IIJA’s New Digital Asset Reporting Requirement

The Infrastructure Investment and Jobs Act of 2021 (IIJA) was signed into law on Nov. 15, 2021. One major provision of the IIJA includes a requirement that cryptocurrency exchanges perform intermediary Form 1099 reporting for cryptocurrency transactions to the IRS. This will will require that cryptocurrency exchanges perform intermediary Form 1099 reporting for cryptocurrency transactions for all digital assets starting in 2023.

Existing reporting rules. As might already be aware if you have a stock brokerage account, whenever you sell stock or other securities you receive a Form 1099-B at the end of the year reporting your security gains and losses. This Form 1099-B reports the details of transactions, such as sale proceeds, relevant sale or purchase dates, your tax basis for the sale, and the character of gains or losses (long-term, short-term, etc.). Additionally, if you were to transfer stock or securities from one broker to another, your old broker is required to provide your new broker with information on the holdings that were transferred, such as tax basis or date acquired.

Digital asset broker reporting. The IIJA expanded the definition of brokers to include Crypto Exchanges and other service providers that are providing transfers of digital assets on behalf of another person. This means that any platform on which you can buy and sell cryptocurrency will be required to report digital asset transactions to you and the IRS at the end of each year.

Transfer reporting. Sometimes you may have a transfer transaction that is not a sale or exchange. For example, if you transfer cryptocurrency from your wallet at one Crypto Exchange to your wallet at another Crypto Exchange, the transaction is not a sale or exchange. For that type of transfer, as with stock, the old Crypto Exchange will be required to furnish relevant basis and other information to the new Crypto Exchange. Additionally, if the transfer is to an account maintained by a party that is not a Crypto Exchange (or broker), the IIJA requires the old Crypto Exchange to file a return with the IRS. We expect that this filing will include generally the same information that is furnished in a broker-to-broker transfer.

What are Digital assets. For the reporting requirements, a “digital asset” is any digital representation of value which is recorded on a cryptographically secured distributed ledger or any similar technology. The IRS can (and may) modify this definition. As it stands, the definition will capture most cryptocurrencies as well as potentially include some non-fungible tokens (NFTs) that are using blockchain technology for one-of-a-kind assets like digital artwork.

Cash transaction reporting. Historically, when a business receives $10,000 or more in cash in a transaction, that business is required to report the transaction, including the identity of the person from whom the cash was received, to the IRS on Form 8300. The IIJA now requires that businesses treat digital assets like cash for purposes of this reporting requirement, for reporting that is due after December 31, 2023.

Closing. Some things to keep in mind: First, if you use a Crypto Exchange, and it has not already performed a KYC (Know Your Customer), expect it to do so soon. Second, the transactions subject to the reporting will include not only selling cryptocurrencies for fiat currencies (like U.S. dollars), but also exchanging cryptocurrencies for other cryptocurrencies. Third, a reporting intermediary does not always have perfect information, especially when it comes to an entirely new type of reporting. Expect the first information reporting cycle for this reporting requirement to be a bit bumpy.

Remember that as your trusted CPA advisors, we are here to help you and can provide solutions for any challenges that may develop.

IIAJ Retroactively Terminates Employee Retention Tax Credits

The Infrastructure Investment and Jobs Act (IIAJ) (to be signed by President Biden on November 15, 2021), retroactively ended the Employer Retention Tax Credit (ERTC) to apply only through September 30, 2021 (rather than through December 31, 2021), unless the employer is a recovery startup business. As a result of retroactive termination of the ERTC, you may need to review your payroll tax compliance (including tax deposits) to make sure that it conforms with these changes.

Background. Congress originally enacted the ERTC in the Coronavirus Aid, Relief and Economic Security (CARES) Act in March of 2020 to encourage employers to retain employees during the pandemic. Congress later extended and modified the ERTC to apply to wages paid before January 1, 2022.

Eligible employers could claim the refundable ERTC against the employer’s share of Medicare (1.45% rate) taxes equal to 70% of the qualified wages paid to each employee (up to a limit of $10,000 of qualified wages per employee per calendar quarter) in the third and fourth calendar quarters of 2021.

