Terranova & Associates, LLC strives to keep our clients up to date during these unprecedented times with the fluid Government COVID - 19 tax changes that will affect you.
The President signed the 1.9 Trillion COVID-19 relief Bill H.R. 1319, called American Rescue Plan Act of 2021. This Bill passed the House of Representatives and Senate on a party-line vote. What this means is there was no bi-partisanship.
Here is a brief highlight of the tax changes by the Bill:
· $1,400 Economic Impact Payments at Adjusted Gross Income (AGI) of $75,000 to $80,000 for individuals, $112,500–$120,000 for head of household, and $150,000–$160,000 for joint ﬁlers are phased out.
· Exclusion of $10,200 of unemployment compensation from income for tax year 2020 for households with incomes under $150,000. This will result in taxpayers paying to amend filed tax returns to obtain refunds.
· Exclusion from income of partial and total forgiven student loan debt, for loans discharged between December 31, 2020 and January 1,2026.
· On payroll credits for paid sick and family leave, provides for reimbursement of pension plan and apprenticeship program contributions made by employers under collective bargaining agreements that are allocable to employee paid sick and family leave. Clariﬁes that paid leave wages do not include wages taken into account as payroll costs under certain Small Business Administration programs.
· One year extension of excess business loss limitations for non-corporate taxpayers through the end of 2026. It was created by the Tax Cuts and Jobs Act of 2017.
· For tax years after December 31, 2026, public companies will be allowed to deduct as much as $1 million in compensation for each of the next top ﬁve paid employees after the CEO and CFO. The tax break in current law from the 2017 tax bill applies to those two and the next three highest paid oﬃcers.
· Increasing the child tax credit from $2,000 to $3,000 (with a $3,600 credit for children under the age of 6), and making the child tax credit fully refundable. The enhanced child tax credit would begin to phase out at AGI of $75,000 for single ﬁlers, $112,500 on head-of-household returns, and $150,000 on joint returns. These changes are effective only for 2021.
· Extending the employee retention tax credit through December 31, 2021, and expanding the credit to allow the hardest-hit businesses to count all wages paid as qualifying wages, not just those wages paid to employees that are not providing services, and allowing certain start-up businesses to be eligible for thecredit.
· Exempt Economic Injury Disaster Loan (EIDL) grants and Restaurant Revitalization Grants from tax and provide that such exclusions shall not result in a denial of deduction, reduction of tax attributes, or denial of increase in basis by reason of this exclusion from income.
· Providing an extension and expansion of the paid sick and FMLA leave tax credits created in the Families First Coronavirus Response Act of 2020, and providing payroll tax credits for employers who voluntarily provide paid leave through the end of September2021.
· Providing that all COVID-19 student loan relief istax-free.
· Repealing the election for US aﬃliated groups to allocate interest expense on a world wide basis, effective for tax years beginning in 2021.
· Extending and supplementing interest rate smoothing for single-employer plans through 2025 with a phase-out after that, and increasing the amortization period for shortfalls from seven years to 15 years for plan years beginning after December 31, 2019 (with option to elect to apply for the 2019 plan year).
· Expanding the scope of the $1 million deduction limit for public corporations under Section 162(m) to include the ﬁve highest paid employees of the corporation. The ﬁve employees would be determined each year, and these employees would not be subject to the ‘once a covered employee, always a covered employee’ treatment that continues to apply to the CEO, CFO, and three highest paid executive oﬃcers. The provision would be eﬀective for tax years beginning after December 31, 2026.
· Lowering and modifying the threshold below which a third-party settlement organization is not required to report payments to participants in its network. The provision seeks to address payments that are common in the ‘gig’ economy. For any calendar year beginning after December 31, 2021, a third-party settlement organization is required to report transactions with any participating payee that exceed a minimum threshold of $600 in aggregate payments, regardless of the aggregate number of such transactions.
· Extending for one year, through December 31, 2026, the $500,000 limitation on excess business losses of non-corporatetaxpayers.
As additional information becomes available, we will provide additional updates.
We are available for consultations regarding this and other tax matters if you need assistance, please contact us. We are excited to welcome the new clients that have retained our services!
This is our update as of this time and we will strive to keep you informed; please keep in mind this is a fluid topic and subject to change at any time.
This information should be used to strategically navigate through the months ahead. We are in the office and are happy to assist you.
Please feel free to share this with your relatives and friends and remember we are here to help our clients during this difficult time.
Terranova & Associates, LLC.
Thomas D. Terranova, Jr., CPA, PFS, CITP
150A Andover Street, Ste 11C
Danvers, MA 01923
Tel: (978) 774-7700 X 104, Fax: (978) 774-7705
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