that is part of the Consolidated Appropriations Act, 2021 (H.R. 133) which was signed into law on 12/27/2020.
Congress has created a PPP second draw available to smaller businesses that can show their business has been impacted by the pandemic. The second draw offers a similar package to the PPP offered out of the Cares Act earlier in 2020. There have been some changes and limitations put in place for the second draw including:
Calculation of loan: The loan calculation follows the same rules as it did under the Cares Act with the exception that you can choose to use payroll amounts from the calendar year 2019 or the 12 months immediately preceding the date of the loan application.
Borrowers with North American Industry Classification System (NAICS) codes starting with 72 (hotels and restaurants) can get up to three and one-half (3.5) times their monthly average payroll costs.
Under original guidance from the Department of Treasury, the expenses paid with funds from the PPP loans were not deductible. The passing of this new bill has clarified that the treatment of the forgiveness will be as tax-exempt income. The forgiveness amount will not add-back the forgiveness as income or result in any reduction in expenses paid.
A simplified application (one-page) will be released for loans of $150,000 or less in the coming weeks. Currently, applications exist for loans of $50,000 or less only. We will provide more details when the Department of Treasury releases the new application.
Currently, a business may take a tax deduction of 50% of business meals. Starting on January 1, 2021, and ending on December 31, 2022, all meals from restaurants will be 100% tax-deductible.
Changes have been made to the Employee Retention Tax Credit including:
The FFCRA sick and leave pay has been extended for qualified employees until March 31, 2021. The original Act was set to expire on December 31, 2020. All the same, requirements will remain in place with the exception of date extension.
Below is a summary of the stimulus relief for individuals that is part of the Consolidated Appropriations Act, 2021 (H.R. 133) which was signed into law on 12/27/2020.
Stimulus payments should start being processed in the coming week(s). Stimulus payments are $600 for each individual ($1200 per couple) and $600 for children age 17 and under. The amount of the stimulus payment will start to phase out at incomes of $75,000 (Single), $112,500 (Head of household) and $150,000 (Married filing joint or surviving spouse).
There are a number of online calculators that can be used to determine the projected amount of the second stimulus check. You will need your 2019 Adjusted Gross Income, which can be found on line 8b of form 1040.
Here is a calculator from Forbes: https://www.forbes.com/advisor/personal-finance/second-stimulus-check-calculator-payments/
Individuals on unemployment can receive an extra $300 per week for up to 11 weeks starting on December 26, 2020. The $300 is not retroactive and is good through March 14, 2021.
Taxpayers that qualify for Earned Income Tax Credit, who have less earned income in 2020 than in 2019, can use their 2019 Earned Income to calculate their Earned Income Tax Credit.
The bill allows taxpayers to carry over amounts in their FSA to 2021 (from 2020), and then again into 2022 (from 2021). This covers both healthcare and dependent care FSAs.
Starting in 2021, the Tuition and Fees Deduction has been eliminated. It has been replaced with a higher phase-out limit of the Lifetime Learning Credit. The new phase-out limits are $80,000 for single and $160,000 for joint returns.
Starting in Tax Year 2021, an individual who does not itemize deductions can also get an above-the-line deduction of $300 per return ($600 for a joint return) for cash donations. The suspension of cash donation limits was also extended through 2021.
Starting in 2021, to be able to claim medical expenses, the floor is officially 7.5%. This number has vacillated between 10% and 7.5%, but is now permanent at 7.5%.
On November 18, 2020, the Department of Treasury issued more clarifications regarding the deductibility of expenses paid with PPP funds that are ultimately forgiven. The Revenue Ruling 2020-27 clarified that expenses will be non-deductible for Tax Year 2020 as long as the taxpayer “reasonably expects” that there will be debt forgiveness on the loan—even if forgiveness isn’t determined by the end of the year.
Many PPP lenders are now accepting applications for forgiveness. Please note that Congress may still make changes to this ruling as senate finance committee chairman Chuck Grassley (R-IA) and ranking member Ron Wyden (D-OR) issued a bi-partisan statement calling on the Department of Treasury to reconsider this position.
Remember, we are here to help! Forgiveness application submission is not a simple task. We can assist you to ensure your application is accurate and that you put yourself in the best position to gain maximum loan forgiveness.
On October 8, 2020, the Department of Treasury introduced an easier Loan Forgiveness Application for businesses that received PPP loans of $50,000 or less. This new application does not require any calculations for Loan Forgiveness and borrowers are not subject to any wage or FTE reductions. All relevant payroll reports and records of other qualified expenses should still be kept on file, as they could be requested in the future by the SBA.
Links are provided below to access these new, simpler forms. Our firm is here to help if you have questions about your PPP Loan Forgiveness.