For the third and fourth quarters of 2021, a recovery startup business is an employer eligible to claim the ERTC. Under pre-IIAJ law, a recovery startup business was defined as a business that

  1. Began operating after February 15, 2020,
  2. Had average annual gross receipts of less than $1 million and
  3. Didn’t meet the eligibility requirement, applicable to other employers, of having experienced a significant decline in gross receipts or having been subject to a full or partial suspension under a government order.

However, recovery startup businesses are subject to a maximum total credit of $50,000 per quarter for a maximum credit of $100,000 for 2021.

IIAJ retroactive termination. The ERTC was retroactively terminated by the IIAJ to apply only to wages paid before October 1, 2021 unless the employer is a recovery start up business. Thus, for wages paid in the fourth calendar quarter of 2021,

  1. The credit applies only to recovery startup businesses and
  2. Other employers can not claim the credit.

In connection with the continued availability of the ERTC for recovery startup businesses in the fourth quarter of 2021, the IIAJ also modified the definition of a recovery startup business so that a recovery startup business is one that

  1. Began operating after February 15, 2020, and
  2. Has average annual gross receipts of less than $1 million.

The pre-IIAJ prerequisite that a recovery startup business must not have otherwise met the requirements for an eligible employer qualifying for the ERTC, i.e., having experienced a significant decline in gross receipts or having been subject to a full or partial suspension under a government order, no longer applies. Thus, because of the modified definition, an employer that was not a recovery startup business in the third quarter of 2021 might qualify as a recovery startup business in the fourth quarter of 2021 and be able to claim the ERTC for the fourth quarter of 2021.

If you retained payroll taxes in anticipation of receiving the ERTC based on post-September 30, 2021 payroll taxes, we need to review your situation and determine how and when to repay those taxes and address any other compliance issues. We anticipate IRS will issue guidance to assist employers in handling any compliance issues.

If you have additional questions or concerns about how the retroactive termination of the ERTC will affect your business, please let us know.

IRS announces 401(k) limit increases to $20,500

The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan has been increased from $19,500 to $20,500 beginning with the 2022 calendar year.

Additionally, the income ranges for determining eligibility to make deductible contributions to traditional Individual Retirement Arrangements (IRAs), to contribute to Roth IRAs, and to claim the Saver’s Credit have also all increased for 2022.

Below are the updated phase-out ranges for IRA contributions in 2022:

Single Taxpayers

For single taxpayers covered by a workplace retirement plan (even if only for a portion of the year), the phase-out range is increased to $68,000 to $78,000, up from $66,000 to $76,000.

Married Filing Jointly Taxpayers

If the spouse making the IRA contribution is covered by a workplace retirement plan, the phase-out range is increased to $109,000 to $129,000, up from $105,000 to $125,000.

If the spouse making the IRA contributor is not covered by a workplace retirement plan but is married to someone who is covered, the phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000.

Married Filing Separately Taxpayers

If a taxpayer is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Roth IRAs

The income phase-out range for taxpayers making contributions to a Roth IRA is increased to $129,000 to $144,000 for single and head of household taxpayers, up from $125,000 to $140,000. For married couples filing jointly, the income phase-out range is increased to $204,000 to $214,000, up from $198,000 to $208,000. The phase-out range for a married individual filing a separate return who makes contributions to a Roth IRA is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.

Simple IRAs

The amount individuals can contribute to their SIMPLE retirement accounts is increased to $14,000, up from $13,500.

Key employee contribution limits that remain unchanged

The limit on annual contributions to an IRA (Roth or Traditional) remains unchanged at $6,000. The IRA catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000, for a maximum contribution amount of $7,000.

The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,500. Therefore, participants in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan who are 50 and older can contribute up to $27,000, starting in 2022. The catch-up contribution limit for employees aged 50 and over who participate in SIMPLE plans remains unchanged at $3,000.

Details on these and other retirement-related cost-of-living adjustments for 2022 are in Notice 2021-61, available on IRS.gov.

Advance Child Tax Credit: Should You Opt-Out?

The American Rescue Plan Act (ARPA) included a provision that allows for the IRS to begin making advanced payments of the Child Tax Credit next month. This credit, up to $3,600 per child under the age of 6 and $3,000 per children ages 6 to 17, is typically received as a credit applied against your total tax when you file your tax return.

