CARES Act for businesses update

The following represents a summary of the recently signed into law CARES Act—also referred to as the Stimulus Package. Specifically, we are providing a summary of the Paycheck Protection Program.

Title 1 of the CARES Act, entitled “Keeping American Workers Paid and Employed Act,” provides relief for small businesses and their employees who are adversely affected by the COVID-19 outbreak. The key provision in this Act is the Paycheck Protection Program—an emergency lending facility to provide small business loans on favorable terms to borrowers impacted by the current economic state.

PAYCHECK PROTECTION PROGRAM – KEY POINTS

The following offers highlights of the Paycheck Protection Program that small business owners need to be aware of and consider as they move forward:

• Available to businesses with 500 employees or less.
• Loan period ranges from February 15, 2020 through June 30, 2020.
• Loan amount equates to 2.5 times average monthly payroll expenses for 12 months prior to the loan origination—up to $10 million.

• Loan interest is 1.0% (Treasury changed from 0.5% on 04/02/2020.)
• Loan duration is 2 years. (Treasury changed from a max of 10 years on 03/31/2020.)
• Loan forgiveness is available—A borrower is eligible for loan forgiveness equal to the amount spent on the following items, during the eight-week period beginning on the loan origination date:
  • Payroll costs
  • Mortgage interest incurred in the ordinary course of business
  • Rent paid based on a leasing agreement
  • Payments for utilities—including electricity, gas, water, transportation, telephone or internet
  • Additional wages paid to tipped employees

Note: The loan forgiveness amount can be reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.

Note: To have loan amounts fully forgiven, at least 75% of forgiveness amount calculated must be for payroll costs. (This is a NEW requirement from the Treasury as of 03/31/2020.)

• Collateral is not required to secure the loan.
• No personal guarantee is required to secure the loan.
• Loan repayments are automatically deferred for six months and up to one year. This includes interest, fees and loan principal.
• Payment Protection Program loans are applied for through approved banks. The SBA may administer some loans based on viability.
• For businesses that have been denied SBA loans previously, lending requirements are more lenient.

CARES ACT – ADDITIONAL KEY POINTS

Employee Retention Payroll Tax Credit

• The Employee Retention Payroll Tax Credit cannot be used in conjunction with the Payroll Protection Program or any other loan where payroll costs are forgiven.
• Employee retention credit is equal to 50% of qualified wages with a cap of $10,000 wages.  Maximum credit per employee is $5000.

• The employer’s gross receipts must be 50% or less than the same calendar quarter in 2019 to qualify.
• For employers with 100 or less employees, qualified wages are defined as wages paid for all employees during the period—whether they were able to work or not. For employers with 100 or more employees, qualified wages are defined as wages paid to employees not providing services.

Deferral of Employer Social Security Taxes

The deferral of employer social security taxes cannot be used in conjunction with the Payroll Protection Program. This allows an employer to defer their portion of Social Security taxes from March 27, 2020 to January 1, 2021. 50% is due by December 31, 2021 and the remainder by December 31, 2022.

Bonus Depreciation

This allows employers to expense qualified improvement property under the section 168 bonus depreciation rules.

20200411151629-COVID-19 Emergency Relief SMB Guide – 041120

Maximizing PPP loan forgiveness

As a recipient of a Paycheck Protection Program loan, we want to remind you of program rules— especially in relation to maximizing loan forgiveness. Regulations and guidance from the government have evolved and we will continue to keep you updated on changes moving forward.

General rules

Borrowers are eligible for loan forgiveness equal to the amount the borrower spent during the eight-week period—beginning from the date you received loan funds. Also, not more than 25% of the forgiven amount may be used for non-payroll costs.

The following items qualify for loan forgiveness:

1. Payroll costs, including benefits.
2. Interest on mortgage obligations incurred before February 15, 2020.
3. Rent under lease agreements in force before February 15, 2020.
4. Utility costs—including electricity, gas, water, transportation, telephone and internet.

