The American Rescue Plan has been deemed by the U.S. Department of the Treasury as one of the most progressive pieces of legislation in history, and its’ primary intent is to build a bridge to an equitable economic recovery. These are some of the main provisions contained within this legislation:
Economic Impact Payments. For Americans and their families, this means a third round of Economic Impact Payments, which will ensure that eligible Americans receive greater amounts of financial assistance during 2021, rather than waiting for a Recovery Rebate Credit when 2022 tax returns are filed. The Treasury Department and the IRS want to expand their reach, and are trying to assist the homeless, rural poor, and other disadvantaged Americans by working with homeless shelters, legal aid clinics, and disseminating information in more than 35 languages.
Child Tax Credit. The Child Tax Credit is intended to reduce child poverty by supplementing family earnings through the provision of this tax credit. In summary, the credit amounts were increased, the scope of the child’s age was expanded, periodic payments will be advanced from July 1 to December 31, 2021, and for the first time, (the credit) is extended to Puerto Rico and U.S. Territories.
State and Local Fiscal Recovery Fund. Emergency funding for state, local territorial and Tribal governments is being provided to assist with the disparity between each state’s rising need for increased services and falling revenues. The American Rescue Plan will support public health response and assist states to cover public health emergency costs incurred and provide recovery support through assistance with small businesses, nonprofits, impacted industries, and support for essential workers.
Capital Projects Fund. The pandemic has brought to light the shortcomings of our nation’s infrastructure and the impact to American families, including network access and connectivity. This Plan will address vital challenges required to ensure that all communities have access to high-quality, modern infrastructure in order to quickly adapt to crises and minimize the divide that can leave some American families behind.
Homeowner Assistance Fund/Emergency Rental Assistance. States are being provided with relief for both vulnerable homeowners and at-risk renters with funding to mitigate the financial harm caused by the pandemic and keep Americans safe, with funding being disbursed quickly and efficiently through existing program structures.
State Small Business Credit Initiative. Small businesses have been most impacted by the pandemic and all communities have been witness to closed local storefronts, resulting in a national small business revenue downturn of 32%, with many businesses struggling to persevere. This law will provide states with small business credit expansion initiatives through new lending and investing activity, providing collateral support, facilitate loan participation, and enable credit guarantee programs, to allow small business enterprises recovery on solid footing.
Employee Retention Credit and Paid Leave Credit Programs. The Employee Retention Credit for small businesses will be extended through December 2021 and will allow business to offset current payroll liabilities up to $7,000/employee/quarter or those who have seen their revenues decline, or were temporarily shuttered. Paid Leave Credits will also be extended through September 2021 for small and midsize businesses who offer paid leave due to illness, quarantine or caregiving, with a dollar-for-dollar tax credit equal to wages up to $5,000 dollars for paid sick leave. This incentive is designed to encourage sick employees to stay home and help keep the virus under control.
Unemployment Compensation. Millions of Americans lost their jobs as a result of the COVID-19 pandemic and have claimed unemployment benefits. Now, the American Rescue Plan waives federal income taxes on the first $10,200 of unemployment benefits received in 2020 by middle- and lower-income taxpayers, and extends to workers who received benefits through federal unemployment programs as well as traditional benefits through state unemployment insurance fund.
To ensure that your business takes advantage of all of the initiatives in place draw on the guidance of the experienced, proven legal, tax, accounting and business consulting professionals at Allen Barron, Inc. We invite you to contact us or call today for a free consultation at 866-631-3470 to learn more about our tax preparation, account and business advisory services. We’re here to help.
