New legislation expands benefits to workers and employers

President Joe Biden signed into law the latest round of COVID-19-related legislation. The American Rescue Plan Act is intended to provide additional relief to workers and employers through tax credits, expanded federal unemployment benefits, and additional small-business aid.

Economic Stimulus Payments

The maximum payment is $1,400 per qualified individual or $2,800 for a couple. Payments are now available for all dependents, including children in college and elderly relatives. As before, economic stimulus payments are phased out, based on adjusted gross income (AGI). The upper threshold has been reduced from the previous payments to $80,000 for single filers and $160,000 for joint filers. Payments for dependents are also phased out under these thresholds. The IRS is expected to begin sending payments in March. You can track the status of your payment here.

Child Tax Credit

Child Tax Credits have been expanded under the new law to $3,600 per qualified child under age six and $3,000 for a child up to age 17. The credit is fully refundable. The phaseout begins at an AGI of $75,000 for single filers and $150,000 for joint filers. Higher-income families can still claim the $2,000 credit subject to the prior phaseout rules. The IRS is expected to make advance payments of the credit starting in July.

100 Percent COBRA Subsidy through September

Under the American Rescue Plan Act, the federal government will pay 100 percent of COBRA insurance premiums for employees who lost their jobs because of the pandemic, as well as premiums for their covered relatives, allowing them to stay on their company-sponsored health plan. The coverage ends September 30, 2021.

FFCRA Tax Credit Extension

The Families First Coronavirus Response Act (FFCRA), which provided certain workers with COVID-19-related paid sick leave, expired on Dec. 31, 2020. Although employers are no longer required to offer such leave, Congress extended the tax credit in prior legislation last December for employers that voluntarily continued to offer it through March 31, 2021. The American Rescue Plan Act extends the tax credit again through September 30, 2021.

Extended Unemployment Benefits

The federal government’s $300 weekly supplement to unemployment benefits was extended through September 6, 2021. The first $10,200 in unemployment benefits will be tax-free for households earning up to $150,000. The bill also extends Pandemic Emergency Unemployment Compensation (PEUC) for self-employed and gig workers and other workers who don’t qualify for state unemployment benefits.

Relief for Restaurants and Others

The bill allocates $50 billion to small businesses, including $28.6 billion for a new grant program that will provide funds to bars, restaurants, and other venues that had to close during the pandemic. The bill also expands the Paycheck Protection Program (PPP) to cover more nonprofits and digital media companies and adds $15 billion to the Economic Injury Disaster Loan Advance Grants Program.

Final Note about the American Rescue Plan Act

The IRS strongly urges taxpayers to not file amended returns related to the new legislative provisions or take other unnecessary steps at this time. The IRS will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return.

KRS professionals are available to provide guidance on how to maximize your stimulus payment as well as assist with loan and grant applications. Please contact us if you have any questions, concerns, or need advice during this unprecedented time. Visit the KRS Coronavirus Resources Page for additional information.