To maximize loan forgiveness, keep a few critical items in mind

The Paycheck Protection Program is intended to help businesses maintain employees. Therefore, using the PPP loan for payroll purposes, first and foremost, is the best way to help ensure maximum loan forgiveness.

The following items can reduce your loan forgiveness:

1. Reduction of full-time equivalent employees.
2. Reduction of more than 25% of wages to individual employees.
3. If more than 25% of the qualified expenses are for non-payroll costs.

NOTE: If you received an EIDL Advance of up to $10,000, that amount will reduce loan forgiveness.

To maximize loan forgiveness, consider the following:

1. If you laid off employees or reduced employee salaries after February 15, 2020 and before April 26, 2020, rehire employees or increase their salaries if possible. You have until June 30, 2020 to restore full-time equivalent employees and salary levels for changes made between February 15 and April 26, 2020.
2. Other than payroll, ensure that you allocate loan funds to qualifying expenses, including rent, mortgage interest and utilities (although these expenses do not support full forgiveness).

NOTE: We recommend that if you extend an offer to rehire an employee, do so in writing. In the event the person chooses to not return to work, you now have documentation that the offer was made and the employee declined it. This protects you from being penalized for not re-hiring.

The importance of recordkeeping

Ensure that you follow the specific guidelines provided by your lender in relation to documentation. You will be asked to provide documentation when it comes time to determine the amount of loan forgiveness. Maintain detailed records of loan spending, especially on payroll costs. Also, be sure to record other qualifying expenses like rent and utilities.

Next steps

As you approach the end of your eight-week loan, lenders will collect documentation in order to calculate your forgiveness amount. Lenders have 60 days to make a determination on the amount of loan forgiveness.

Any amount that is not forgiven must be repaid like a normal loan. While interest begins accruing immediately (at the 1.0% rate), the first loan payment is not due for six months after the loan originated. The outstanding amount must be repaid within two years.

Prepayments are allowed if it’s determined that a portion of the loan must be repaid—beginning any time or paid over 18 months if you begin making payments at the six-month mark.

We are here to help 

Please reach out and let us know how we can help you. Our team can assist with recordkeeping and provide sound advice to ensure you best follow guidelines to maximize loan forgiveness.

20200709171859-Fact Sheet – Maximizing PPP Loan Forgiveness

Paycheck Protection Program (PPP) forgiveness update

On November 18, 2020, the Department of Treasury issued more clarifications regarding the deductibility of expenses paid with PPP funds that are ultimately forgiven. The Revenue Ruling 2020-27 clarified that expenses will be non-deductible for Tax Year 2020 as long as the taxpayer “reasonably expects” that there will be debt forgiveness on the loan—even if forgiveness isn’t determined by the end of the year.

Many PPP lenders are now accepting applications for forgiveness. Please note that Congress may still make changes to this ruling as senate finance committee chairman Chuck Grassley (R-IA) and ranking member Ron Wyden (D-OR) issued a bi-partisan statement calling on the Department of Treasury to reconsider this position.

Remember, we are here to help! Forgiveness application submission is not a simple task. We can assist you to ensure your application is accurate and that you put yourself in the best position to gain maximum loan forgiveness.

Overview of Pandemic Relief Bill for businesses

Below is a summary of the stimulus relief for businesses that is part of the Consolidated Appropriations Act, 2021 (H.R. 133) which was signed into law on 12/27/2020.

Paycheck Protection Program second draw

Congress has created a PPP second draw available to smaller businesses that can show their business has been impacted by the pandemic. The second draw offers a similar package to the PPP offered out of the  Cares Act earlier in 2020. There have been some changes and limitations put in place for the second draw including:

