Weekly Digest – March 17 2021
Eventually, epidemiologists hope that the coronavirus will become a seasonal pathogen, not much worse than the flu. But the path to that state is not a straight line, as this article in Stat describes, breaking the continued pandemic into short-, middle- and long-term phases. With vaccines steadily reaching more people, most agree that we are at least approaching the end of the “crisis” phase. Over the short-term, we may see reduced transmission as more people receive vaccines, but most experts recommend continued mask-wearing to protect children and adolescents. In the middle-term, we may see continued seasonal waves as new children are born and the immunity from vaccines and the disease itself wanes. These waves may fill hospitals, but because we have more experience in dealing with spikes, we may deal with them more productively. In the long-term, COVID-19 may become yet another seasonal flu, and it may yet evolve to be less dangerous.
So we get on with our lives by planning for small gatherings with our family if possible and getting outside safely when possible. I spend my days watching for ever changing guidance on new tax bills, debating on how to best handle the available stimulus funding, checking in with my staff who are now mostly working remotely, but first…
My pick for best photo of the week as the sun rose just yesterday morning as I started out for my walk/run on Rockaway beach. For me the best way to keep my sanity especially in busy times is to do something special for me each day.
And my “wildlife photo” pick of a flock of Canadian Geese in flight
The American Recovery Plan
President Biden signed the American Rescue Plan Act (ARPA) into law on Thursday, March 11. Here’s a summary of the key provisions.
- A third stimulus payment of up to $1,400 for each eligible person. See below for more details.
- Expanded federal unemployment benefits of up to $300 per week through September 6.
- For 2020, the first $10,200 of unemployment benefits will not be taxable for those making under $150,000.
- Expanded child tax credit of up to $3,600 per child under age 6 and $3,000 for each child aged 17 or under. The plan includes the option to make the payments periodic rather than paid out as a tax refund.
- Funds to help schools reopen safely.
- Funding to help state, local, and tribal governments.
- A ban on evictions through September 30, 2021.
- Extension of the Employee Retention Credit. See below for more details.
- Student loans forgiven between December 30, 2020 and January 1, 2026 will be tax-free.
- Additional funds for the Paycheck Protection Program. Right now this legislation does not extend the March 31, 2021 deadline for applying for funds. Last night the house passed the Paycheck Protection Program Extension act in a vote of 415-3. This will extend the application deadline to May 31st. Now on to the senate and president for the final vote.
A notice from the IRS recommends that people wait to amend 2021 tax returns to take advantage of these new provisions until the agency develops a response. Worksheets for those who are filing on paper will be created, and the IRS is working with software companies to make changes to reflect the new law.
Economic Impact Payments (aka Stimulus Checks)
The third round of stimulus payments began going out the day after President Biden signed the new law. Single taxpayers with income under $75,000 will receive a full payment, and joint filers with combined incomes under $150,000 will each receive a payment of $1,400. However, the payments phase out completely for single taxpayers with incomes over $80,000 and for joint filers with combined incomes over $150,000. Children and adult dependents will also each receive a check for $1,400.
If the IRS has your current banking information, you will likely receive your payment as a direct deposit. Otherwise, your payment will go out as a paper check or prepaid debit card. The IRS Get My Payment tool has been updated for third round payments.
Some people may experience delays in receiving their payments. People who have not yet filed a 2019 or 2020 return, or who filed their returns on paper, may have to wait because the payment amount is based on the most recently filed tax return. The IRS is still working through a backlog of more than six million paper returns that were filed during the pandemic shutdown. Moving or changing banks may also delay payments. If your dependents have changed since your last tax return, you may face a delay in receiving the payment for that dependent. Filing a 2020 return – even if you’re not required to file – will ensure that you receive all the benefits you’re entitled to, including the expanded child tax credit.
If you’re eligible for any of the stimulus payments but did not receive the full amount you’re entitled to, you can receive the additional stimulus payment as a Rebate Recovery Credit on your 2020 tax return.
As we process those 2020 tax returns for those of you who have NOT received the proper stimulus payments we follow IRS guidelines to reconcile those payments. We see the process works quite well as those funds are added to your refund or reduce your tax liability.
