Congress is keeping the printing presses rolling. This is a summary of the American Rescue Plan Act of 2021 (Act) and its impact on small business owners. We will update with more detail after the IRS has had a chance to promulgate their rules, so stay tuned!
Economic Injury Disaster Loans (EIDL)
An additional $15B for targeted EIDL advances. $5B of that is for $5,000 payments to businesses that had a loss of revenue greater than 50% and employs not more than 10 employees. The balance of the funds is to fund the existing EIDL advance program.
The Act created a Restaurant Revitalization Fund for 2021 with $29B in funding, $5B of which is set aside for businesses with 2019 revenue under $500k. Grants are available up to $10mm per business, limited to $5mm per physical location. Grant amounts are calculated by computing the drop in revenue in 2020 over 2019. Grant funds can be used for essentially all normal business costs, including payroll, rent, utilities, maintenance, supplies, food & beverage, and operational expenses. Unused grant amounts must be returned to the government.
For taxpayers with less than $150k in Adjusted Gross Income can exclude $10,200 of unemployment benefits, per spouse.
Otherwise known as ‘stimmies’, rebates of $1,400 per person, including dependents. The eligibility for the rebate will be based upon 2019 or 2020 tax filings and be sent to taxpayers under $75k in Adjusted Gross Income. The rebate is an advance on a credit for the 2021 tax year. If you 2021 income is above the $75k income threshold, some or all the credit will be due on your return.
Child Tax Credit: Credit amount is increased to $3k (from $1k) for 2021. For children under 6 the credit is $3,600. Increases age of qualifying children to 18 (from 17) for the 2021 tax year. Credit is reduced when Adjusted Gross Income is more than $75k (single taxpayer).
Earned Income Credit (EIC): The Act expanded eligibility for taxpayers with no qualifying children by reducing the minimum age to 19 and increasing the income level for phase out of the credit.
Dependent Care: The Act increases the eligible dollar limit for the credit to $8k for one child, and $16k for two or more children and increased the percentage from 35% to 50%. Income limits for phase outs were increased.
Paid Sick and Family Leave: This is the credit originally created in the Families First and Coronavirus Act last year. Employers who were required to pay sick leave because of that Act in 2020 are eligible for a credit of 100% of the wage amount up to a weekly dollar limit. The new law extends the credit for voluntarily paid sick and family leave through September 30, 2021. This credit is also available for self-employed individuals with no employees.
Employee Retention Credit: The Act expanded the credit to businesses in existence after February 15, 2020 that had a 3-year average revenue of not more than $1mm.
The hits just keep on rolling. For businesses in Oklahoma and Texas, the filing deadline for both businesses and individuals has been pushed to June 15th, 2021. With the new law, IRS may extend the April 15th deadline to everyone, but who knows. Have questions? Please reach out.
Employee Retention Credit Expands Under Consolidated Appropriations Act 2021