• Company size is smaller. Instead of 500 or less employees as it was in the Cares Act, the employee limits are reduced to 300.
• Companies will have to show a 25% or more reduction in revenue for an individual quarter in 2020 compared to 2019. This requires comparing quarterly financials for each quarter of 2020 to each quarter in 2019.
• Businesses that have 20% or more ownership by Individuals or other entities based in China or Hong Kong are ineligible for the PPP second d
• Businesses that were created or organized in China or Hong Kong or have significant operations in those countries are not eligible.
• Businesses engaged in political or lobbying activities are not eligible. This includes political research, political advocacy and public policy strategy companies
• Additional ineligible businesses include:
• Life insurance companies
• Lending institutions
• Passive businesses owned by developers and landlords that do not actively use or occupy the assets
• Businesses located outside the United States
• Pyramid sale distribution businesses
• Businesses with more than one-third of gross revenue from gambling
• Businesses involved in a federal illegal activity
• Private clubs that limit membership to members for any reason other than capacity
• Government-owned businesses (does not include businesses controlled by a Native American tribe)
• Businesses that have an associate that is incarcerated, on parole or probation, or has been indicted for a felony or crime or moral turpitude
• Businesses that present live performances that are sexual in nature or sell products, services or have displays that are sexual in nature
• Businesses that have defaulted on a federal loan or federally assisted financing

Calculation of loan: The loan calculation follows the same rules as it did under the Cares Act with the exception that you can choose to use payroll amounts from the calendar year 2019 or the 12 months immediately preceding the date of the loan application.

Hotels and restaurants

Borrowers with North American Industry Classification System (NAICS) codes starting with 72 (hotels and restaurants) can get up to three and one-half (3.5) times their monthly average payroll costs.

Deductibility of expenses forgiven under the PPP and PPP second draw

Under original guidance from the Department of Treasury, the expenses paid with funds from the PPP loans were not deductible. The passing of this new bill has clarified that the treatment of the forgiveness will be as tax-exempt income. The forgiveness amount will not add-back the forgiveness as income or result in any reduction in expenses paid.

PPP simplified forgiveness application

A simplified application (one-page) will be released for loans of $150,000 or less in the coming weeks. Currently, applications exist for loans of $50,000 or less only. We will provide more details when the Department of Treasury releases the new application.

Tax deduction for 100 percent of business meals starting January 1, 2021

Currently, a business may take a tax deduction of 50% of business meals. Starting on January 1, 2021 and ending on December 31, 2022, all meals from restaurants will be 100% tax deductible.

Employee Retention Tax Credit extension and changes

Changes have been made to the Employee Retention Tax Credit including:

• The credit is now allowed for wages paid through July 1, 2021. The original credit was due to expire on January 1, 2021.
• The credit limit of $10,000 wages per employee has been changed to $10,000 per employee per quarter for 2021.
• The credit limitation has been changed from 50% of qualified wages to 70% of qualified wages in 2021.
• The gross receipts test has been changed to comparing the respective quarter in the current year.
• The credit can also be taken if the payroll for the Employee Retention Tax Credit was not paid with forgiven (or forgivable) PPP funds.
• For 2020, the credit calculation has not changed, only that it can be taken in conjunction with the PPP from the above bullet.
• The changes to this tax credit are retroactive to the original Cares Act date of March 12, 2020.

Extension of Families First Coronavirus Response Act sick and family leave

The FFCRA sick and leave pay has been extended for qualified employees until March 31, 2021. The original Act was set to expire on December 31, 2020. All the same requirements will remain in place with the exception of date extension.

I​s your business eligible for the 

Employee Retention Credit?

Because the coronavirus has negatively affected so many businesses nationwide, a number of coronavirus payroll tax credits are available to help employers out. One option is the Employee Retention Credit (ERC).

The Employee Retention Credit is a CARES Act relief measure for businesses. It is a fully refundable tax credit that eligible employers who are able to keep employees on payroll can claim.

How much is the credit?

For 2020: The maximum ERC is $5,000 per employee.

For 2021: The maximum ERC is $7,000 per employee, per quarter for the first two quarters of the year, with a total maximum ERC of $14,000 per employee.

Who is eligible for the ERC?

• Businesses are eligible if either of these two things happened in 2020:

1. Your operations were fully or partially suspended due to a COVID-19-related governmental order, or
2. You experienced a significant reduction in gross receipts for one or more quarters.

