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Recent Updates On Coronavirus Tax Relief

Recent Updates On Coronavirus Tax Relief

The government recently agreed on the details of a $900 billion coronavirus bill attached to a $ 1.4 billion omnibus that will fund the government for fiscal 2021. Congress also voted to extend a continuing resolution (C.R.) to keep the federal government funded at current levels ahead of the omnibus and relief package.

The Coronavirus relief bill expands and amends several clauses first adopted in the CARES Act, a $ 2.2 trillion congressional pandemic rescue bill passed in March. With this package, lawmakers will respond to the coronavirus and the economic hardships associated with record tax support of $ 3 trillion. The package extends relief efforts until mid-March 2021, providing support to help people and businesses get through the pandemic's coming months.

Extension of unemployment insurance benefits

An 11-week extension of Unemployment Insurance (U.I.) benefits for the first time under the CARES Act, which expires December 26. This includes Pandemic Unemployment Assistance (PUA), which extends sustainable development benefits to workers who are traditionally ineligible, such as independent contractors and big economy workers, and Federal Pandemic Unemployment Assistance (FPUA) in the event of a pandemic, which will provide an additional amount of $ 300 per week to state unemployment insurance compensation.

Pandemic Emergency Unemployment Benefit (PEUC), which initially provided for an additional 13 weeks of unemployment insurance benefits, will also be extended to 11 weeks (for a combined maximum of 50 weeks) and expire on March 14, 2021. People who receive more benefits from the standard 26 week period as of March 14 will still receive them until April 5 if they have not reached the maximum number of weeks of assistance. Federal funds will be extended to states that waive the waiting week to receive benefits. Workers with incomes of at least $ 5,000 may be eligible for an additional benefit of $100 per week under the mixed-earner unemployment benefit to account for a base salary below the unemployment insurance. 

Direct payments to Individual (Stimulus Check or Relief Rebate)

The second round of direct payments to people, based on collection refunds sent under the CARES Act, but with major changes. Direct payments could reach $ 600 for each eligible single child, with no family size limit. Dependent adults are not eligible. The refund would be designed in the same way as the recovery rebate as the tax credits will be prepaid based on 2019 income and start to be phased out from $150,000 for married filing jointly, $112,500 for heads of household, and $ 75,000 for single filers. The payments are phased out at $ 87,000 for single filers without qualified employees and at $ 174,000 for married couples who file jointly with not eligible dependents.

There are some changes to the direct payments in this exemption cycle and the lower total benefit. Children will receive the same amount of benefits as qualified adults. Families with mixed immigration status with a valid Social Security number for a spouse are also eligible for payments, unlike refunds under the CARES Acts. 

The bill allocates $166 billion for direct payments. 

Child tax credit (CTC) and Earned income tax credit (EITC)

Adjustments to the CTC and the EITC calculation for the fiscal year 2020. During the pandemic, many people eligible for these credits had lower incomes due to a loss of income occupation or underemployment. This may reduce the credits to which they are entitled to file their taxes in the spring of next year. This provision will use 2019 income to determine a person's credit eligibility for the 2020 fiscal year.

Charitable contribution 

The "above-the-line" charitable contribution is a new deduction for the 2020 tax year and extends through 2021. An eligible taxpayer may claim up to $300 as an "above-the-line" deduction to reduce their taxable income. For the first time ever, taxpayers will be able to claim the standard deduction and deduct up to $300  in charitable donations (paid via cash) when calculating their taxable income. 

Flexible savings accounts

Flexible Savings Account (FSA) balances can be carried over from 2020-2021, and 2021 balances can be carried over to 2022. This will assist taxpayers with unused balances, such as child care expenses, who normally lose the value of the ASF balance at the end of the financial year.

Payroll tax deferral

For those who choose to defer the White House employee payroll tax, the payback period has been extended from April 2021 to Dec. 31, 2021, extending the payback period for those taxpayers.

Paycheck Protection Program (PPP)

It renewed the $284 billion Payment Protection Program funding to provide first and second-time repayable loans to small business lenders. The bill expands the eligibility of nonprofit organizations and includes caveats for micro-businesses and community-based lenders. Second-term loans are limited to companies with less than 300 employees and a decrease of at least 25% in gross turnover during a quarter of 2020 compared to the same quarter of 2019. The maximum loan amount for second-time borrowers is $2 million. Companies that obtain a PPP loan will now claim an Employee Retention Tax Credit (ERTC), whereas previously they could only choose one or the other.

PPP loans can be used to pay for qualifying expenses, which have been extended to include expenses such as covered property damage, supplier's costs, or worker protection costs, in addition to employee salaries or operating expenses such as rent and utilities. When used for eligible expenses, PPP loans are repayable. The bill provides for a simplified forgiveness process for loans up to $ 150,000.

The bill also states that businesses can deduct expenses paid for forgiven PPP loans. This clarification applies to both old and new loans and does not include any cushions or limitations. Typically, debt forgiveness is considered taxable income. In the CARES Act, it was clarified that accepted PPP loans would not be considered taxable income. 

Small Business Administration (SBA) Debt Relief Payment and Economic Injury Disaster

It also provides $43.5 billion in small business debt cancellation (SBA) payments, $ 20 billion in new Economic Injury Damage Loan (EIDL) program grants to low-income community businesses, and $ 2 billion to improve the SBA loan. Additional funding of $ 15 billion is intended for theaters, independent cinemas, and cultural institutions.

Employee retention tax credit

The bill increases the tax credit refundable payroll from a maximum of $ 5,000 to $ 14,000, changing the calculation by 50% of the compensation paid up to 10,000 to 70% of salaries paid to $10,000 for each quarter. The bill specifies that companies will now benefit from the employee retention tax credit and participate in PPPs.

Low-income housing tax credit

Increase in public allocations for the low-income housing tax credit. This loan subsidizes residential development construction and rehabilitation with strict income limits for eligible tenants and their cost of living.

Social insurance payroll tax credit employer

Extension until March 2021 of the employer-side social security payroll tax credits to compensate for illnesses linked to the coronavirus and family leaves, created in the Family Response Act for the first coronavirus.

The coronavirus rescue bill is the second-largest recovery legislation, behind CARES Acts, with a combined total of over $ 3 trillion in support. Continued tax support for small businesses, the unemployed, families, and others will help close the gap until widespread vaccine distribution this year, hopefully, will end this crisis.