March 23, 2021 en_US Here is what businees owners need to know about the American Rescue Plan Act, a coronavirus relief bill signed by President Biden in March 2021. American Rescue Plan Act provides PPP funding and tax breaks

American Rescue Plan Act provides PPP funding and tax breaks

By Myranda Mondry March 23, 2021

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.

More pandemic relief is on the way. President Joe Biden signed into law on March 11 the American Rescue Plan Act, a $1.9 trillion coronavirus relief bill that provides additional funding for small businesses, issues another round of stimulus payments to eligible taxpayers, and amends some existing tax provisions.

New funding for EIDL and PPP

The new law allocates over $50 billion to benefit small businesses through a variety of programs. Of that funding, $28.6 billion is dedicated to restaurants and bars, many of which have struggled to recover amid social distancing regulations. Another $15 billion is distributed to the Economic Injury Disaster Loan program, which has been extended through the end of 2021. Additionally, $7.25 billion will continue to fund the latest round of Paycheck Protection Program loans.

Additional amounts will be disbursed to health care entities supporting vaccine distribution and testing related to COVID-19. Schools, colleges, and universities will see more funding, as well as state and local governments.

5 things you need to know about the new act

In addition to small business funding, the American Rescue Plan Act amends several tax provisions and creates a new round of stimulus payments for eligible taxpayers. Some key updates include:

1. $1,400 stimulus checks for eligible taxpayers

A new round of economic impact payments, or stimulus checks, will be issued to qualifying individuals. Just as before, these payments are advance payments of a recovery rebate credit issued by the IRS.

These payments begin at $1,400 for individual taxpayers or $2,800 for married taxpayers filing jointly. This round includes an additional $1,400 for each dependent, including college students and qualifying relatives claimed as dependents.

The individual credit amount is based on the taxpayer’s adjusted gross income (AGI). AGI is gross income minus any adjustments such as student loan interest, tuition and fees, alimony payments, contributions to a retirement account, and certain expenses of teachers and self-employed individuals. The act uses the taxpayer’s 2019 AGI to determine individual eligibility for the stimulus payment — unless a 2020 return has already been filed.

For single taxpayers, the credit begins to phase out at an AGI of $75,000 and will phase out entirely at $80,000. For married taxpayers who file jointly, the credit begins to phase out at an AGI of $150,000 and will phase out entirely at $160,000. For heads of household, the phaseout starts at $112,500 and ends at $120,000.

2. Extended Families First Coronavirus Response Act

These tax credits, initially enacted by the Families First Coronavirus Response Act, compensate employers and self-employed individuals for coronavirus-related paid sick, family, and medical leave. The American Rescue Plan Act extends these credits through September 30, 2021.

Additionally, the new law:

  • Increases the limit on the credit for paid family leave to $12,000
  • Increases the number of days a self-employed individual can take into account when calculating the qualified family leave equivalent from 50 to 60
  • Allows workers to use paid leave credits for leave related to a COVID-19 vaccination or to waiting for a COVID-19 diagnosis or test result
  • Resets the limitation of days taken into account for sick leave on March 31, 2021
  • Expands credits to allow 501(c)(1) government organizations to take them

3. Extended unemployment benefits

The American Rescue Plan Act extends the $300 per week supplement to unemployment benefits from March 14 to September 6, 2021. Additionally, the act makes the first $10,200 in unemployment benefits tax-free in 2020 for taxpayers making less than $150,000.

4. Extended Employee Retention Credits

The Employee Retention Credit (ERC) allows certain employers to claim a tax credit for paying qualified wages to employees. The act extends the ERC through the end of 2021.

5. Additional funding option for PPP borrowers

The Shuttered Venue Operators (SVO) Grant program was established in December 2020. The program includes $15 billion in grants to shuttered venues, including theatrical producers, motion picture theater operators, and more. Previously, PPP loan recipients were unable to receive funding from or even apply for both programs. The American Rescue Plan Act allows eligible entities that have received a first- or second-draw PPP loan after December 27, 2020, to receive an SVO grant in addition. However, the amount of the grant will be reduced by the amount of PPP funds received.

For more information about the American Rescue Plan Act, tax changes, and provisions, please visit the White House website.

Regulations and guidance from the SBA and the U.S. Department of Treasury on the PPP are evolving rapidly, and the information contained herein may be outdated. Please refer to the latest guidance from the SBA and Treasury to confirm current program rules. Given the large demand for additional authorized Paycheck Protection Program funds, not every qualified Paycheck Protection Program applicant will receive a loan. The funding described is made available to businesses located in the United States of America and are not available in other locations. Previous approval of a Paycheck Protection Program loan does not guarantee approval of a second PPP loan.

This content is for information purposes only and information provided should not be considered legal, accounting or tax advice, or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. Intuit Inc. does it have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.

We provide third party links as a convenience and for informational purposes only. Intuit does not endorse or approve these products and services, or the opinions of these corporations or organizations or individuals. Intuit accepts no responsibility for the accuracy, legality or content on these sites.

Rate This Article

This article currently has 1 ratings with an average of 5.0 stars

Myranda Mondry

senior content creator

Myranda Mondry is a senior content creator for the QuickBooks Resource Center. She graduated with a degree in English and Journalism from Boise State University. Her work has been published in Forbes, The Huffington Post, and other top-tier publications. Myranda currently resides in Boise, Idaho, where she runs an Etsy shop selling handmade heirloom quilts. She’s passionate about her dogs, '80s rock music, and helping small businesses succeed. Read more