After much debate in Congress and after Congress passed a $1.9 trillion dollar bill to further assist Americans through the affects of the COVID pandemic, on March 11, 2021, President Biden executed the American Rescue Plan Act of 2021 into law. Some of the high points of the Act are as follows:
* For qualified individuals, the government will make direct payments of $1,400 per individual and $2,800 per married couples. In addition, for every child or other dependent that an individual has, they may also receive an additional $1,400 as well. Several clients have received these checks already so please check your bank accounts for the deposit of these additional funds.
* The law expands the Student Loan Forgiveness Income Exclusion through 2025. Normally any debt that is forgiven becomes taxable income for the debtor. However under this new law, student loan debt forgiveness will not be taxable income.
* Up to $10,200 of unemployment compensation will not be taxable in 2020. This provision may create a lot of complications for the IRS and for taxpayers. Since a number of individuals who had been receiving unemployment compensation may have already filed their 2020 tax returns, they may need to amend those tax returns. Also, the IRS will need to adjust their computer programs to take into account the change in the taxability of unemployment compensation. Hopefully, this transition will be a smooth process for both taxpayers and the IRS.
* The Child and Dependent Care Tax Credit will be increased, so that the child credit for qualified families will be between $3,000 and $3,600 depending on the age of the child. The Act also clarified some items for the Paycheck Protection Program. However, the expiration date was not extended. The end result is that after March 31, unless there is an extension, you will not be able to get a Paycheck Protection Program loan. The Act also extended the Employee Retention Credit Program until the end of the year as well.
* The Act also extended various employee COVID programs, including but not limited to the Family Medical Leave Credit Program and also the Sick Day Program for employees.
* The new law also provides approximately $350 billion dollars to state and local governments to assist with COVID recovery measures to offset the loss of revenue from taxes because of the significant unemployment numbers.
* The new law will provide $50 billion to expand COVID testing and related health care matters.
By the way, the IRS has also recently extended the individual tax filing deadline to May 17 so you have a little more time to file your tax return this year if you have not filed already.
Please be aware of all of these items and how they may affect you or your family. Please consult your attorney or accountant if you have any questions regarding these matters.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.
Attorney James F. Contini II is a certified specialist in estate planning, Trust & Probate Law by the OSBA. He is with the firm Krugliak, Wilkins, Griffiths & Dougherty Co. LPA in New Philadelphia.