The American Rescue Plan Act signed into law by President Biden includes the following significant tax provisions:
Business tax provisions:
- Family and sick leave credits – Extends tax credits through 9/30/21.
- Employee retention credit – Extended through 12/31/21, program criteria as follows:
- To qualify experienced a full or partial suspension of business operations due to COVID-19 governmental orders or incurred at least 20% decline in quarterly gross receipts as compared to the 2019 year quarter.
- Main benefits for employers with up to 500 full-time employees (limited benefits for employers with more than 500 employees).
- Credit is 70% of up to $10,000 per employee per quarter qualified wages claimed against employer payroll taxes.
- Additional information available at the following IRS website https://www.irs.gov/newsroom/new-law-extends-covid-tax-credit-for-employers-who-keep-workers-on-payroll
- Restaurant revitalization grants – Businesses that serve food or drink as its primary purpose will be eligible for grants that will match their pandemic-related revenue loss calculated by comparing the reduction in 2020 revenue as compared to 2019.
- COBRA continuation coverage – Continuation coverage premium assistance credit applied to premiums and wages through September 30, 2021.
Individual tax provisions [phase out begins when adjusted gross income (AGI) is above $75,000 (single) and $150,000 (joint)]:
- Unemployment benefits – $10,200 exclusion for unemployment compensation in 2020 subject to above phaseout.
- Recovery rebates – $1,400 per individual economic impact payment subject to above phaseout.
- Child tax credit – Only for year 2021 increased to $3,000 per child (or $3,600 for a child under the age of six) and includes 17-year old children subject to above phaseout.
Please contact your tax advisor at WFY to discuss additional details regarding these tax benefits. Click here to contact a WFY tax advisor.