Congress Passes $1.9T American Rescue Plan; What’s New & What Changed

On March 10th, Congress passed the $1.9 trillion American Rescue Plan, the third major stimulus package – offering economic relief for taxpayers as the pandemic continues to impact businesses, employers, and employees. On March 11, President Biden signed the coronavirus relief package (H.R.319) into law. 

Lurie’s Economic Relief Team has organized the following summary to help you understand what’s new for business and individuals, adjustments current programs, extensions, and available tax credits. Please reach out to your Lurie advisor for questions.

Key Provisions of the American Rescue Plan

Within the $1.9T legislation, there is another $50 billion in aid for small businesses through the Paycheck Protection Program. The American Rescue Plan contains extensions to tax credits and economic relief programs for businesses, self-employed professionals, and entrepreneurs. Most notably, the Employee Retention Credit has been extended – contact your Lurie advisor for more details on this program and how you can benefit. Here are a few of the highlights, and our team will continually update this page as more information and guidance are released.

For Businesses

The Employee Retention Credit has been expanded through the end of 2021, meaning that Q3 and Q4 can also be used. Before, it was only Q1 and Q2 of 2021. 

The expansion also provides relief for recovery startup businesses up to $50,000 per quarter. A recovery startup business is an employer that began the business after February 15, 2020 that had gross receipts of less than $1M. The credit was extended for wages paid by January 1, 2022.

    Restaurant Revitalization Grants – $28.6 billion was appropriated to the Restaurant Revitalization Fund that will allow for qualifying restaurant or food and drink service locations for lost revenue in 2020. The grants are capped at $5M per physical location or $10M per eligible entity.

    For Self-Employed

    Refundable credit for sick and family leave equivalents – if a self-employed individual would otherwise have been eligible for paid leave under the Emergency Paid Sick Leave Act or the Families First Coronavirus Response Act due to COVID-19 had they been an employee, they may be eligible for a credit equal to:

    1. The number of days during the taxable year that the individual is unable to perform services (up to a maximum of 10 for sick leave and 60 for family leave) multiplied by the lesser of $200 or 67% of the average daily self-employment income of the individual for the taxable year. If the individual themselves are sick, the $200 goes up to $511 and the 67% up to 100%.
    2. To calculate the average daily self-employment income, take the net earnings from self-employment for the individual taxable year divided by 260. There is an election to compute this amount utilizing the prior taxable year.

      The credit would be available for days occurring April 1, 2021 through September 30, 2021.

        For Individuals

        Third stimulus check – At $1,400 per individual, this will be the largest stimulus check yet for most Americans. The first round paid $1,200, and the second paid $600. The maximum eligibility threshold levels are lower for this stimulus, set to individuals making up to $75,000 a year, while married taxpayers filing jointly making up to $150,000 a year will receive a $2,800 payment.

        The key difference in the third stimulus check compared to the previous stimulus payments is that it will phase out much sooner – meaning that some Americans who received the money in the first two rounds of checks won’t get anything this time. Recovery rebates for individuals phase-out completely for those making $80,000 at an individual level or $160,000 for married filing jointly. Unlike the first two rounds of stimulus, adult dependents will now qualify for a payment.

        Unemployment income taxation – for taxpayers with adjusted gross income under $150,000; the first $10,200 of unemployment income will not be taxable for 2020.

        Child Tax Credit – for 2021, the amount of child tax credit for children under the age of 17 increases from $1,000 to $3,000. If the child is under the age of six, the amount of credit increases to $3,600; subject to modified adjusted gross income phase-outs. In addition, an online portal is to be established to allow for advance payments of the credits and for taxpayers to update relevant information including the birth of a child, marital status, and income modifications.

        Dependent Care Credit – for 2021, this credit has been made refundable and increased to $8,000 for one child and $16,000 for two or more qualifying children. In addition, up to 50% of qualifying expenses could qualify for the credit as opposed to the current rate of 35%. The credit will begin to phase out for taxpayers with adjusted gross income exceeding $125,000.

        Tax Provisions and Program Modifications within the American Relief Plan

        Where are We Now? What Has Changed?

        Lurie’s Economic Relief Team is continually reviewing the legislation and latest guidance from the IRS. Please check back often as we update or expand this table with resources, links, and updates. 