• Businesses are eligible for the first quarter of 2021 if either of these three things happened:

1. Your operations were fully or partially suspended due to a COVID-19-related governmental order, or
2. First-quarter 2021 gross receipts fall by more than 20% compared to first-quarter 2019 gross receipts, or
3. Fourth-quarter 2020 gross receipts fell by more than 20% compared to fourth-quarter 2019 gross receipts.

• For 2020, employers with 100 or fewer full-time equivalent (FTE) employees during 2019 can claim the ERC on all wages paid to employees during the period in which the employer satisfied the shutdown test or the gross receipts test.
• For 2021, the Act increases the small employer threshold from 100 to 500 FTE employees, meaning employers with up to 500 FTE employees in 2019 may claim the ERC for 2021 on wages paid for working or non-working periods.
• Employers cannow take advantage of the Paycheck Protection Program (PPP) and claim ERC. This part of the new law is retroactive, allowing PPP recipients to retroactively claim ERC. However, an employer that receives a PPP loan may not use those wages to qualify for the Employee Retention Credit, regardless of whether and when the loan is forgiven.

Due to these and other technicalities, we encourage you to contact our firm if you have questions on your eligibility.

How do you claim the Employee Retention Credit?

There is no Employee Retention Credit application. Instead, employers can claim the Employee Retention Credit on their Federal Form 941, 944, or 943 returns. If you think you may qualify or need help determining whether you qualify, please call us today.

Summary of American Rescue Plan Act of 2021 for Businesses

Below is a summary of the American Rescue Plan Act of 2021 (H.R. 1319) for businesses. The bill was signed into law on 3/11/2021.

Grants for restaurants and other food businesses (Restaurant Revitalization Grants)

Grants will be available in the near future for restaurants and other food and beverage businesses that are impacted by current economic conditions. These grants will be processed through the Small Business Administration (SBA).

Extension and expansion of the Families First Coronavirus Response Act (FFCRA) Sick/Leave Pay

• The period that is available to claim the FFCRA Sick/Leave Pay has been extended from March 31, 2021 to September 30, 2021.
• The credit can now include the employer’s share of Social Security and Medicare Tax.
• The amount of wages an employer may claim per employee increased from $10,000 to $12,000.
• The sick/leave time now includes a provision to allow employees to obtain the COVID-19 v

Extension and adjustments to the Employee Retention Credit (ERC)

• The Employee Retention Credit has been extended from June 30, 2021 to December 31, 2021.
• Clarifies that the ERC is not available for wages paid with PPP or PPP round two funds, shuttered venue assistance, or the Restaurant Revitalization G

Taxation clarification on Restaurant Revitalization Grants or EIDL Advance

HR 1319 clarifies that Restaurant Revitalization Grants and the EIDL Advance are generally excluded from gross income and other tax-related calculations.

Shuttered Venue Operators Grant (SVOG)

HR 1319 includes an additional $1.25 billion for the Shuttered Venue Operators Grant (SVOG) program. It also allows eligible entities that receive a first or second draw PPP loan after December 27, 2020 to receive a grant. Previously, receiving or having open applications for both programs had been prohibited. With the passage of the new law, it is possible for venue operators to receive both a PPP loan and an SVOG, as long as the amount of the SVOG is reduced by the amount of PPP funds approved. SVOG eligibility requirements can be found through the SBA’s website: https://www.sba.gov/sites/default/files/2021-03/SVOG%20Eligibility%20Requirements-508.pdf

CARES Act for individuals update

The following represents a summary of the recently signed into law CARES Act—also referred to as the Stimulus Package.

RECOVERY CHECKS – KEY POINTS

Recovery check distribution amounts—Single taxpayers will receive $1,200 and joint taxpayers will receive $2,400. There is an additional $500 for each qualifying child.

The recovery check is considered a credit for 2020, but paid in advance.