Beginning August 10, 2020, the SBA will begin accepting PPP loan forgiveness applications. While August 10 is the date set by the SBA, it is important to check with your lender, as many lenders may have set their own unique date for accepting forgiveness applications.
It’s also important to note that there is pending legislation in Washington that could allow automatic forgiveness of loans that are $150,000 or less. At this time, there is no guarantee the legislation will pass.
We will continue to monitor the situation and work to keep clients updated.
As promised, we have kept a close watch on new legislation that affects the Paycheck Protection Program (PPP) and have an important update for you.
Recent legislation (titled HR7010) has passed, offering adjustments to PPP loans—particularly regarding forgiveness calculations. Key changes are as follows:
We hope this update helps. Again, we will continue to closely monitor new legislation and inform you on the key changes that may affect your PPP loan.
IRS extends additional federal tax deadlines to cover individuals, trusts, estates, corporations and others
Last month, the IRS announced that taxpayers have until July 15, 2020 to file and pay federal income taxes (originally due on April 15, 2020). On April 9, 2020, the IRS expanded this tax relief effort to additional returns, tax payments and other actions.
As a result, extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020 and before July 15, 2020. Individuals, trusts, estates, corporations and other non-corporate tax filers qualify for the extension. This means that anyone, including Americans who live and work abroad, can now wait until July 15, 2020 to file their 2019 federal income tax return and pay due taxes.
Estimated tax payments
Additionally, any individual or corporation with a quarterly estimated tax payment due on or after April 1, 2020 and before July 15, 2020, can wait until July 15, 2020 to make a payment—without penalty. This means that estimates normally due June 15, 2020 are now due one month later on July 15, 2020.
Extension of time to file beyond July 15
Individual taxpayers who need additional time to file beyond the July 15 deadline can request an extension to October 15, 2020.
Note: This is an extension to file the tax return. It is not an extension to pay taxes owed. Taxes owed are still due by the July 15, 2020 deadline.
March 29, 2020 – last updated (04/03/2020)
The following represents a summary of the recently signed into law CARES Act—also referred to as the Stimulus Package. Specifically, we are providing a summary of the Paycheck Protection Program.
Title 1 of the CARES Act, entitled “Keeping American Workers Paid and Employed Act,” provides relief for small businesses and their employees who are adversely affected by the COVID-19 outbreak. The key provision in this Act is the Paycheck Protection Program—an emergency lending facility to provide small business loans on favorable terms to borrowers impacted by the current economic state.
The following offers highlights of the Paycheck Protection Program that small business owners need to be aware of and consider as they move forward:
Employee Retention Payroll Tax Credit
Deferral of Employer Social Security Taxes
The deferral of employer social security taxes cannot be used in conjunction with the Payroll Protection Program. This allows an employer to defer their portion of Social Security taxes from March 27, 2020 to January 1, 2021. 50% is due by December 31, 2021 and the remainder by December 31, 2022.
This allows employers to expense qualified improvement property under the section 168 bonus depreciation rules.
March 28, 2020
The following represents a summary of the recently signed into law CARES Act—also referred to as the Stimulus Package.
Recovery check distribution amounts—Single taxpayers will receive $1,200 and joint taxpayers will receive $2,400. There is an additional $500 for each qualifying child.
The recovery check is considered a credit for 2020 but paid in advance.
The amount is reduced (but not below zero) by 5% of each dollar a person’s adjusted gross income (AGI) exceeds. Consider the following:
Consider the following example:
Other key details for recovery check eligibility include:
Any employee who was furloughed or part of a layoff is eligible for state unemployment. Details are as follows:
Ability to withdraw up to $100,000 retirement in 2020 for COVID-19-related purposes without 10% penalty—The distribution is taxable over a 3-year period unless electing to pay it back within 3 years. This essentially equates to a loan unless it is not paid back within the 3-year timeframe. This rule applies to individuals:
Waived required minimum distributions (RMD) from individual retirement accounts—The required minimum distribution for 2020 has been waived.
This also applies to retirees who turned 70 1/2 in 2019 and are required to take their RMD by 4/1/20. If the retiree that turned 70 1/2 in 2019 still intends to take their RMD, this must happen by April 1, 2020—otherwise, the same penalty for late withdrawal will be applied.
Above-the-line charitable contribution—For the tax year 2020, if a taxpayer does not itemize deductions, they can deduct up to $300 in addition to the standard deduction for cash charitable contributions (no stock contributions).
Charitable contribution limitation by AGI—The 60% adjusted gross income limitation has been removed for 2020 (other than from donor-advised funds).
In an effort to provide continued clarity around changes to tax law, we are offering this update to our previous tax announcements. As such, we have removed a few of our previous tax update posts.