        Program
        What Changed in the American Rescue Plan?
        Anticipated Further Changes and Expected Updates*

        Paycheck Protection Program (PPP)

        No Change

        Additional funding was provided within the stimulus package but the current deadline to apply is March 31, 2021. We anticipate the deadline to be extended but are still awaiting guidance.

        Employee Retention Credit (ERC)

        Extension of applicability for startup businesses – businesses that began after February 15, 2020 and had gross receipts of less than $1M. In addition, the program is extended until January 1, 2022.

        Forms, instructions, regulations, and other guidance related to the startup business provisions.

        Treatment of Unemployment Income

        For taxpayers making up to $150,000; the first $10,200 of unemployment income will not be considered taxable for 2020

        Guidance on how to fix returns already filed for 2020 that have unemployment income taxed

        Restaurant Revitalization Grants

        Establishment of a Restaurant Revitalization Fund to reimburse restaurant businesses for lost revenue in 2020. The grants, which will not be taxable, will be capped at $5M per location or $10M per entity.

        Guidance on how to apply for the grant program.

        Individual Stimulus Checks

        $1,400 per qualifying individual; phasing out for individuals making $80,000 a year and married filing joint filers making $160,000 a year

        FFCRA – Families First Coronavirus Relief Act

        Expands the benefit to self-employed individuals for days occurring between April 1, 2021 and September 30, 2021

        Form updates and instructions for claiming the credit for self-employed individuals

        Economic Impact Disaster Loan (EIDL)

        Additional appropriations and targeting grants to covered entities that have suffered economic losses of greater than 50% and employs not more than 10 employees. EIDL grants are not taxable income and underlying expenses are deductible

        Child Tax Credit

        For 2021, an increase in the credit amount from $1,000 to $3,000 for children 17 and under. If a child is under 6, the credit jumps to $3,600. The credit will phase-out for taxpayers with modified adjusted gross income of $75,000 (single); $150,000 (married filing joint); or $112,500 (head of household).

        Dependent Care Credit

        Increases the amount of the credit in 2021 to $8,000 for your first child and $16,000 for two or more qualifying individuals. Depending on income thresholds, up to 50% of your expenses could generate a credit for 2021.

        Student Loan Forgiveness

        Allows for any forgiveness of student loans from 2021 through 2025 to be nontaxable

        For More Information

        This is just an overview of the American Rescue Plan – and not meant to replace guidance from your CPA or Lurie advisor. Our team will continually update this page with guidance and resources. In the meantime, please don’t hesitate to reach out to your Lurie advisor with questions or concerns you have about taxes or your individual financial or business situation.

        We are here to help. Click here to contact us. 

        Meet Our Team

        Julie A. Helms

        Tax Director

        Julie has over 10 years of experience with fixed assets, specializing in cost segregation and expense vs. capital analyses. She has a unique approach and enjoys the complicated areas of the tax law where she can come up with creative solutions for her clients. Knowing the correct answer can look different for each client, Julie works with clients and their current systems and processes to find the best solution tailored for them. Julie has mastered the art of taking complicated tax concepts and translating them into understandable and implementable processes.

        Mike J. Mondelli

        Tax Manager

        With more than a decade of federal tax experience, Mike provides advice on federal tax matters. He routinely advises on IRS practice and procedure including examination, appeals, collection, penalty abatement, audit reconsideration, research, captive insurance disclosures, Private Letter Rulings, and other federal tax issues.

        Let's Start a Conversation

        Disclaimer:

        This article is for your general education, and does not create a client relationship or any service engagement between you and Lurie LLP. The content of this article is based on the best information available, but official guidance, rules, laws and/or updates may change and become out of date. Please contact your Lurie advisor before acting on any of the information contained in this article.

        We may provide links to third-party sources for your convenience, but we do not review, control, or monitor the materials on any other websites. Lurie LLP is not responsible for the performance of those websites or for your business dealings with them.

        Disclaimer:

        This article is for your general education and does not create a client relationship or any service engagement between you and Lurie LLP. *The content of this article is based on the best information available on the date is was published, but official guidance, rules, laws and/or updates may change and become out of date. Please contact your Lurie advisor before acting on any of the information contained in this article.

        We may provide links to third-party sources for your convenience, but we do not review, control, or monitor the materials on any other websites. Lurie LLP is not responsible for the performance of those websites or for your business dealings with them.

        Share Post: