Last week, President Biden signed the most recent government stimulus bill, the American Rescue Plan Act of 2021. This $1.9 trillion stimulus package was passed with hopes of speeding up an economic recovery due to the Pandemic. Two key elements of the bill focused on addressing unemployment benefits and issuing a third stimulus payment for qualifying taxpayers.
With federally assisted unemployment benefits set to expire the week of March 14, this bill extends the subsidized program until the week of September 6. People collecting state unemployment benefits and Pandemic Unemployment Assistance (PUA) will continue to receive the additional federal unemployment assistance of $300 per week in addition to the state unemployment benefit for an additional six months.
Furthermore, for the 2020 tax year, taxpayers can exclude their first $10,200 of unemployment benefits received in 2020 from their taxable income on their tax return. To qualify, the taxpayer’s modified adjusted income on the tax return must be less than $150,000. For joint filers, each spouse will separately qualify for the $10,200 exclusion. As of now, this exclusion is for tax year 2020 only. This exclusion is only for federal taxes and each state will need to determine if they will allow the exemption as well. For taxpayers that have already filed their 2020 tax return and qualify for this exclusion, an amended tax return can be filed to claim the benefit.
A third round of stimulus checks is also part of the package. Beginning the weekend of March 13, the government began sending out stimulus checks in the amount of $1,400 per person. This special payment is not income but is an advance payment of the 2021 Recovery Rebate Tax Credit to be included on taxpayers’ 2021 federal tax returns. The prior two stimulus checks excluded dependents over the age of 16. Stimulus checks being sent under this bill include all dependents listed on a taxpayer’s tax return – children over the age of 16 as well as parents and others that qualify as dependents for a taxpayer.
Phase out of the checks are based upon filing status and income levels:
- For a single filer the income phase-out range is between $75,000 – $80,000
- For a joint filer the income phase-out range is between $150,000 – $160,000
- For a head of household filer the income phase-out range is between $112,500 – $120,000
The income threshold for taxpayers will be based upon the 2020 tax return, if already filed. If the 2020 tax return has not been filed yet then then the threshold will be based upon the taxpayer’s 2019 tax return. If your income is above the phase-out range in 2020 but below the range as reported on your 2019 tax return, then you should consider delaying your 2020 tax return filing until your stimulus check is received.
If the IRS has a taxpayer’s bank info from a prior tax return, the payment will be via direct deposit. Otherwise, a check or debit card will be sent to the recipients. Taxpayers can check the status of their stimulus payment by going to the following IRS link: Get My Payment | Internal Revenue Service (irs.gov)
SBA offers several different relief options to help businesses, nonprofits, and faith-based organizations recover from the impacts of COVID-19.
In order to reach the smallest businesses, SBA will offer Paycheck Protection Program loans to businesses with fewer than 20 employees and sole proprietors only from Wednesday, February 24 through Wednesday, March 10, 2021. President Biden has also announced additional program changes to make access to PPP loans more equitable.
Please visit their website for more details at: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources
Over this past weekend, President Trump moved forward and signed the COVID-19 relief bill. This legislation had expeditiously passed both the House and Senate the past Monday and was waiting for the president’s signature to make it official. This bill is the second major stimulus package passed in 2020. The final version of this bill provides needed financial help for both business and individuals. Highlights of the $900 billion Coronavirus relief package as it impacts individuals are noted below:
- Additional Stimulus payments to taxpayers to begin being paid out – similar to the Economic Impact Payments (EIP) paid out earlier this year.
- $1,200 for married filing joint tax filers plus $600 for qualifying dependent children
- Phase-out begins at $150,000
- $600 for all other tax filers plus $600 for qualifying dependent children
- Single and MFS phase-out begins at $75,000
- Head of household Phase-out begins at $112,500
- Expansion in the special charitable deduction allowed for Non-Itemizers.
- The new stimulus package allows taxpayers who do not itemize their tax returns to take a charity deduction in the amount of $600 for married filing joint filers and $300 for all other filers. This special rule applies to both 2020 and 2021 tax years. Only cash contributions paid directly to a charitable organization qualify for this deduction.
- Revocation on the Limitation on Charitable Contributions.
- There is no AGI limitation on the allowed amount of a taxpayer’s charitable contribution for 2020 and 2021 tax years.
- Expansion of expenses qualifying for the educator expense deduction.
- Qualified educator expenses will now include amounts paid for personal protective equipment (PPE) and other supplies used in the prevention of COVID-19 in the classroom.
- Changes to employer flexible spending accounts (FSAs).
- The grace period for unused benefits and contributions to employer FSAs (such as for medical expenses and dependent care expenses) has been extended to 12 months after the year end for 2020 and 2021.
- Special carryforward rule where a dependent “aged out” during the Pandemic. DCB funds can be used for such child under age 14.
- Employer FSA plans can allow employees to make prospective changes to their contribution amounts mid-year in 2021 without a valid change in status event.
- Additional unemployment benefits provided
- Supplementary Federal Pandemic Unemployment Compensation (FPUC) in the amount of $300 per week to be provided for 11 weeks to qualifying individuals – extended to March 14, 2021.
