On March 11, President Biden signed the American Rescue Plan Act (“ARPA”), a wide ranging $1.9 trillion COVID-19 relief and stimulus package.
ARPA extends and expands some of the critical provisions in the CARES Act enacted last March, and the Consolidated Appropriations Act (CAA) enacted in December. It also includes new provisions that should come as welcome news to many families and businesses.
Here is an overview of some of the key provisions of ARPA that will affect individuals and businesses:
- ARPA provides a third round of direct-payment stimulus checks to eligible individuals. The payment to each individual is $1,400, plus $1,400 per dependent (including adult dependents). To qualify, individuals must have an adjusted gross income (AGI) of up to $75,000 per year ($150,000 for married couples filing jointly and $112,500 for heads of households). The payments phase out and are no longer made when AGI exceeds $80,000 for individuals, $160,000 for married joint filers and $120,000 for heads of household.
- For eligible individuals, the Child Tax Credit (CTC) increases to $3,000 for each child ages 6 to age 17, and $3,600 per year for children under age 6. To be eligible for the full payment, you must have a modified AGI of under $75,000 for singles, $112,500 for heads-ofhouseholds and $150,000 for joint filers and surviving spouses. The credit phases out at a rate of $50 for each $1,000 (or fraction thereof) of modified AGI over the applicable threshold. Parents will begin receiving advance payments of part of the CTC later this year. Under ARPA, the IRS must establish a program to make monthly payments (generally by direct deposits) equal to 50% of eligible taxpayers’ 2021 CTCs, from July 2021 through December 2021.
- For 2021, there’s an expanded child and dependent care tax credit of up to $4,000 for childcare expenses for one child and up to $8,000 for two or more children for households making up to $125,000.
- Any student loan debt forgiven between December 31, 2020, and January 1, 2026, will receive tax-free treatment.
- An additional $300 per week in unemployment benefits will be paid through September 6, 2021. In addition, the first $10,200 in unemployment benefits received beginning in 2020 isn’t included in gross income for taxpayers with AGIs under $150,000. (For joint filers below the AGI limit, the $10,200 exclusion applies separately to each spouse.) The IRS has indicated that it will provide taxpayers with additional guidance relating to this provision that makes the first $10,200 of 2020 unemployment benefits nontaxable. For those who have not filed yet, the IRS will provide a worksheet for paper filers and work with the software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return. For those who received unemployment benefits and have already filed their 2020 tax return, the IRS emphasizes they should not file an amended return at this time until the IRS issues additional guidance.
- Federal rental assistance is included for families affected by COVID-19, applicable to past due rent, future rent payments, and utility and energy bills.
- Pandemic assistance grants will be made to eligible businesses serving food or drinks, including restaurants and food trucks.
- There will be additional funding for forgivable loans to eligible businesses under the Paycheck Protection Program (PPP), which had been scheduled to expire on March 31, 2021.
- The Employee Retention Tax Credit is extended for eligible employers that continue to pay employee wages during COVID-19-related closures or experience reduced revenue through December 31, 2021. This includes “recovery startup businesses” (those businesses that launched after February 15, 2020, with average annual gross receipts of $1 million or less).
- Tax credits for paid sick and family leave are modified and extended to September 30, 2021.
- ARPA establishes a fund for the Pension Benefit Guaranty Corporation to provide financial assistance to “critical and declining” plans to ensure that benefits are paid through the 2051 plan year. This financial assistance is not a loan, and there are no repayment obligations for plans receiving assistance.
- Beginning April 1, 2021, through September 30, 2021, eligible individuals who have been laid off, furloughed, or had their hours reduced can choose to continue group health benefits without having to pay COBRA premiums.
- ARPA provides premium subsidies for individuals purchasing health insurance on the Affordable Care Act exchanges through 2022. The subsidies are scaled as income increases, but, under the law, an individual will not be required to pay more than 8.5 percent of his or her income for a health insurance plan purchased on an exchange.
Our office will continue to follow ongoing developments relating to the implementation of ARPA. Please contact Jonathan Samel, our Business and Estates Department Chair at 215.661.0400 or JSamel@HRMML.com.
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