The Child Tax Credit advance payments, which are scheduled to be made on the 15th of each month, were established to create financial certainty for families to plan their budgets. The first monthly payment is slated to begin on July 15, unless a taxpayer opts-out

Should you opt out of advance payments?

Everyone’s individual situation is different, but many individuals rely on these credits at year-end upon filing to reduce their tax burden, especially individuals and entrepreneurs that have factored these credits into their withholding and estimated tax payments. If you want to avoid any unwanted surprises at tax time, it may be beneficial to opt out of the advance payments unless you need the funds to make ends meet. If you chose to opt out, you will still be able to claim the full Child Tax Credit upon filing of your 2021 tax return. Otherwise, any payments received in advance are not allowed to be claimed as a credit on your 2021 tax return.

Receiving these advance payments will likely complicate your tax return next filing season and result in a lower tax refund or larger balance due than usual.

If you received advances of the Child Tax Credit that you were ultimately not eligible for based on 2021 income, you may also be required to pay these amounts back. Since the advanced credit is based on 2019 or 2020 information, if you earn or receive more income in 2021 than you did in 2020 or 2019, or if your child turns 18 by January 1, 2022, you may be on the hook to repay this advance with your 2021 tax return.

How much are the Child Tax Credit payments?

Most eligible taxpayers will receive $300 per month for each child under 6 years old and $250 per month for each child aged 7-18. However, higher earners will receive reduced payment amounts.

The annual credit can be reduced to $2,000 per child if your modified AGI (adjusted gross income) in 2021 exceeds:

  • $150,000 if you’re married filing jointly
  • $112,500 if you’re filing as a head of household
  • $75,000 if you’re single or married filing separately

The annual credit can be reduced to below $2,000 per child if your modified AGI in 2021 exceeds:

  • $400,000 if you’re married filing jointly
  • $200,000 for all other filing statuses

You can opt-out of receiving this credit here.

You can check your eligibility here.

The American Rescue Plan Act of 2021 – Individual Provisions

Below we have assembled a brief summary of some of the individual taxpayer provisions of the American Rescue Plan Act of 2021 (ARPA), passed on March 11, 2021.

A Third Round of Stimulus

Recovery rebate credits (stimulus checks). ARPA provides a third round of nontaxable stimulus checks directly payable to individuals. These payments are structured as refundable tax credits against 2021 taxes but will paid in 2021 and reconciled on your 2021 tax return.

This round of stimulus offer’s a maximum payment of $1,400 per eligible individual ($2,800 for married joint filers) and $1,400 for each dependent.

The income phase out limitations for this round set in quicker than previous predecessor payments. For this round of payments, the phase outs will occur between the following Adjusted Gross Income (AGI) amounts:

  • Single – $75,000 – $80,000
  • Head of Household: $112,500 – $120,000
  • Married filing joint: $150,000 – $160,000

Eligibility is based on information from 2020 income tax returns (or 2019 returns, if 2020 returns haven’t been filed when the advanced credit is initially issued). For households whose payment was based on 2019 income data, and who would be eligible to receive a larger payment based on 2020 data, no need to worry, as there is a provision that allows for the IRS to issue a supplementary payment.

Changes to the Child Tax Credit and Dependent Care Credit

Child tax credit. For 2021, the child tax credit has been increased significantly from $2,000 per qualifying child to $3,000 per child or $3,600 for children under 6 years of age.

Additionally, the IRS will begin making advanced payments of a taxpayer’s estimated 2021 tax credit during the later part of this year. These advances are expected to be 50% of the anticipated credit a taxpayer would receive on their 2021 return.

Child and dependent care credit. For 2021, the amount of expenses taken into consideration for the child and dependent care credit has been increased from $3,000 to $8,000 for taxpayers with one qualifying dependent and from $6,000 to $18,000 for taxpayers with two or more qualifying dependents. This is a massive increase to a credit that was historically insignificant to high-earners.

Dependent care assistance programs. For 2021, the amount excludible under a dependent care assistance program has been increased to $10,500 (or $7,500 for a married taxpayer filing a separate return).

