must read highlights of the proposed 1.9 trillion stimulus bill
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The proposed bill is now passed and we’ve summarized it here.
Updated as of 3.1.2021
Look, this next package is enormous and almost as big as the CARES Act. The CARES Act was 2 trillion and stimulus bill #3 is called the American Rescue Plan Act of 2021 is currently totaling 1.9 trillion. It is no joke and we are here to break down the highlights on what it means for you, your family and your business.
Note that this is all still proposed and being modified regularly.
Their “goal” is to finalize this bill prior to the end of unemployment which is currently March 14th, 2021.
Stimulus Checks are $1,400 per Adult and Dependent
Eligibility has changed in comparison to the prior checks and includes adult dependents.
The income limits have dropped and there is a hard cap for each filing type. Meaning that once you reach the maximum amount you will not receive a stimulus check for your dependents (in the prior packages parents always received checks for kids regardless of income).
See diagram below for income threshold amounts. For each filing type you’ll receive the full $1,400 if you make under a certain amount (dark orange area), or a limited amount if you make within an income range (lighter orange) and then no benefit if you exceed the highest cap.
What year tax return will this be based on?
The assumption would be that it would be based on the most recent return received. Therefore, if you qualify in 2019 and NOT in 2020, you may want to wait to file until you receive the check.
Inversely if you qualify in 2020 but not in 2019 you may want to file now so you can get that benefit.
If you don’t receive the check and were entitled to, I would imagine you’d receive it on the 2021 return (a year from now eek).
Increased Child Tax Credit
The child tax credit could increase from $2,000 per child to $3,600 (kids under 6) and $3,000 (kids 6-17) per child. In addition, the phase out thresholds will be lifted higher so that more taxpayers will qualify for the tax credits.
The new thresholds would be:
Individuals $75,000
Head of Household $112,500
Married Filing Joint $150,000
Technically this is a credit for 2021 so it won’t impact this current tax filing season but under section 7527A there is a plan for advance payment of the child tax credit.
This means that you could receive advances of this credit NOW (assuming this bill passes) if you qualify on previous tax returns. The Secretary will calculate this for you and then provide an online portal to set up payments etc. to receive these funds.
If you receive MORE than you were eligible for you will have to pay it back with your tax return for 2021.
Extension of Pandemic Unemployment Assistance
The $300 per week unemployment checks are ending in March. The Act plans to extend unemployment assistance to August and increase weekly checks to $400.
It’s possible that the plan will also include triggers to extend unemployment into September under certain conditions.
Extension of the Employee Retention Credit
If you don’t know about this HUGE credit, we’ve broken it all down in our blog here.
The previous Act states that the credit will only be available in Q1 and Q2 of 2021, but the American Rescue Plan Act is extending it to January 1, 2022. Which means eligible entities would receive Q3 and Q4 of 2021.
The potential benefits could be up to $7k per employee PER QUARTER. So $28k in credits for each employee.
To qualify you must have had a drop in gross sales of at least 20% for the 2021 quarter in comparison to the corresponding quarter in 2019.
Ex1. Q2 2021 was $75,000 and Q2 2019 was $100,000 you would qualify because there was more than a 20% drop in sales.
Ex2. Q2 2021 was $75,000 and Q2 2019 was $80,000 you would NOT qualify because sales did not drop more than 20%.
Please note there are other pieces to qualifications and all can be summarized here.
$5k Additional Targeted EIDL Grants
In addition to amounts otherwise available there is a fund specifically for $5k EIDL grants. These grants are for “covered entities” meaning that you business needs to qualify under the low-income area provision.
If you are covered you can qualify for the additional $5k if you are one of the following:
“severely impacted small business” - defined as suffering an economic loss greater than 50% and employs less than 10 employees
“substantially impacted small business” - defined as not meeting severely impacted but still has less than 10 employees
If this passes, payments will begin 28 days after the enactment of the Act. Nothing to do besides wait on this one.
More Support for Restaurants
There is a fund that is set aside specifically for restaurants of $25 billion. The potential grant amount is not currently capped and it would total the difference between revenues made in 2019 vs 2020!
These will be grants to restaurants that are not a chain or franchise with more than 20 locations.
Funds will be required to be spent on payroll, mortgages, rent, to set up outdoor seating, provide PPE, paid leave, food, debt and other expenses.
This could be a life line for many restaurants. And don’t forget the increased amount of PPP funds that restaurants can receive on their second round.
Shuttered Venue Operator Grant
This was included in the CAA 2021 (passed in December 2020) to support and relieve owners of venues who had to shut down because of Covid-19 (think theaters, arenas, museums, zoos, etc.). The new Act allocates more funds to this program to increase the availability of these grants.
The amount these venues can receive are substantial:
45% of 2019 gross revenue or 10MIL whichever is less
If not open all of 2019, it would be the average monthly revenue multiplied by 6 or 10MIL whichever is less
Expansion of Paid Sick and Family Leave
The current paid sick and family leave credits are pretty big. These are available to both businesses and self employed individuals.
As things are currently:
Each employer (and self employed person) was entitled to receive credits for up to 10 days of sick leave related to Covid specific causes up to $2k per employee.
And an additional Extended Family Leave credit up to 50 days if the employee (or self employed person) was on leave to care for a child due to school and daycare closures up to $10k per employee.
The new Act shows that:
Employers are entitled to $12k per employee instead of only $10k for the Extended Family Leave.
Self employed individuals who file on a Schedule C can take up to 60 days rather than the prior 50.
Paid leave is allowed for employees and self employed individuals to receive the Covid-Vaccination. This includes getting the immunization and time to recover form any side effects.
Previously you could only claim these credits through 3/31/2021 and now this could be extended through 9/30/2021.
Days eligible to be taken will reset on March 31,2021 - and an additional 10 days will be allowed after that.
In conclusion…
There is a lot going on in this bill. Based on our current understanding, the main areas of the bill do not impact the 2020 tax returns and should not prevent anyone from moving forward.
The things to keep a close eye on are usage of your PPP2 if you have it, employee wages as we see this employee retention credit being extended, and just adequately keeping books and records as up to date as possible to be able to act fast.
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