The amount is reduced (but not below zero) by 5% of each dollar a person’s adjusted gross income (AGI) exceeds. Consider the following:

• Married filing joint: $150,000 (AGI over $198,000 does not qualify)
• Head of household: $112,500 (AGI over $146,500 does not qualify)
• Single: $75,000 (AGI over $99,000 does not qualify)

Consider the following example:

1. A married couple with no children has an AGI of $190,000.
2. $190,000 is $40,000 above the $150,000 amount shown above.
3. The couple’s check is reduced by 5% of $40,000, which is $2000.
4. Therefore, they would receive a check for $400. (i.e., $2400 – $2000 = $400)

Other key details for recovery check eligibility include:

• Nonresident aliens are not eligible for the rebate.
• If a taxpayer has an outstanding debt (which the IRS would typically offset a refund by paying that debt), recovery dollars will not be used to offset that debt.
• Amount will be direct deposited into the account on the last filed return. Every taxpayer will receive a letter indicating their recovery check was dispersed. If the letter is not received, there will be a specific phone number to call to have the check re-issued.
• AGI will be accessed from 2019 returns if filed at the time of determination. Otherwise, 2018 returns will be used. Taxpayers who have not filed a return will not receive a check unless they did not file because they only have SSA-1099 or RRB-1099 (social security). The Treasury Department will review those forms for 2019 and issue the appropriate amount via check.

UNEMPLOYMENT – KEY POINTS

Any employee who was furloughed or part of a layoff is eligible for state unemployment. Details are as follows:

• Unemployment amount via the state typically ranges from 30-50% of the standard wage, depending on the state.
• The amount a person will receive for unemployment over four months will be the amount the state would already provide, but increased by $600 per week through July 31, 2020. For example, if a person is eligible for $300 weekly, they will receive $900 per week over four months or through July 31, 2020, whichever comes first.
• If an employee is already unemployed due to COVID-19, the $600 weekly additional payment will be paid retroactively.
• Self employed individuals, independent contractors and gig workers are eligible for unemployment under this program.

RETIREMENT DISTRIBUTIONS – KEY POINTS

Ability to withdraw up to $100,000 retirement in 2020 for COVID-19-related purposes without 10% penalty—The distribution is taxable over a 3-year period unless electing to pay it back within 3 years. This essentially equates to a loan unless it is not paid back within the
3-year timeframe. This rule applies to individuals:

• Diagnosed with COVID-19
• Who have family (spouse or dependent) who have been diagnosed with COVID-19
• Who have adverse financial consequences in relation to COVID-19
• Who include the distribution in taxable income (unless they elect the 3-year payback)

Waived required minimum distributions (RMD) from individual retirement accounts—The required minimum distribution for 2020 has been waived.

This also applies to retirees who turned 70 1/2 in 2019 and are required to take their RMD by 4/1/20.  If the retiree that turned 70 1/2 in 2019 still intends to take their RMD, this must happen by April 1, 2020—otherwise, the same penalty for late withdrawal will be applied.

CHARITABLE CONTRIBUTIONS – KEY POINTS

Above-the-line charitable contribution—For tax year 2020, if a taxpayer does not itemize deductions, they can deduct up to $300 in addition to standard deduction for cash charitable contributions (no stock contributions).

Charitable contribution limitation by AGI—The 60% adjusted gross income limitation has been removed for 2020 (other than from donor advised funds).

Tax Update Announcement – 04/10/2020

IRS extends additional federal tax deadlines to cover individuals, trusts, estates, corporations and others

Last month, the IRS announced that taxpayers have until July 15, 2020 to file and pay federal income taxes (originally due on April 15, 2020). On April 9, 2020, the IRS expanded this tax relief effort to additional returns, tax payments and other actions.

As a result, extensions generally now apply to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020 and before July 15, 2020. Individuals, trusts, estates, corporations and other non-corporate tax filers qualify for the extension. This means that anyone, including Americans who live and work abroad, can now wait until July 15, 2020 to file their 2019 federal income tax return and pay due taxes.

Estimated tax payments

Additionally, any individual or corporation with a quarterly estimated tax payment due on or after April 1, 2020 and before July 15, 2020, can wait until July 15, 2020 to make a payment—without penalty. This means that estimates normally due June 15, 2020 are now due one month later on July 15, 2020.

Extension of time to file beyond July 15

Individual taxpayers who need additional time to file beyond the July 15 deadline can request an extension to October 15, 2020.

