Covid Tax Relief Act

Covid Tax Relief Act

The Trump administration officially signed the coronavirus relief and government funding package into law on December 27, 2020. Here are a few key points to consider when filing your taxes in 2021:

Stimulus Eligibility & Payments

  • Stimulus for individuals $600
  • Married Couples $1,200
    • Plus $600 for each dependent under 17

Phase-out begins when income (AGI) $75,000 for individuals and $150,000 for married couples.

New PPP Borrowers
For new PPP (Paycheck Protection Program) loans, borrowers are no longer locked into 8 or 24 weeks, they can now choose any period lasting between 8 and 24 weeks. Additionally, it allows for streamline forgiveness for borrowers under $150,000.

For first time PPP applicants, four new types of expenses are included in addition to the previous expenses, but cannot exceed 40% of the total loan:

  • Covered operations expenditures
  • Covered property damage costs
  • Covered supplier cost
  • Covered worker protection

Second Round PPP
To qualify for a second round of PPP, you must have fewer than 300 employees, reduced from 500 employees and be able to establish a 25% drop in gross receipts during a quarter in 2020 relative to that same quarter in 2019.

New & Second Round PPP
Qualified expenses paid with PPP funds are now deductible. Which was a reversal of the CARES Act.

The loan follows the same calculations as the first PPP round which is 2.5 times average monthly payroll. Note: Hospitality industry – Bars restaurants, hotels can borrow 3.5 times average monthly payroll still limited to 2 million.

Grants for Shuttered Venue Operators
This grant covers: live venue operators or promoters, theatrical producers, live performing arts organization operators, museum operators, motion picture theatre operators, or talent representatives. Applicants must be fully operational as of February 29, 2020

  • SBA will make an initial grant of 45% of gross revenues earned in 2019 up to 10 million.
  • A second grant of up to 50% of the first grant can also be made, but the total of both grants cannot exceed $10 million.

Applicants need to demonstrate a 25% reduction in revenues quarter over quarter comparing 2020 to 2019. Grant to be used to pay the following expenses:

  • Payroll costs
  • Rent, utilities or mortgage interest and principal
  • Interest on other debt outstanding prior to February 15, 2020
  • Up to $100,000 in payments to an independent contractor
  • Other ordinary and necessary business expenses

Unemployment Insurance
Bill provides additional $300 per week for all workers receiving Unemployment through March 14, 2021 or maximum of 24 weeks. It also extends PUA program to $100 per week and maximum number of weeks to 50 weeks.

Employee Retention Credit:
Bill Extends ERC through July 1, 2021. Previously this credit was 50% of employee wages with a maximum of $10,000 in wages per year, per employee. The updated percentage is now increased to 70% of employee wages of a maximum of $10,000 per quarter, per employee.

In order to qualify, businesses need to show a 20% drop in gross receipts during a quarter in 2020 relative to that same quarter in 2019.

Business Meals
Business meals are 100% deductible in 2020 & 2021. Normal rules are met as normal under IRS regulations, meaning they are ordinary and necessary for business operation.

Changes to Charitable Contributions
This bill increased charitable contributions from 60% to 100% AGI through 2021.

Have tax questions? Ask Us.

The first step to hassle-free accounting, tax returns, and tax planning starts by reaching out to one of our representatives.

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Robert Hall and Associates Tax Consultants