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How Does the Consolidated Appropriations Act Affect You?

The Consolidated Appropriations Act 2021 is expected to be signed by President Trump today. There are key provisions for both individuals and businesses.

This is a 5,600-page document so it will take some time to provide all the details but the following is what has been released so far:

For Individuals: The full credit is $600 per individual, $1,200 per couple, and $600 for children. Children 17 and older are not eligible for the credit. There are income limits as in the first round of payments.

Payments are expected to start early next week. If you have not received the first payment or it was incorrect, you will be able to receive this on your 2020 tax return filing.

If you do not receive the second payment or it is an incorrect amount, you can claim this on your 2020 tax filing. For example, if a family has a child born in 2020 the additional $600 will not be included in the next round of payments. This amount will be claimed as a credit when filing the 2020 tax return.

Unemployment assistance is extended by 16 weeks. Supplemental federal unemployment benefits will continue to April 2021 instead of ending in December. The current CDC eviction moratorium will be extended until January 31, 2021.

For Businesses: Business expenses paid for with PPP proceeds are tax-deductible and the funds are not income. This will be the same rule for the second round of PPP funds.

There will be a second round of PPP funding (PPP2) to both first-time borrowers and those who have received a previous loan.

Previous PPP recipients may apply if:

  • You have 300 or fewer employees
  • Have used or will use the full amount of their first PPP loan
  • Can show a 25% gross revenue decline in 2020 quarter compared to the same quarter in 2019

PPP2 first time borrowers include:

  • Businesses with 500 or less employees
  • Sole proprietors, independent contractors, and eligible self-employed individuals
  • Not for profits, including churches

Borrowers that returned all or part of a previous PPP loan can reapply for the maximum amount available to them.  As with the first round of PPP, you will apply through your bank for funds.

More details will follow as they’re available. If you have any questions, contact us at David Mills, CPA, LLC.

New Law Provides Variety of Tax Breaks to Businesses and Employers

While you were celebrating the holidays, you may not have noticed that Congress passed a law with a grab bag of provisions that provide tax relief to businesses and employers.

The Further Consolidated Appropriations Act, 2020 was signed into law on December 20, 2019. It makes many changes to the tax code, including an extension (generally through 2020) of more than 30 provisions that were set to expire or already expired.

Two other laws were passed as part of the law (The Taxpayer Certainty and Disaster Tax Relief Act of 2019 and the Setting Every Community Up for Retirement Enhancement Act – SECURE).

Here are five highlights:

1. Long-term part-timers can participate in 401(k)s

Under current law, employers generally can exclude part-time employees (those who work less than 1,000 hours per year) when providing a 401(k) plan to their employees.

A qualified retirement plan can generally delay participation in the plan based on an employee attaining a certain age or completing a certain number of years of service but not beyond the later of completion of one year of service (that is, a 12-month period with at least 1,000 hours of service) or reaching age 21.

Qualified retirement plans are subject to various other requirements involving who can participate.

For plan years beginning after Dec. 31, 2020, the new law requires a 401(k) plan to allow an employee to make elective deferrals if the employee has worked with the employer for at least 500 hours per year for at least three consecutive years and has met the age-21 requirement by the end of the three-consecutive-year period.

There are a number of other rules involved that will determine whether a part-time employee qualifies to participate in a 401(k) plan.

2. The employer tax credit for paid family and medical leave is extended

Tax law provides an employer credit for paid family and medical leave. It permits eligible employers to claim an elective general business credit based on eligible wages paid to qualifying employees with respect to family and medical leave.

The credit is equal to 12.5% of eligible wages if the rate of payment is 50% of such wages and is increased by 0.25 percentage points (but not above 25%) for each percentage point that the rate of payment exceeds 50%. The maximum leave amount that can be taken into account for a qualifying employee is 12 weeks per year.

The credit was set to expire on Dec. 31, 2019. The new law extends it through 2020.

3. The Work Opportunity Tax Credit (WOTC) is extended

Under the WOTC, an elective general business credit is provided to employers hiring individuals who are members of one or more of 10 targeted groups. The new law extends this credit through 2020.

4. The medical device excise tax is repealed

The Affordable Care Act (ACA) contained a provision that required that the sale of a taxable medical device by the manufacturer, producer or importer is subject to a tax equal to 2.3% of the price for which it is sold.

This medical device excise tax originally applied to sales of taxable medical devices after Dec. 31, 2012.

The new law repeals the excise tax for sales occurring after December 31, 2019.

5. The high-cost, employer-sponsored health coverage tax is repealed

The ACA also added a nondeductible excise tax on insurers when the aggregate value of employer-sponsored health insurance coverage for an employee, former employee, surviving spouse or other primary insured individual exceeded a threshold amount.

This tax is commonly referred to as the tax on “Cadillac” plans.The new law repeals the Cadillac tax for tax years beginning after December 31, 2019.

Stay tuned

These are only some of the provisions of the new law. We will be covering them in the coming weeks. If you have questions about your situation, don’t hesitate to contact us at David Mills CPA, LLC.
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