You could soon see another stimulus payment in your bank account with the recent passage of the Emergency Coronavirus Relief Act of 2020, which means more direct relief to you and your family. Here are some of the major points you need to know that are buried inside this $900 billion piece of legislation.

Direct stimulus payments to you. The legislation includes a$600 payment per person, including adults and dependent children who are underage 17. Payments are based on your 2019 income and should start being distributed shortly, per Treasury Secretary Mnuchin. The payment amount phases out for adjusted gross incomes over $75,000 for single taxpayers and $150,000for married couples.

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Things to consider:

• If your income in 2019 is over the phaseout threshold, but not over the phaseout threshold for 2020, you will have an opportunity to request the funds on your 2020 tax return.
• Unlike the first round of stimulus payments in 2020, if you have someone in your household who is ineligible, you can still get payments for those individuals who are eligible.
• If the number of adults or dependents in your household changed during the year, you will need to keep track of this and be prepared to issue corrections to ensure you receive the correct payment amount.
• The payment mechanism in place for the initial 2020 direct stimulus payments should help facilitate distributions of this second round of direct stimulus payments.

Extension of unemployment benefits. Federal unemployment benefits of up to $300 per week are extended through March 14. Benefits for self-employed workers, set to expire at the end of 2020, are also extended.

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Things to consider:

• If you have not already done so, you must file for unemployment with your state.
• These benefits also apply to self-employed and part-time employees. Many workers who were eligible for this unemployment earlier in 2020 did not file because this class of workers is typically not eligible for most state unemployment programs.

New PPP loan funds. There is additional money available from the Small Business Administration (SBA) for a new round of PPP loans. The new loan program is targeted to businesses that need the funds. To qualify, your business must have 300 or fewer employees and have seen a drop in revenue of 25% or more during any quarter in 2020. Some of the money is ear marked for very small borrowers, underserved communities, and small lenders. There are even simplified requirements for forgiveness if the loan amount being applied for is less than $150,000.

Eviction moratoriums and rent assistance. The bill extends until January 31, 2021 a moratorium on evictions that was scheduled to expire at the end of 2020. The bill also includes $25 billion in emergency assistance to renters.

There is much more in this huge bill, including relief for hard-hit industries, education, student loans, and vaccine assistance. Please keep up-to-date as more is learned after a full review of the bill is made available.

PPP Loan Expenses Are Now Tax Deductible

If you or your business received funds from the Paycheck Protection Program (PPP), the recently passed Emergency Coronavirus Relief Act of 2020 will help to dramatically cut your tax bill. Here’s what you need to know.

Background

The PPP program was created by the CARES Act in March 2020 to help businesses which were adversely affected by the COVID-19 pandemic. Qualified businesses could apply for and receive loans of up to $10 million. Loan proceeds could be used to pay for certain expenses incurred by a business, including salaries and wages, other employee benefits, rent and utilities.

If the business used at least 60% of loan proceeds towards payroll expenses, the entire amount of the loan would be forgiven.

The Dilemma

While the CARES Act spelled out that a business’s forgiven PPP loan would not be considered taxable income, the legislation was silent about how to treat expenses paid for using PPP loan proceeds if the loan was ultimately forgiven.

Congress intended for these expenses to be deductible for federal tax purposes. But since the legislation was silent on this issue, the IRS swooped in and deemed these expenses to be nondeductible.

There was considerable debate over the latter half of 2020, with Congressional politicians explaining that their intent was that the expenses be deductible and the IRS responding “Too bad, they’re nondeductible.”

The Solution

Congress overruled the IRS’s position in the Emergency Coronavirus Relief Act of 2020. The legislation officially makes deductible for federal tax purposes all expenses paid for using proceeds from a forgiven PPP loan.

Stay tuned for updates as to how this new legislation affects your business.

2021 Retirement Plan Limits

As part of your 2021 tax planning, now is the time to review funding your retirement accounts. By establishing your contribution goals at the beginning of each year, the financial impact of saving for your future should be more manageable. Here are annual contribution limits for 2021:

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Take action

If you have not already done so, please consider:

• Reviewing and adjusting your periodic contributions to your retirement savings accounts to take full advantage of the tax advantaged limits
• Setting up new accounts for a spouse or dependent(s)
• Using this time to review the status of your retirement plan
• Reviewing contributions to other tax-advantaged plans including flexible spending accounts and health savings accounts

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