12/31/2020
TAX NEWS
December 27, 2020
New Coronavirus Relief Package: What Does it Mean for You and a Second Stimulus Check
New Coronavirus Relief Package: What Does it Mean for You and a Second Stimulus Check
A new coronavirus relief package was passed by Congress. Here is what the pending legislation could mean for you and your second stimulus payment.
A second stimulus is coming for millions of Americans.
The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 – a $900B relief package to deliver the second round of economic stimulus for individuals, families, and businesses was signed into law December 27, 2020. The bill provides relief through multiple measures and expands many of the provisions already put into place under the CARES Act, including a second round of direct stimulus payments to individuals and families.
Here is what relief is included:
Stimulus Payments for Individuals and Joint Taxpayers
A second wave of direct stimulus payments for millions of Americans – up to $600 for eligible individuals, $1,200 for joint taxpayers, and an additional $600 for each dependent child under 17 – is on the way for millions. This means a family with two children could receive $2,400.
As of today, there is nothing you need to do to get a stimulus payment. The IRS will begin work to issue stimulus payments using the most recent information they have on file, likely from your 2019 tax return, either by direct deposit or by check.
We expect stimulus payments will begin to be sent in the next couple of weeks. We’ll update this post when more information becomes available.
So, how do you know if you may be eligible to receive a second stimulus payment?
If you have an adjusted gross income (AGI) of up to $75,000 ($150,000 married filing jointly), you could be eligible for the full amount of the recovery rebate.
*Note, adjusted gross income (AGI) is your gross income like wages, salaries, or interest minus adjustments for eligible deductions like student loan interest or your IRA deduction. Your AGI can be found on line 8b of your 2019 Form 1040.
As your AGI increases over $75,000 ($150,000 married filing jointly), the stimulus amount will go down. The stimulus check rebate will completely phase out at $87,000 for single filers with no qualifying dependents and $174,000 for those married filing jointly with no dependents.
The bill also expands stimulus payments to mixed-status households (households with different immigration and citizenship statuses), meaning more households may be eligible for this stimulus than were for the first round. This may be retroactive, so some individuals that were ineligible for the first stimulus, provided under the CARES Act, may then be eligible to receive that payment as well.
*Note, if you think you may have been eligible for the first stimulus, but didn’t receive it, don’t worry. TurboTax will help you claim your stimulus payment in the form of a recovery rebate credit when you file your 2020 tax return.
Those people receiving Social Security retirement, disability, Railroad Retirement, VA, or SSI income and are not typically required to file a tax return, will again receive a stimulus payment. As in the first round, the IRS would use the information from your Form SSA-1099, Form RRB-1099, or the Veterans Administration to generate your stimulus payment.
Extended Unemployment
Unemployment payments will increase by $300 per week and the benefits will be extended until March 14, 2021.
The bill also extends the Pandemic Unemployment Assistance (PUA), which expands unemployment to those who are not usually eligible for regular unemployment insurance benefits. This means that self-employed, freelancers, and side giggers will continue to be eligible for unemployment benefits.
Certain workers who have at least $5,000 per year in self-employment income, but are disqualified from receiving Pandemic Unemployment Assistance because they also have an employer could also be eligible for an additional $100 per week in unemployment benefits.
Special Lookback for Earned Income Tax Credit and the Child Tax Credit
This is a very important provision which has the potential to help workers who experienced lower income in 2020, or received unemployment income in lieu of their regular wages, get bigger tax credits and larger refunds in the coming year.
The special lookback rule will allow lower income individuals to use their earned income from 2019 to determine their Earned Income Tax Credit and the refundable portion of the Child Tax Credit in 2020, since their lower 2020 income could reduce the amount they are eligible for.
The Earned Income Tax Credit is the country’s largest program for working people with low to moderate income. More than 25 million eligible tax filers received federal Earned Income Tax Credit last tax season and the average Earned Income Tax Credit was $2,476 per filer.
Extended Student Loan Forbearance
College students and parents with federal student loans will receive an additional extension on student loan payments, and will not be required to make payments on Federal Student loans until April 1, 2021. This includes both principal and interest payments.
Expanded Paycheck Protection Program (PPP) for Small Businesses and Eligible Non-Profits
The Coronavirus Response and Relief Supplemental Appropriations Act of 2021, provides a second round of payments under the Paycheck Protection Program.
Self-employed individuals, small businesses, small 501(c)(6) organizations, restaurants, live venues, and EIDL grants will again be eligible. Also, businesses experiencing severe revenue reductions will have the opportunity to apply for a second PPP loan.
Businesses with 300 or fewer employees that have experienced 25% revenue loss in any 2020 quarter and small 501(c )(6) organizations that have 150 employees or fewer would be eligible for a Paycheck Protection Program under the COVID-19 Emergency Relief Package.
The expanded Paycheck Protection Program, also broadens the type of business expenses that can be forgiven under the loan to include supplier costs, will allow business expenses paid utilizing PPP proceeds to be tax deductible, and would simplify the loan forgiveness process.
Contractor Paid Leave
Contractors who were temporarily unable to work due to facility closures and other restrictions could be able to receive reimbursement for paid leave from federal agencies.
Eviction Moratorium and Rental Assistance
The Coronavirus Response and Relief Supplemental Appropriations Act of 2021 extends the moratorium on evictions under the CARES Act, designed to protect renters from eviction, until January 31, 2021.
Families struggling to pay rent or with past due rent could be able to get assistance with paying past due rent, future rent payments, as well as utility bills.
Tax Extenders the bill includes the permanent passage and, in some cases, multi-year extension of many additional tax.
Spicer & Associates has you covered don’t worry about knowing these tax provisions. Spicer & Associates is here for you and will continue to keep you to together.
