After a week delay, President Trump signed the $908 billion stimulus package into law on December 27th, 2020. Here is a summary of the new economic relief law:
Second Stimulus Check
The new law will send a second stimulus check, up to $600, to each eligible adult and a flat $600 for qualifying child age 16 and younger. Individuals with AGI (adjusted gross income) up to $75,000, heads of household with AGI up to $112,500, and couples with AGI up to $150,000 will be eligible for the full amount. Anyone with higher AGI may qualify for reduced amount.
The IRS will use data in their systems to send the new payments (Direct Debit or a mailed check/debit card will be issued). If no payment is received for some reason, it can be claimed on your 2020 tax return since it is an advance payment of what will be called the Recovery Rebate Credit (RRC).
The House passed an amendment that would change the amount to a maximum $2,000 for eligible adult. We will send an update if the Senate approve the amendment. For the most up to date information on Economic Impact Payments visit www.irs.gov. Payments began being issued on December 30th, 2020.
Federal Unemployment Insurance
The new law will provide an additional $300 per week for unemployment benefits until March.
Payroll Protection Program Extension
The new law will add $284 billion to the Paycheck Protection Program. Here are some highlights:
- Restaurants and other hospitality businesses may multiply those payroll costs by 3.5 instead of the previous 2.5, making them eligible for slightly more funding.
- Applicants who have no more than 300 employees and can demonstrate at least a 25 percent drop in revenues from the fourth quarter of 2019 to the same period this year may qualify for this second round of funding.
- Covered expenses now to include things like cloud computing or remote-work software; and equipment for government-mandated sanitation and social-distancing, like sneeze guards or air filtration systems.
- The deadline for all new loans is March 31.
- Business will be allowed to deduct the costs covered by the PPP loans on their federal tax returns.
- The new law simplifies the forgiveness application process for loans up to $150,000. Affected businesses will not need to submit documentation supporting their claims but should keep it on hand in case of an audit down the line.
- The new law now provides that EIDL Advances will not reduce PPP loan forgiveness. Borrowers may amend their submitted forgiveness application if the EIDL Advances amount was deducted from the forgiveness amount.
The new law extends the federal eviction moratorium, provided by the CAREA Act, through January 31, 2021. The law also provides $25 billion to state and local government to help qualified renter households pay for rent and utilities.
Employee Retention Credit and Business Expenses
The law extends the employee retention tax credit and temporarily allows a 100% business expense for meals (up from the current 50%) if the expense for food and beverages is provided by a restaurant. This provision is effective for expenses incurred after December 31, 2020 and expires at the end of 2022.