Note: This is an extension to file the tax return. It is not an extension to pay taxes owed. Taxes owed are still due by the July 15, 2020 deadline.

Overview of Pandemic Relief Bill for individuals

Below is a summary of the stimulus relief for individuals that is part of the Consolidated Appropriations Act, 2021 (H.R. 133) which was signed into law on 12/27/2020.

Second round of stimulus checks/direct deposits

Stimulus payments should start being processed in the coming week(s). Stimulus payments are $600 for each individual ($1200 per couple) and $600 for children age 17 and under. The amount of the stimulus payment will start to phase out at incomes of $75,000 (Single), $112,500 (Head of household) and $150,000 (Married filing joint or surviving spouse).

There are a number of online calculators that can be used to determine the projected amount of the second stimulus check. You will need your 2019 Adjusted Gross Income, which can be found on line 8b of form 1040.

Here is a calculator from Forbes: https://www.forbes.com/advisor/personal-finance/second-stimulus-check-calculator-payments/

Enhanced unemployment benefits

Individuals on unemployment can receive an extra $300 per week for up to 11 weeks starting on December 26, 2020. The $300 is not retroactive and is good through March 14, 2021.

Earned Income Tax Credit changes for 2020 tax returns

Taxpayers that qualify for Earned Income Tax Credit, who have less earned income in 2020 than in 2019, can use their 2019 Earned Income to calculate their Earned Income Tax Credit.

Rollover of Flexible Spending Accounts (FSA)

The bill allows taxpayers to carry over amounts in their FSA to 2021 (from 2020), and then again into 2022 (from 2021). This covers both healthcare and dependent care FSAs.

Tax Year 2021 – Removal of Tuition and Fees Deduction

Starting in 2021, the Tuition and Fees Deduction has been eliminated. It has been replaced with a higher phase-out limit of the Lifetime Learning Credit. The new phase-out limits are $80,000 for single and $160,000 for joint returns.

Tax Year 2021 – Charitable deductions

Starting in Tax Year 2021, an individual who does not itemize deductions can also get an above-the-line deduction of $300 per return ($600 for a joint return) for cash donations. The suspension of cash donation limits was also extended through 2021.

Tax Year 2021 – Medical Expense deductions

Starting in 2021, to be able to claim medical expenses, the floor is officially 7.5%. This number has vacillated between 10% and 7.5%, but is now permanent at 7.5%.

Summary of American Rescue Plan Act of 2021 for Individuals

Below is a summary of the American Rescue Plan Act of 2021 (H.R. 1319) for individuals. The bill was signed into law on 3/11/2021.

Special information that may impact individuals who received unemployment in 2020:

For taxpayers who received unemployment in 2020 and have an Adjusted Gross Income of $150,000 or less, the first $10,200 of unemployment received is considered non-taxable.  Adjusted Gross Income determination is made without including the unemployment received.

**Our firm will provide future guidance to our clients that may be impacted.**

**This is only in effect for 2020. This does not impact your unemployment benefits received in 2021.**

Individual tax provisions in 2021

Many of these tax provisions are for Tax Year 2021 only. Continuation of these items will require congress to extend these provisions.

2021 Recovery Rebates

As many individuals received Economic Impact Payments (stimulus checks) in 2020 and early 2021, another round of rebates will be distributed in the coming weeks. The eligible credit is $1,400 for single taxpayers and $2,800 for married filing joint filers. A credit of $1,400 is also available for eligible dependents. The income limits and phaseout for the recovery rebates will be determined by your 2020 tax return (if it has been filed), otherwise will default to income on your 2019 tax return.

There are a number of online calculators that can be used to determine the projected amount of the third stimulus check. If your 2020 return has been filed, you will need your Adjusted Gross Income amount, which can be found on line 11 of Form 1040. Otherwise, you will need your 2019 Adjusted Gross Income, which can be found on line 8b of Form 1040.