Change in Taxability of Unemployment Benefits

Income exclusion for unemployment benefits. For 2020, taxpayers with modified AGI less than $150,000 can exclude from gross income $10,200 of their unemployment benefit. As of the date this was written, this limit inconveniently applies to taxpayer’s of all filing statuses, whether married filing joint, separate, head of household, or single.

We hope you find these updates useful. If you have any questions, please don’t hesitate to contact our office.

The American Rescue Act of 2021 – Business Provisions

Below we have assembled a brief summary of some of the business taxpayer provisions of the American Rescue Plan Act of 2021 (ARPA), passed on March 11, 2021.

Extension of the paid sick and expanded family and medical leave tax credits

Payroll tax credits. Paid sick leave and family leave credits are extended to apply to apply to wages paid through September 30, 2021. This credit had previously only applied to wages paid up to of March 31, 2021.

Self-employment sick and family leave credits. These credits, which are creditable against the income tax for self-employed individuals, have also been extended to apply to eligible days through September 30, 2021.

Other notes. Both of these credits now expand eligible leave to include obtaining and recovering from COVID-19 immunization.

Tax-Free Treatment of Restaurant Revitalization Grants

Taxability of Restaurant Revitalization Grants . ARPA allows for tax-free treatment of the SBA Restaurant Revitalization Grants. Under ARPA, these advances aren’t included in income and taxpayers are allowed a deduction for expenses paid with these tax-free grants.

We hope you find these updates useful. If you have any questions, please don’t hesitate to contact our office.



ARPA’S Enhancements to the Premium Tax Credit

The premium tax credit (PTC) is a refundable tax credit that assists individuals and families in paying for health insurance obtained through a Marketplace (Healthcare.gov) and was established under the Affordable Care Act (ACA). Recent COVID relief legislation, the 2021 American Rescue Plan Act, (or ARPA) that was just recently passed in March 2021 made several changes to this credit. Below, we’ve assembled an overview of these changes.

Changes in Eligibility for Households Above 400% of the Federal Poverty Line

Under pre-ARPA law, individuals with household income above 400% of the federal poverty line (FPL) weren’t eligible for the PTC.

Under ARPA, for 2021 and 2022, the PTC is available to taxpayers with household incomes that exceed 400% of the FPL. This change will have the effect of increasing the number of people who are eligible for the PTC.

An Increase to PTC for 2021 and 2022

New tables for 2021 and 2021 will modify how the PTC is calculated. These tables calculate the PTC on a sliding scale based on household income, expressed as a percentage of the federal poverty line (FPL). The amount of PTC a taxpayer is eligible for is limited to the excess of the premiums for the applicable benchmark plan over the taxpayer’s required share of those premiums. Previously, a taxpayer would have had to spend as much as 9.83% of their house hold income on health insurance to be eligible for the PTC. This amount decreases to 8.5% for 2021 and 2022.

No Repayment of Excess Advance PTC Payments for 2020

One of the biggest changes to the PTC was the suspension of any repayment of “excess” advances of the PTC. Even though the ARPA was passed in March 2021, this impacted many 2020 filers and is part of the reason for the delays experienced this filing season.

Historically, if your actual PTC turned out to be more than the advance payments you received as a subsidy to your health insurance premiums during the year, you would receive a refundable income tax credit for the excess. But if your advance payments exceed your PTC, you were required to pay back the excess as additional income tax, subject to a repayment cap based on your household income.

For 2020 under ARPA, if you file a 2020 return reconciling your advance PTC payments with your actual PTC, no additional income tax will be imposed if the advance payments are greater. Taxpayers can retain the benefit of the advance payments even if they exceed the maximum PTC to which they are entitled.

This is all very new guidance, but at this time, we are not recommending that clients file amended returns to claim a refund if they’ve already filed a 2020 return and paid the excess credit back as additional tax.

Please let us know if you would like more information about these new provisions.

Consolidated Appropriations Act 2021 – Business Provisions

On Sunday, December 27, 2020, the President signed into law one of the longest bills in US history. This bill, the Consolidated Appropriations Act 2021, is a sprawling 5,593 pages and contains a $900 billion relief package for aid related to the COIVD19 pandemic as well as a $1.4 trillion in annual funding for the federal government in the upcoming year.