Economic Injury Disaster Loans (EIDL)
The SBA recently announced that payments on outstanding EIDL loans will be deferred. This deferral includes all EIDL loans, not just the pandemic-related ones. Payments on loans made in 2020 will be due 24 months from the date of the note, while payments on loans made in 2021 will be due 18 months from the date of the note. Payments on disaster loans made prior to 2020 that were in repayment status as of March 1, 2020 may also be deferred until March 31, 2022.
Tax Issues for Unemployment
While the new stimulus program exempts some unemployment benefits from federal taxation, some states will continue to include all unemployment benefits in state taxable income. On the federal side, up to $10,200 of unemployment benefits for taxpayers with taxable income under $150,000 will not be subject to federal income tax. Because ARP was signed into law in the middle of tax filing season, many states had already included the taxes to be raised by taxing unemployment benefits in budget projections for the year. Some people already filed 2020 tax returns before the new law was signed and included those unemployment benefits on their tax returns. It’s not yet clear if the IRS will require that those tax returns be amended to reflect the change in law, or whether the IRS will be able to make changes on their end and refund any excess taxes paid. Impacted taxpayers may want to consider extending their tax returns until this is all sorted out.
As we review the IRS guidance and wait for software updates we can see how beneficial this has been for many taxpayers who continue to struggle through these trying times.
Family and Sick Leave Credits Expanded and Extended
Employers who provide sick pay or pay for family leave related to the coronavirus pandemic can receive refundable tax credits. This program, which was part of the Families First Coronavirus Response Act signed into law by President Trump, was extended and expanded under ARPA to September 30, 2021. The maximum credit for family leave has been expanded to $12,000 per employee and the credit amount per employee will reset after March 31, 2021. See the IRS website for information about how to take advantage of this credit (Note: the IRS website has not yet been updated for the ARPA changes.).
Employee Retention Credit
This credit was set to expire at the end of June but will be extended through the end of 2021. For the first half of 2021, employers can file for a refundable credit against the employer portion of social security taxes, up to $7,000 per employee per quarter for a total of $14,000 for the first half of 2021. Starting in the second half of 2021, this credit can be used against the employer portion of all payroll taxes, and will continue at the same amounts. This means an eligible employer could receive refundable tax credits of up to $28,000 per employee for all of 2021. Employers can also use a look-back for 2020 to receive additional funds. Details on how to apply for this credit are on the IRS website; however, the IRS has not yet updated their information to reflect ARPA.
Employers around the country are rethinking their need for large offices with a move to a hybrid or remote workforces. Some companies have sold large office complexes or are not renewing leases, while others are reconfiguring office space to be a place where employees gather when they need to collaborate. Most executives seem to be holding off on making permanent changes to locations or setting hard dates for employees to return to the office, which leaves some workers in limbo as they try to determine their own living arrangements.
Tech firms are weighing the advantages and disadvantages to continuing with remote work. GeekWire has a summary of approaches and surveys that tech companies are using to make that determination. A survey by Microsoft found that employees’ productivity at home depended on their tenure at the company and on the suitability of their home environment for remote work.
Harvard Business School interviewed faculty members for their advice to employers as they rethink the future of work. Many, including Rosabeth Moss Kantor, urged employers to apply empathy and to consider the needs of employees when making plans.
For those planning to continue working from home, staff at CNN compiled a list of their favorite products that have made working from home more pleasant. These recommendations range from better office chairs and an ergonomic mouse to simple pleasures such as pop-up Post-It notes and colorful gel pens.
I and several other accounting professionals were asked to supply some “Tips for Tax Pros on Working Virtually”, we had done so last year as well. Hope some of these tips register with you too…
- Our Covid-19 Resource Center with relevant blog posts, videos and prior weekly newsletters
- Payroll, HR and benefits company Gusto has put together An Employer’s Guide to Navigating the Coronavirus
- Accounting Today has a special page for articles on COVID-19
- The best source for up-to-date and accurate health information is the Center for Disease Control (CDC)
- The CDC also has recommendations for businesses and employers
- Intuit QuickBooks has a dedicated page to help small businesses
- Entrepreneur put together a listing of free tech resources for remote work
- The Consumer Financial Protection Bureau has warnings about COVID-related scams
- Fast Company has a listing of the best productivity apps for 2020
- The New York Times has an online newsletter on K-12 and higher education
- The Wall Street Journal has a collection of articles on education
- The Atlantic has a state-by-state coronavirus tracker
We sincerely hope that you and your family are well and remain well. If you have any questions or concerns, don’t hesitate to reach out to us. We are all in this together!
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