UPDATE: American Rescue Plan Act – What to Know

Updated: March 26, 2020

There have recently been changes to the American Rescue Plan Act of 2021 that business owners should be aware of. We have highlighted a few of those changes below. 

• The Families First Coronavirus Response Act (FFCRA)-based leave may still take a payroll tax credit to cover wages paid has been extended through September 30, 2021.
• Additional Reasons Supporting Emergency Sick Leave – ARPA expands the reasons an individual may receive a tax credit for emergency sick leave to include:
  • Is scheduled for the vaccine or recovering from adverse effects of COVID-19 vaccine.
  • Is seeking or awaiting the results of a COVID-19 test when the employee has been exposed to COVID-19 or employer requested the test.
• Paid Sick Leave “Reset” – ARPA provides that employers may receive a tax credit for an additional 10 days of emergency paid sick leave between April 1 and September 30, 2021. 
• Nondiscrimination – ARPA requires that the employer extend emergency sick and/or expanded FMLA to all employees, not just to specific groups or classes of employees.
• Additional Reasons Supporting Expanded FMLA – Is now brought in line with the emergency sick leave reasons.  The employer can now claim a payroll tax credit for up to 12 weeks of leave for any of the following reasons:
  • The employee is subject to or is caring for an individual who is subject to a federal, state, or local quarantine or isolation order.
  • The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19 or is caring for an individual who has been so advised.
  • The employee is caring for a son or daughter because the child’s school or place of care has closed or is unavailable due to COVID-19.
  • The employee is receiving or experiencing negative effects from the COVID-19 vaccine or is awaiting the results of a COVID-19 test requested by the employer or necessitated because of close contact.
• Increase Cap on Expanded FMLA Dollars – The FFCRA had a cap of $10,000 of paid leave wages per employee, the ARPA raises the limit to $12,000.

If you have any questions regarding the above information, please call us at (608) 782-0200.

Updated: March 23, 2020

There has been new information released regarding the $10,200 unemployment tax break that was a part of the American Rescue Plan Act. 

The IRS plans to automatically process refunds for taxpayers who had unemployment income in 2020 and filed their tax returns before legislation passed that made those benefits tax-free. The IRS Commissioner, Charles Rettig, is suggesting not to file an amended return at this time. The IRS believes they will be able to automatically issue refunds associated with the $10,200. People who had unemployment income in 2020 and have not yet filed their tax return may need to wait to ensure that they submit all information to the IRS correctly.  

Both Wisconsin and Minnesota have extended the filing dates to May 17^th for the 2020 returns. This extension does not include an extension for estimated payments thus far. Neither Wisconsin nor Minnesota have adopted the non-taxable unemployment as of March 18, 2021. Wisconsin will most likely have a Schedule I adjustment and MN has updated their tax form to make an adjustment to add back the non-taxable benefit to the MN return.

As the IRS will releases more details in the coming days we will share more updates. 

Updated: March 19, 2020

Recently, there have been new legislations and bills passed by the United States Government that could directly affect you. As we continue to learn more, we will update and post here on the latest news.

American Rescue Plan Act

An economic stimulus bill passed last week to speed up the United States recovery from the economic and health effects of COVID-19 pandemic. The American Rescue Plan Act will have major tax impacts for the 2020 and 2021 tax returns which include:

Tax-Free unemployment benefits for 2020

• Up to $10,200 of unemployment benefits received in 2020 is EXEMPT from federal income tax for households with an adjusted gross income under $150,000.
• If you are married, you and your spouse can each exclude up to $10,200 of unemployment compensation.
• If you have already filed your 2020 taxes, we suggest waiting for further guidance from the IRS. It is unknown if individuals will need to amend their taxes or if the IRS will automatically adjust.

Retroactive refunding of the advanced premium tax credit

• If you qualify for a premium tax credit for healthcare purchased on the exchange and you had an excess premium tax credit for 2020, no repayment is required.
• If you have already filed your 2020 taxes, we suggest waiting for further guidance from the IRS. It is unknown if individuals will need to amend their taxes or if the IRS will automatically adjust.

Stimulus checks to individuals

• $1,400 stimulus checks ($2,800 for married filing joint) will be issued to eligible individuals. This includes $1,400 for each minor and adult dependent.  This is different from the previous two stimulus packages that cut off payments for dependents that were 17 and older.
• There are income limits for this payment. You will receive the full payment amount if you fall beneath the thresholds listed below.  If your income is within the thresholds you will receive an adjusted payment amount. If your income is above the listed thresholds you will not qualify to receive a payment. 
  • Single: $75,000 to $80,000
  • Married filing joint: $150,000 to $160,000
  • Head of household: $112,500 to $120,000
• Distributing checks, the week of March 15th
• How will people get the check?
  • Direct Deposit
  • Physical checks-sent to home address
  • Debit Cards-Prepaid Visa Card sent to home address

Expanded child tax credit for 1 year (2021)

• • Individual filers with income up to $75,000, married filers with income up to $150,000 and head of household filers with income up to $112,500 will get $3,600 for each child under 6 years old. For children 6-17 the credit is $3,000
  • When will people get the child tax credit?
    • Families could receive half their total credit on periodic basis – up to $300/month per child up to age 6 and $250/month per child ages 6-17.
      • This could start as early as July and run through the rest of the year.
    • Families could claim the remaining half on their 2021 tax returns.
  • Tax filers above the income threshold will still be eligible for the existing $2,000 child tax credit that phases out at $200,000 ($400,000 for married filing jointly).

Required Minimum Distributions (RMD’s)

Secure Act changed the start date for RMD’s from 70 ½ to 72 years if individual reaches age 70 ½ after December 31, 2019.

• If an individual turned 70 ½ after Dec. 31^st, 2019, they are not required to take an RMD until age 72.
• If an individual turned 70 ½ in 2019 they are required to take an RMD by April 1^st, 2020 but due to the CARES ACT the deadline was waived. If individual did not take their first RMD in 2020, they need to take it by April 1, 2021 and the 2021 RMD by Dec 31^st, 2021. This only applies to those who turned 70 ½ in 2019 and did not take an RMD in 2019.

Deadline for 2020 Taxes to be filed for Federal extended until May 17, 2021. The deadline for State returns has not been determined. 

We will continue to make updates as soon as we learn more.