Paycheck Projection Program (PPP)

Clarification of Tax Treatment for Forgiveness of Covered Loans. The Consolidated Appropriations Act of 2021 confirms Congress’s original intent in the CARES Act and reverses the Treasury Department’s interpretation of the tax implications of loan forgiveness, clarifying that PPP loan forgiveness will not be included in the gross income of an eligible recipient nor will any deductions paid for with PPP proceeds be disallowed or have it’s tax attributes reduced.

Covered Period Selection. Borrowers have the option of selecting any covered period length between 8 and 24 weeks after the loan origination date.

Additional Eligible Expenses. Employer-provided group insurance benefits are now considered forgivable payroll costs.  The 60/40 ratio (60% payroll expenses and 40% other expenses to achieve 100% forgiveness) has not been changed, but “other expenses” can now include expenses other than rent and utilities. This change only applies to loans that have not been forgiven yet. Additional eligible expenses include:

  • Operations expenditures such as software, product delivery, processing fees, or tracking of payroll expenses
  • Costs related to property damage and vandalism or looting that occurred during 2020 but were not covered by insurance or other compensation. Supplier costs, including those prior to the covered period that were essential to operations
  • Worker protection expenditures (PPE and investments to help recipient comply with federal health and safety guidelines)

PPP Round 2. The Act has provided for a second round of PPP loans. To qualify:

  • Revenue must have decreased by 25% (any quarter in 2019 vs. the same quarter of 2020)
  • Must have been in operation on February 15, 2020. 
  • Must have 300 employees or less
  • Must not be a publicly traded company
  • Must have used all of the first PPP loan in order to apply for second PPP loan

Borrowers may receive a loan amount of up to 2.5x the average monthly payroll costs incurred or paid during 2019 or the one year period prior to the date on which the loan is made, not to exceed $2 million. Entities in industries assigned to NAISC Code 72 (Accomodation and Food Services) may receive loans of up to 3.5x average monthly payroll costs. 

Simplified Loan Forgiveness. Loan forgiveness application and documentation is simplified for loans up to $150,000, which will be forgiven in full when the borrower signs and submits certification providing information regarding the number of employees retained, the estimated amount spent on payroll expenses, and the total loan value. 

Borrowers who have returned all or part of their PPP loan can reapply for the maximum amount forgivable as long as they have not received forgiveness. They can also work with lenders to modify the loan value if loan calculations have increased due to changes in interim final rules. 

Economic Injury Disaster Loan (EIDL)

Extension of EIDL Applications: The Consolidated Appropriations Act of 2021 extended the application deadline for EIDL loans through December 31, 2021. Eligible small businesses can still apply for a maximum loan amount of $2 million, and are now eligible to receive the full $10,000 advance grant regardless of the number of workers employed (previously $1,000 per employee).

EIDL Advance Grant and PPP Loan Forgiveness: The provisions from the previous CARES act reducing PPP loan forgiveness by the amount of advance grant received was repealed with the new act. EIDL Advances will no longer reduce PPP forgiveness. 

Tax Implications: The grants remain excluded from income, and no deductions are disallowed as a result of this income exemption.

Employee Retention Tax Credit (ERTC)

ERTC and PPP Loans. Employers who have received a PPP loan can now also qualify for the ERTC retroactively. To prevent double dipping, qualified payroll that have been taken into account for PPP loan forgiveness will not be eligible for purposes of determining the ERTC for that period. The ERTC however can be applied to qualified wages paid for using the PPP proceeds that were not forgiven by the SBA.. 

Tax Credit Hike. Beginning January 1, 2021, the ERTC rate has been increased from 50% to 70% of qualified wages. The $10,000 qualified wage limitation has also been increased to $10,000 per quarter, previously having been limited to the first $10,000 in wages per employee, per year.  As a result, employers can now enjoy a maximum credit of $7,000 for each employee per quarter, as opposed to the previous $5,000 max credit per employee for wages paid after March 12, 2020 and before January 1, 2021. .  

