The U.S. Senate and House of Representatives overwhelmingly passed the Consolidated Appropriations Act, 2021 a $900 billion COVID-19 relief bill last night that provides $600 stimulus payments to individuals, adds $300 to extended weekly unemployment benefits, and provides more than $300 billion in aid for small businesses.

The relief bill also ensures tax deductibility for business expenses paid with forgiven Paycheck Protection Program (PPP) loans, provides fresh PPP funding, makes Sec. 501(c)(6) not-for-profit organizations eligible for loans for the first time, and offers businesses facing severe revenue reductions the opportunity to apply for a second loan.

The Senate approved the bill with a 92-6 vote at about 11:45 p.m. Monday, December 21, just a couple of hours after the House approved it 359-53. Despite the fact that Former President Trump threatened to veto the bill, he signed it on the evening of December 27, 2020.

Read our article New Coronavirus Stimulus Bill Passes Congress with PPP Loan Updates and Tax Implications for details on the relief for small businesses.

We have outlined below key provisions for individuals of the relief bill:

New Economic Impact Payments for Individuals
The relief bill broadens the eligibility for the stimulus payments. Under the CARES Act, joint returns of couples where only one member of the couple had a Social Security Number were ineligible for a payment. Families will now be eligible to receive payments for the members of the family that have SSNs. This change is retroactive, so those who fall under this category who missed out on the first round of Economic Impact Payments (EIPs) can claim that money when filing 2020 tax returns in the spring of 2021.

  • EIPs of $600 check per taxpayer ($1,200 for married filing jointly). The phase-out begins for those earning $75,000 annually ($112,500 for heads of household and $150,000 for married filing jointly) and disappears at $99,000.
  • The IRS will use the same methodology for calculating payments as it did for the first round of Economic Impact Payments.
  • The direct deposits could go out as soon as next week, according to Treasury Secretary Steven Mnuchin.

Additional Relief for Individuals

  • 11 weeks of emergency unemployment benefits of $300 per week from Dec. 26 until March 14, 2021. 
  • Extends the Pandemic Unemployment Assistance (PUA) program, with expanded coverage to the self-employed, gig workers, and others in nontraditional employment, and the Pandemic Emergency Unemployment Compensation (PEUC) program, which provides additional weeks of federally funded unemployment benefits to individuals who exhaust their regular state benefits.
  • Protects individuals who received pandemic-related unemployment benefit overpayments through no fault of their own and are now unable to repay the funds.
  • Provides $25 billion in rental relief and an extension of the eviction moratorium through Jan. 31, 2021.
  • Bans surprise medical bills, which sometimes occur when a patient unexpectedly gets care outside of a network. Going forward, insurance companies will have to work these out with providers.

Tax Relief for Individuals

  • Allows families who are eligible for the Earned Income Tax Credit and the Additional Child Tax Credit and who experienced an income loss in 2020 to use their 2019 income to determine these credits.
  • Reduces the income threshold for medical expense deductions from 10 percent to 7.5 percent.
  • Provides relief for employees with unused amounts in their health and dependent care flexible spending accounts by allowing for more expansive carryover and grace period policies.

As we have been doing with all coronavirus legislation and IRS and SBA guidance during these past several months, we will be sure to update you with any additional insight as soon as possible. Continue to check back here for the most up to date tax information and changes in response to coronavirus. If you have questions about this or related topics contact an MCB Advisor at 703-218-3600 or click here. 

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