Here is a link to a calculator to calculate your recovery rebate:  https://www.forbes.com/advisor/personal-finance/third-stimulus-check-calculator/

Child Tax Credit (currently in place for 2021 only)

The Child Tax Credit has been increased to $3,000 per child ($3,600 for certain children under 6). The child tax credit is now applicable to children under 18. The child tax credit in 2020 was $2,000 and applicable for children under 17.

Advance Payments of the Child Tax Credit

Along with changes increasing the Child Tax Credit, the Department of Treasury will also begin sending advance payments of the credit. This means you will get a monthly amount during the year instead of getting the full credit when doing your tax return.

**This means your traditional tax refund may be lower starting in 2021 or the amount you traditionally owe may be more than usual.**

**The IRS will send you a tax form reporting all advance payments you received. This form will be required to complete your return.**

**For children born during the tax year, you will not receive an Advance Payment in the first year, you will receive the credit with your tax return.**

Dependent Care Benefits (currently in place for 2021 only)

The Dependent Care Credit has multiple changes in place for 2021.

1. The calculation of the credit is now 50 percent of the eligible expenses.
   1. The calculation traditionally has been 35 percent of eligible expenses.
2. The amount of eligible expenses is now $8,000 for one qualifying child or $16,000 for two or more qualifying children.
   1. The amount of eligible expenses was $3,000 for one qualifying child or $6,000 for two or more qualifying children.
3. There is still an income phaseout for the credit. It was increased from starting to phase out at $15,000, to beginning to phase out at $125,000.
4. Starting in 2021, the credit is now a refundable credit. The credit traditionally was only allowed if the taxpayer had sufficient tax liability. Starting in 2021, the amount in excess of the tax liability will be included in the tax refund.

**Example of how this impacts an individual. The credit now goes from a max of $1,050 for one qualifying child (35 percent of $3,000) or $2,100 for two or more qualifying children (35 percent of $6,000) to $4,000 for one qualifying child (50 percent of $8,000) and $8,000 (50 percent of $16,000).**

Employer Provided Dependent Care Benefits (currently in place for 2021 only)

Dependent care benefits offered through an employer (reducing taxable income) have been increased for 2021. The amount of dependent care benefits that can be excluded has been increased from $5,000 to $10,500 per family.

Earned Income Tax Credit Expanded (currently in place for 2021 only)

The Earned Income Tax Credit has been expanded to most individuals 19 and over instead of 25 and older and will no longer have a maximum age of 65.

The credit income limits and phaseout have also been increased. The credit has also been expanded to certain married filing separate filers.

Premium Tax Credit

The premium tax credit increases credits for individuals eligible for health insurance premium assistance under current law and provides credits for taxpayers with income below 400% of the federal poverty line. It removes restrictions for taxpayers receiving unemployment compensation anytime in 2021. Under these changes, no additional income tax is imposed for tax years beginning in 2020 where the advance credit payments exceed the taxpayer’s Premium Tax Credit (PTC).

Student Loan Forgiveness (for Tax Years 2021-2025 currently)

Certain student loan debt forgiven between in 2021 through 2025 can be excluded from gross income. Currently, the amount of student loan forgiveness is considered taxable income.

IR-2021-59, March 17, 2021

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.

“This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic, while also working on important tax administration responsibilities,” said IRS Commissioner Chuck Rettig. “Even with the new deadline, we urge taxpayers to consider filing as soon as possible, especially those who are owed refunds. Filing electronically with direct deposit is the quickest way to get refunds, and it can help some taxpayers more quickly receive any remaining stimulus payments they may be entitled to.”

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until October 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

State tax returns

The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. Taxpayers also will need to file income tax returns in 42 states plus the District of Columbia. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details.

Winter storm disaster relief for Louisiana, Oklahoma and Texas

Earlier this year, following the disaster declarations issued by the Federal Emergency Management Agency (FEMA), the IRS announced relief for victims of the February winter storms in Texas, Oklahoma and Louisiana. These states have until June 15, 2021, to file various individual and business tax returns and make tax payments. This extension to May 17 does not affect the June deadline.

For more information about this disaster relief, visit the disaster relief page on IRS.gov.