Eligible Employers Modifications. The Act expanded  the gross receipts test for eligible employers, reducing the required gross receipt decline from 50% to 20% of the comparable quarter. The comparable quarters are determined as follows:

  • For businesses that started operations in 2019 – same calendar quarter in 2019 and 2020 (i.e. 2019 Q3 vs 2020 Q3)
  • For businesses that started operations in 2020 – same calendar quarter in 2020 and 2021 (i.e. 2020 Q1 vs 2021 Q1)
  • Alternative Election – businesses can elect to compare immediately preceding quarters (i.e. 2020 Q1 vs 2019 Q4)
  • The above modifications are available to employers beginning January 1, 2021.

The above modifications are available to employers beginning January 1, 2021.

Extended Availability. The ERTC is now available through June 30, 2021.

Advance Payment of ERTC. Beginning January 1, 2021, employers with less than 500 employees can apply to receive the credit in advance for up to 70% of average quarterly wages paid in 2019 (or 2020 for businesses not in existence in 2019). For seasonal employers, wages from a specific calendar quarter may be used instead of the average. The advance will be reconciled against the actual credit later on, increasing the employer’s payroll tax for the calendar quarter if there is an excess.

Employee Retention Tax Credit - 2021

Extension of SBA Loan Debt Relief

Extension of Monthly Payments: The debt relief program provided for by the CARES Act, which covers principal, interest and fees payments for eligible SBA 7(a) Loans has been extended for an additional 3-month period, with payments starting on February 1, 2021. There is an extended 5-month period after the initial 3 months for businesses operating under certain hard-hit industries (food and entertainment, educational services etc.). 

Maximum Covered Payments Per Month: The SBA will only cover a maximum of $9,000 for each month, with the excess amount to be reported as additional interest to be paid at the end of the loan period. 

Limitations on Specified 7(a) Loans: Borrowers cannot receive debt relief assistance for more than one 7(a) loan that were taken out between March 27, 2020 to October 26, 2020.

Tax Implications: The debt relief is also excluded from income, with no expense disallowance as a result of the income exemption.

SBA Loan Enhancements

Temporary Fees Waiver. The SBA is expected to waive or reduce administrative fees related to SBA 7(a) and 504 loan applications.

Increased 7(a) Loan Guarantee. The SBA will now guarantee at least 90% of the balance of 7(a) loans, up from 75% to 85% (depending on loan amount).

SBA Express Loans. The maximum loan amount is temporarily increased to $1 million and the SBA guarantee rate is modified to the following:

  1. Loans less than or equal to $350,000 – up to 75%
  2. Loans greater than $350,000 – up to 50%

All of the above provisions are only applicable through September 30, 2021, as the act specifically provided for a prospective repeal by October 1, 2021.

Grants for Shuttered Venue Operators

Eligibility Requirements The person or entity must be a live venue operator or promoter, which includes the following:

  • Theaters
  • Museums
  • Cinemas
  • Talent managers and representatives

The grantee  must have been operational on or before February 29, 2020 and must have experienced at least a 25% reduction in gross receipts on a quarter-to-quarter basis. The grantee must also be operational, or is expected to resume operations, by the grant date. 

Exclusions. The Act specifically prohibits the following persons or entities from receiving the grant, that meets the following criteria:

  1. At least one of the following:
    1. Publicly-owned companies
    2. Receiving more than 10% of gross revenue from Federal funding
  2. At least two of the following:
    1. Operating in more than one country
    2. Operating in more than ten states
    3. Employing more than 500 employees as of February 29, 2020

Priority Periods The grant is provided on a priority basis with applicants who had experienced a 90% reduction in gross revenues on an April to December 2019 and 2020 comparative period, getting prioritized in the first 14 days. Second priority (over the next 14 days) is provided to applicants with a 70% reduction in revenues. Applications from the remaining eligible applicants will be processed after the initial 28-day priority period.  

Grant Amount The maximum grant amount that an eligible person or entity can receive is the lesser of:

  1. Operational before January 1, 2019 – 45% of gross revenue for 2019;
  2. Operational during 2019 – average of full months revenue multiplied by 6; or
  3. $10 million

Supplemental Grants Additional grants may be awarded after the initial grant if the grantee still experiences a 70% reduction in gross revenues by April 1, 2021. The SBA however, must process all initial grant applications first before supplying any supplemental grants. The supplemental grant is limited to 50% of the original grant received.

