The American Rescue Plan Act of 2021 was signed into law just in time for tax season to reach its peak. While there does not seem to be any rescue from workload coming for the tax accountants, there may be some financial benefits for you or your business. In this newsletter are a few quick notes and links to help you find which benefits from the Act, or other recent law changes or alerts, might apply for you. Keep in mind that changes can happen at any moment, and much remains up in the air.
TAX RETURN DUE DATE
The IRS is moving the April 15 deadline to May 17 to allow more time to implement required changes. At this time, the date move applies for 2020 INDIVIDUAL RETURNS and payments only. California has announced it will conform. First quarter 2021 estimated taxes, trusts, and corporate returns are still due April 15.
INDIVIDUALS
More economic impact payments (stimulus checks) are being sent out:
https://www.irs.gov/newsroom/more-details-about-the-third-round-of-economic-impact-payments
FAMILIES WITH CHILDREN
The Act expanded dependent care credits for 2021, and increased child tax credits starting with the 2021 tax year. The Act includes a directive for the IRS to make advanced payments of the new child tax credit to certain taxpayers, but no further guidance or links are yet available.
DID YOU PAY NIIT TAX ON YOUR 2017 TAX RETURN?
You paid net investment income tax (NIIT) if there is a number on line 62, page 2, of your 2017 form 1040. Due to a case pending at the Supreme Court, there is an extremely remote chance you could be entitled to a refund of this tax IF you file a claim before the statute of limitations expires (April or October 15, 2021). A sample fill in claim form, with instructions, is available at our website:
https://smithcpas.com/wp-content/uploads/2021/03/NIIT-Protective-Refund-Claims-2017-FILL-IN.pdf
HEALTH INSURANCE SPECIAL ENROLLMENT PERIOD
There is a special enrollment period for ACA health insurance THROUGH MAY 15, 2021. As of January 1, 2020 California began enforcing a healthcare mandate with a tax return penalty for noncompliance. The Act expanded the federal premium tax credit and advance payments towards the credit to help qualified taxpayers afford their insurance.
California enrollment:
Federal enrollment:
About the federal premium tax credit (updates pending):
https://www.irs.gov/affordable-care-act/individuals-and-families/the-premium-tax-credit-the-basics
UNEMPLOYMENT
Unemployment benefits have been extended and expanded. The Act also makes the first $10,200 in unemployment benefits tax-free in 2020 for taxpayers making less than $150,000 per year.
California has issued a statement on the expanded benefits:
https://edd.ca.gov/About_EDD/pdf/news-21-14.pdf
The IRS is implementing the changes and has provided preliminary guidance:
SOLE PROPRIETORS
Sole proprietors can now choose to use gross income to calculate PPP loans, opening up access to businesses that had losses. Remember that while these are officially loans, they can be FORGIVEN if spent appropriately. THE PROGRAM CLOSES MARCH 31, so qualified businesses need to act quickly. A new application form is available for Schedule C Filers choosing to apply using gross receipts:
PPP APPLICATIONS CLOSE MARCH 31
If you have not applied for a first or second draw PPP loan, there is still time, but not much. Remember that while these are officially loans, they can be FORGIVEN if spent appropriately:
https://www.sba.gov/funding-programs/loans/coronavirus-relief-options/paycheck-protection-program
Note that many clients have had success working with lesser known lenders such as Funding Circle and Kabbage.
MORE FOR SMALL BUSINESSES
New, targeted EIDL grants will be available. The SBA plans to reach out to qualified businesses:
RESTAURANTS
The American Rescue Plan Act creates a NEW, $28.6 billion, Restaurant Revitalization Fund for industry-focused grants. No information has been made available yet; watch the SBA webpage for updates.
BUSINESS MEALS DEDUCTIONS
To encourage support for restaurants, 100% of business meals are deductible for 2021 & 2022.
SHUTTERED VENUE OPERATORS
Expanded grants:
BROWSE ALL SBA PROGRAMS
https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
EMPLOYERS – EMPLOYEE RETENTION CREDITS
Expanded and extended employee retention credits. Updates to the IRS webpage are still pending:
https://www.irs.gov/coronavirus/employee-retention-credit
EMPLOYERS – PAID LEAVE CREDITS
Expanded and extended paid leave credits for both employers and sole proprietors. Updates to the IRS webpage are still pending:
EMPLOYERS – DEFERRED PAYROLL TAXES
The IRS has published a tax tip for employers on how to repay:
https://www.irs.gov/newsroom/what-employers-need-to-know-about-repayment-of-deferred-payroll-taxes
CALIFORNIA BUSINESSES
Grant programs in effect and other resources:
https://business.ca.gov/coronavirus-2019/
CALIFORNIA CONFORMITY TO FEDERAL LAW CHANGES
So many questions, yet virtually no answers, especially when it comes to reporting PPP loans and their forgiveness on 2020 California tax returns. Stay tuned.
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DISCLAIMER
While we hope the contents of these alerts are helpful to our clients, these alerts are not intended to be advice upon which you should rely. Tax advice contained in these alerts is not intended to be used for, and cannot be used for, the purpose of avoiding penalties under the US federal tax laws. Inclusion of topics outside the scope of our normal service areas is intended to serve solely as a general starting point and should not replace consultation with experts in the related fields.