How New COVID-19 Stimulus May Affect Your Taxes
January 28, 2021 | Barton Walter and Krier
On December 27, 2020, President Trump signed the Consolidated Appropriations Act (CAA), a spending plan for fiscal 2021 that includes additional economic relief and stimulus for individuals and businesses amid the COVID-19 pandemic. The new legislation contains provisions for small businesses that could significantly reduce federal income tax bills. Read on as we discuss how new COVID-19 stimulus laws may affect your taxes. Help for Cash-Strapped Individuals and Firms Included in the new legislation is another round of “recovery rebate” payments to individuals as well as additional funding for the Paycheck Protection Program (PPP) for businesses. According to the IRS, the economic impact payment sent to individuals is not considered income and will not reduce a taxpayer’s refund or increase the amount they owe when filing their 2020 or 2021 tax returns. Moreover, the Second Draw PPP loan is tax-exempt and not taxable income for businesses, as long as the funds are used for approved expenses such as payroll, mortgage interest, rent, or utilities. Tax-Related Provisions for Individuals The legislation includes some tax relief as well. Some of the provisions include: Permanent reduction of adjusted gross income (AGI) floor to 7.5 percent for medical expense deductions Extended nonitemizer deduction for up to $300 of cash donations ($600 for married couples filing jointly) to […]
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January 21, 2021 | Barton Walter and Krier
Small business still reeling from the effects of the pandemic received some welcomed news in the form of additional funding for the Paycheck Protection Program (PPP). The Second Draw loan program provides an additional $284 billion for small businesses and makes loan forgiveness easier if the bulk of the funds are used for payroll and other expenses related to COVID-19. Read on as we discuss what you need to know about PPP 2.0. What is PPP? PPP is a forgivable loan program established by the CARES Act, which provides economic relief to individuals, workers, and small businesses affected by the COVID-19 crisis. PPP loans help businesses keep workers employed during the pandemic. The first round of PPP loans started in April 2020 but ran out in a matter of weeks as panicked businesses flooded the U.S. Small Business Administration (SBA) with applications. According to the terms of the loan established by the U.S. Treasury, payments can be deferred for borrowers who apply for loan forgiveness. If a borrower does not apply for loan forgiveness, payments are deferred 10 months after the end of the covered period. Starting on January 13, 2021 through March 31, 2021, eligible businesses may apply for the Second Draw PPP loan. Who qualifies for PPP 2.0? Generally, the same […]
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