Use Of Grant Funds The proceeds from the grant may be used for most of the operational and business expenses, except for the following:

  • Purchase of Real Estate
  • Payment of Interest for Debts Incurred after February 15, 2020
  • Capital Investments 
  • Political Contributions

The funds are to be used within one year of disbursement (18 months for supplemental grants) and may be used for expenses incurred during the covered period March 1, 2020 to December 31, 2021 (March 1, 2020 to June 30, 2022 for supplemental grants).

Tax Implications: The grant received is excluded from income, and no deductions are disallowed as a result of this income exemption.

Meals Deduction

Temporary Allowance of Full Deduction for Business Meals. For amounts paid or incurred after December 31, 2020 and before January 1, 2023, expenses for food or beverages provided by a restaurant are eligible for 100% deduction. 

As always, if you have questions about how this bill impacts you, please contact our office.

Consolidated Appropriations Act 2021 – Individual Provisions

On Sunday, December 27, 2020, the President signed into law one of the longest bills in US history. This bill, the Consolidated Appropriations Act 2021, is a sprawling 5,593 pages and contains a $900 billion relief package for aid related to the COIVD19 pandemic as well as a $1.4 trillion in annual funding for the federal government in the upcoming year.

Individual Economic Stimulus Payments

Eligible individuals are provided a refundable tax credit of:

  • $600 per taxpayer ($1,200 for married filing jointly)*
  • An additional $600 per qualifying child [dependent adults ineligible]

The credit is subject to the same income thresholds for eligibility as the first stimulus payment, but is based on 2019 income. If the credit amount on an individual’s 2020 tax return exceeds the amount of the advanced payment based on 2019 income, taxpayers will receive the difference as a refundable tax credit. The credit amount is reduced by 5% of the taxpayer’s adjusted gross income (AGI) in excess of:

  • $150,000 for a joint return
  • $112,500 for head of household
  • $75,000 for all other taxpayers

*There is pending legislation that may increase the amount of the second round of economic stimulus payments to $1,200 per individual ($2,400 for an eligible married filing joint couple). 

Unemployment Payments and New Unemployment Program

Pandemic Unemployment Assistance (PUA): The Consolidated Appropriations Act of 2021 extends the  duration of Pandemic Unemployment Assistance to 50 weeks (previously 39 weeks) for those who don’t qualify for regular compensation or extended benefits under State or Federal law or PEUC (see below).

Federal Pandemic Unemployment Compensation (FPUC): The Consolidated Appropriations Act of 2021 restores the Federal Pandemic Unemployment Compensation (FPUC) supplement to state unemployment benefits at  $300 per week (reduced from the federal supplement of $600 per week under the Section 2104 of the CARES Act that ended July 31, 2020 ). This federal supplement applies to weeks of unemployment after December 26, 2020 through March 14,2021. 

Pandemic Emergency Unemployment Compensation (PEUC): Pandemic Emergency Unemployment Compensation has been extended to March 14, 2021 and allows individuals receiving benefits as of March 14, 2021 to continue through April 5, 2021, as long as that individual has not reached the maximum number of weeks. The number of weeks of benefits an individual may claim through the PEUC program has been increased from 13to 24.

Mixed Earner Unemployment Compensation: A new unemployment program provides an additional $100 per week to “mixed earners”, those that have both wage (W-2) and self-employment (i.e. 1099) income and earned at least $5,000 in 2019 and

Individual Income Tax Changes

Decrease to the Medical Deduction Floor. The Consolidated Appropriations Act of 2021 permanently reduces the medical deduction floor for years beginning after December 31, 2020 from 10% to 7.5%. 

Extension of Charitable Contribution Deduction for Non-Itemizers. Taxpayers who do not elect to itemize deductions for any tax year beginning in 2021 can deduct up to $300 ($600 if married filing joint) in cash contributions to eligible not-for-profit organizations.

Changes to the Child Tax Credit and Earned Income Credit. Taxpayers may elect to substitute the earned income for the preceding tax year, if that is greater that the taxpayer’s earned income for 2020.

As always, if you have questions about how this bill impacts you, please contact our office.