Below, you will find a list of frequently asked questions in reference to the Internal Revenue Service’s (IRS) Notice 2020-18 (PDF). In this Notice, the Treasury Department and the IRS announced special Federal income tax return filing and payment relief in response to the ongoing COVID-19 emergency.
You can review the IRS page for additional information here.
Any person with a Federal income tax return or payment due on April 15, 2020 is eligible for relief under the Notice. “Person” includes any type of taxpayer such as an individual, a trust, an estate, a corporation or any type of unincorporated business entity. The payment due refers to both 2019 Federal income tax payments (including payments of tax on self-employment income) and 2020 estimated Federal income tax payments (including payments of tax on self-employment income)—regardless of the amount owed. The return or payment must be due on April 15, 2020—this relief does not apply to Federal income tax returns and payments due on any other date.
No, you do not have to be sick, quarantined or have any other impact from COVID-19 to qualify for relief. You only need to have a Federal income tax return or payment due on April 15, 2020 as described above.
Yes, the relief provided in the Notice applies to Federal income tax returns and payments in respect of an Affected Taxpayer’s 2019 taxable year and postpones those 2019 return filings and payments due on April 15, 2020 until July 15, 2020. If your Federal income tax return for your fiscal year ending during 2019 is due on April 15, 2020, whether that is the original due date or the due date on extension, your due date is postponed to July 15, 2020.
No, this relief applies only to Federal income tax payments. State filing and payment deadlines vary and are not always the same as the Federal filing and payment deadline. We urge you to check with your state tax agencies for those details. More information is available here.
Nothing, except file and pay any tax due with your return by July 15. You don’t need to file any additional forms or call the IRS to qualify for this automatic Federal tax filing and payment relief. If you expect a refund, you are encouraged to file your return as soon as you can so that you can receive your refund. Filing electronically with direct deposit is the quickest way to get refunds. If you need more time beyond July 15 to file your return, request an automatic extension of time to file as described next.
If you are an individual, you can request an automatic extension to file your Federal income tax return if you can’t file by the July 15, 2020 deadline. The easiest and fastest way to request a filing extension is to electronically file Form 4868 through your tax professional, tax software or using the Free File link on IRS.gov. Businesses, including trusts, must file Form 7004.
You must request the automatic extension by July 15, 2020. If you properly estimate your 2019 tax liability using the information available to you and file an extension form by July 15, 2020, your tax return will be due on October 15, 2020. To avoid interest and penalties when filing your tax return after July 15, 2020, pay the tax you estimate as due with your extension request.
To avoid interest and penalties, pay your taxes in full by July 15, 2020. If you filed Form 1040 or Form 1040-SR, the tax payment amount can be found on line 23. If you filed Form 1040-NR, the tax payment amount can be found on line 75. For a corporation filing Form 1120, the tax payment amount can be found on line 35.
Interest and penalties will begin to be charged after July 15 for any amount remaining unpaid by that date.
No, the payment will not be automatically rescheduled to July 15, 2020. If you do nothing, the payment will be made on the date you chose. Here is information on how to cancel and reschedule your payment:
No, second-quarter 2020 estimated income tax payments are still due on June 15, 2020. First-quarter 2020 estimated income tax payments are postponed from April 15 to July 15, 2020.
Yes. Contributions can be made to your IRA for a particular year at any time during the year or by the due date for filing your return for that year. Because the due date for filing Federal income tax returns has been postponed to July 15, 2020, the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020. For more details on IRA contributions, see Publication 590-A – Contributions to Individual Retirement Arrangements (IRAs).
March 21, 2020
Under the recently enacted Coronavirus Preparedness and Response Supplemental Appropriations Act (the Act), small businesses that have suffered substantial economic injury as a result of COVID-19 can apply for low-interest federal disaster loans through SBA. Small businesses and nonprofits can apply for working capital loans of up to $2 million.
We’ve highlighted the following key details of the Act for you here, but you can also learn more by visiting the COVID-19 disaster assistance page on SBA’s website.
The coronavirus situation is changing rapidly, as are the updates to various relief efforts. We will continue to monitor news and keep you updated as clarification is provided.
If you have questions, be sure to reach out to us. Our entire team is here to support and guide you!
March 20, 2020
“The Families First Coronavirus Response Act” (FFCRA), which goes into effect April 2, 2020 and expires December 31, 2020, responds to the coronavirus outbreak by providing additional assistance in the areas of COVID-19 testing, sick leave, food assistance and more. We’ve compiled key details of FFCRA that we believe you need to know.
In summary, the Act:
More specifically, here’s what FFCRA means for both business owners and employees in the areas of sick leave and expanded family and medical leave.
Department of Labor Links:
The coronavirus situation is changing rapidly, as are the updates to various relief efforts. We will continue to monitor the news and keep you updated as clarification is provided.
If you have questions, be sure to reach out to us. Our entire team is here to support and guide you!