- $100 per week additional benefit for certain “mixed-earners” (individuals who earned income as both an employee and as a freelancer who earned at least $5,000 in self-employment income).
During the spring, the SBA offered practice owners an Economic Injury and Disaster Loan of up to $150k in addition to the PPP Loan of 2.5 times eligible monthly payroll costs and the EIDL Advance of $1k per employee, up to $10k. While almost all our clients accepted the PPP Loan and EIDL Advance, a small percentage took the EIDL Loan too.
As we wrote previously at: https://schwartzaccountants.com/2020/05/more-info-about-eidls/, there are certain pitfalls with the EIDL loan, so please consider paying it off as quickly as you can. We gave instructions to paying off the EIDL Loan at: https://schwartzaccountants.com/2020/10/how-to-pay-off-the-eidl-loan-2/.
Now, it appears there are even more headaches associated with maintaining this loan as the SBA is requesting additional filing requirements for businesses with an outstanding EIDL Loan as follows:
DUTY TO MAINTAIN HAZARD INSURANCE
The document that we need is the Declarations Page of your Hazard Insurance policy. This document must:
- 80% of the business contents needs to be covered
- Be current as of day of the day that I review it
- The address on the policy must match the address that we have on file for you
- The name of the insured must match the name of the Business
- The Coverage period must be 12 months
The Duty to Maintain Hazard Insurance requirement may be found on page 4 of the Loan Authorization and Agreement which you signed “…the Borrower will provide proof of an active and in effect hazard insurance policy including fire, lightning, and extended coverage on all items used to secure this loan to at least 80% of the insurable value. Borrower will not cancel such coverage and will maintain such coverage throughout the entire term of this Loan.”
RESOLUTION OF BOARD OF DIRECTORS
The Resolution must:
- Be called the Resolution of Board (Corp), Certificate of Limited Liability Entity (LLC), or Certificate of Limited Liability Partnership (LLP) or some other such document
- Be provided by you (we cannot provide a template)
- List the Business Name
- State that a business meeting was held and specify on which date
- State that the Business has agreed to assume this SBA loan
- Specify the loan amount
- Authorize the signatory to sign on behalf of the business
- State the name of the signatory
- Be signed by corporate
The Resolution of the Board requirement may be found on page 7 of the Loan Authorization and Agreement which you signed. It states that the borrower shall “…submit the appropriate SBA Certificate and/or Resolution to the U.S. Small Business Administration…”
Please reach out to your practice attorney to property draft the required Resolution of the Board of Directors. Or, Attorney Neil Cohen can help you prepare this Resolution for $300. You can email Neil at: email@example.com.
Then forward the Declarations Page of your hazard insurance policy and the Resolution of the Board of Directors to the SBA per their instructions. Or, just repay the EIDL Loan if your feel your practice can afford to pay back that loan now and you aren’t overly concerned that you’ll need those funds to financially survive in the event of another forced shut down in 2021.
According to the ADANews at: https://www.ada.org/en/publications/ada-news/2020-archive/december/hhs-provider-relief-fund-phase-3-payments-underway:
The U.S. Department of Health and Human Services said Dec. 16 that the next round of Provider Relief Fund distributions is now underway.
The Provider Relief Fund was established by the Coronavirus Aid, Relief and Economic Security Act — known as the CARES Act — to help dentists and other health care providers recover lost revenue and net changes in expenses due to the COVID-19 pandemic. During the Phase 3 round of funding, the program is expected to distribute more than $24 billion to more than 70,000 providers, according to an HHS news release. That number was about $4 billion higher than originally expected.
HHS added that they “enhanced the Phase 3 distribution to consider the actual revenue losses and expenses experienced by providers that were attributable to COVID-19. With this opportunity, previously eligible PRF applicants were invited to apply for additional funding, along with first time applicants…this funding will distribute to providers up to 88% of their reported losses [over and above any PRF Phase-2 funds received].”
Starting on December 16th, many of our clients started to see their HHS PRF Phase-3 Subsidy pop up in their practice bank accounts. If you applied for this Phase-3 Subsidy but did not receive any funds yet, please contact HHS soon.
According to HHS: If you have already submitted your application, you should have received confirmation regarding your application status. If you have additional questions, please contact the provider support line at (866) 569-3522; for TTY dial 711. Hours of operation are 7 a.m. to 10 p.m. Central Time, Monday through Friday.
And don’t forget that all recipients of Provider Relief Fund (PRF) payments are required to comply with the reporting requirements between 1/15/21 and 2/15/21 as described in the Terms and Conditions and specified in future directions issued by the Secretary.
- January 15, 2021: reporting system opens for providers
- February 15, 2021: first reporting deadline for all providers on use of funds
- July 31, 2021: final reporting deadline for providers who did not fully expend PRF funds prior to December 31, 2020
For more info about the HHS Provider Relief Fund subsidies, please view the summary of reporting guidelines for payments exceeding $10,000 – PDF or the Final Reporting Data Elements – PDF.