Editor’s note: Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly. Please refer to the latest guidance from SBA and Treasury to confirm current program rules and how they apply to your particular situation.
The Coronavirus Response and Relief Supplemental Appropriations Act of 2021, a $900 billion relief package to deliver the second round of economic stimulus for individuals, families, and businesses, was signed into law Dec. 27, 2020. The law provides relief through multiple measures, and expands many of the provisions already put into place under the original Coronavirus Aid, Relief, and Economic Security Act, including a second round of direct stimulus payments to individuals and families.
Here is what you need to know:
Stimulus payments for individuals and joint taxpayers
The law includes a second wave of direct stimulus payments for millions of Americans – up to $600 for eligible individuals, $1,200 for joint taxpayers, and an additional $600 for each dependent child under 17. This means a family with two children may receive $2,400.
As of today, there is nothing you need to do to get a stimulus payment. The IRS will begin work to issue stimulus payments using the most recent information they have on file, likely from the 2019 tax return, either by direct deposit or by check.
Stimulus payments should begin to be sent in the next couple weeks. This information will be updated once more information is available.
How will a taxpayer know if they are eligible to receive a second stimulus payment?
Taxpayers with an adjusted gross income (AGI) of up to $75,000 ($150,000 married filing jointly), they should be eligible for the full amount of the stimulus payment.
As AGI increases over $75,000 ($150,000 married filing jointly), the stimulus amount will go down. The stimulus payment completely phases out at $99,000 for single taxpayers, $136,500 for those filing as Head of Household, and $198,000 for joint filers with no kids.
The law also expands stimulus payments to mixed-status households (households with different immigration and citizenship statuses), meaning more households will be immediately eligible for this stimulus than were for the first round. This change is retroactive, so some individuals who were ineligible for the first stimulus, provided under the CARES Act, may then be eligible to receive stimulus payments under this law.
People receiving Social Security retirement, disability, Railroad Retirement, VA, or SSI income, and who are not typically required to file a tax return, will again receive a stimulus payment. As in the first round, the IRS will use the information from Form SSA-1099, Form RRB-1099, or the Veterans Administration, to generate a stimulus payment.
Unemployment payments will increase by $300 per week and the benefits will be extended until March 14, 2021 (or until April 5, 2021, for anyone who has not exhausted their unemployment benefits before then).
The law also extends the Pandemic Unemployment Assistance (PUA), which expands unemployment to those who are not usually eligible for regular unemployment insurance benefits. This means that self-employed workers, freelancers, and anyone with a side business will continue to be eligible for unemployment benefits.
Certain workers who have at least $5,000 per year in self-employment income, but are disqualified from receiving PUA because they also have an employer, could also be eligible for an additional $100 per week in unemployment benefits.
Special lookback for Earned Income Tax Credit and the Child Tax Credit
This is a very important provision that has the potential to help workers who experienced lower income in 2020, or received unemployment income in lieu of their regular wages, get bigger tax credits and larger refunds in the coming year.
The special lookback rule will allow lower income individuals to use their earned income from 2019 to determine their Earned Income Tax Credit and the refundable portion of their Child Tax Credit in 2020, since their lower 2020 income could reduce the amount they are eligible for.
The Earned Income Tax Credit is the country’s largest program for working people with low to moderate income. More than 25 million eligible tax filers received federal Earned Income Tax Credit last tax season and the average Earned Income Tax Credit was $2,476 per filer.
Expanded Paycheck Protection Program (PPP) for small businesses and eligible nonprofits
The legislation provides additional funding for loans under the Paycheck Protection Program (PPP) and establishes a program whereby certain borrowers that already received a PPP loan could receive an additional “second draw” PPP loan.
To qualify for a second PPP loan the borrower must employ 300 or fewer employees and must be able to demonstrate that their business experienced a 25 percent revenue reduction based on a required comparison between 2020 and 2019 periods. Eligibility for initial PPP loans has also been expanded for some borrowers. For example, small 501(c )(6) organizations that have 300 employees or fewer will now be eligible for a PPP loan. The PPP also broadens the type of business expenses that can be forgiven under the loan to include supplier costs, allows business expenses paid using PPP proceeds to be tax deductible, and simplifies the loan forgiveness process for loans of $150,000 or less.
Contractor paid leave
The Act extends the CARES Act provision that allows federal contractors who were temporarily unable to work due to facility closures and other restrictions to receive reimbursement from federal agencies up to the amount of paid leave the contractor paid its employees.
Eviction moratorium and rental assistance
The legislation extends the moratorium on evictions under the CARES Act, designed to protect renters from eviction, until Jan. 31, 2021. Families struggling to pay rent or with past due rent could be able to get assistance with paying past due rent and future rent payments, as well as utility bills.
The legislation includes the permanent passage and, in some cases, multi-year extension of many additional tax provisions, commonly referred to as tax extenders. Tax extenders provide tax relief and support for families and individuals through various mortgage, education, and medical expense relief.
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