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:
Tax-Related Provisions for Businesses
Do any or all of these provisions apply to your business? Contact your Barton, Walter, & Krier tax advisor for more information on how the CAA legislation may affect you.