The American Rescue Plan Act of 2021 was signed into law by President Biden on March 11, 2021. Intended to facilitate the United States’ recovery from the devastating economic and health effects of the COVID-19 pandemic, this economic rescue legislation is one of the most expensive in U.S. history. Below is a broad overview of some of the larger components of the package.

Direct Financial Payments

Direct stimulus payments in the amount of $1,400 will be sent to individuals with an adjusted gross income (AGI) of $75,000 or less. This amount augments the $600 payments in the second stimulus package signed by former president Trump in December of 2020 in order to hit the $2,000 mark originally requested by Trump. Married couples with AGIs of $150,000 or less will receive $2,800 ($1,400 for each), and each qualified dependent regardless of age will receive $1,400. Payments are reduced for individuals who make over $75,000 and disappear completely for individuals who make $80,000 or more ($160,000 for married couples).

Extended Unemployment Benefits

Pandemic Unemployment Assistance (PUA) benefits of $300 a week are extended through September 6, 2021. These benefits were created for workers such as independent contractors, who do not typically qualify for unemployment insurance. The total number of eligibility weeks increases as well, from 50 to 79.

Federal Pandemic Unemployment Compensation (FPUC) benefits, which boost unemployment benefits by $300 per week, are also extended through September 6, 2021.

Pandemic Emergency Unemployment Compensation (PEUC), which provides added weeks of unemployment insurance benefits to workers who have depleted their state unemployment benefits, has been extended through September 6, 2021. The total number of eligibility weeks also increases from 24 to 53 weeks.

Additionally, the first $10,200 in 2020 benefits is tax free for families making $150,000 or less. Taxpayers who had taxes withheld from unemployment benefits in 2020 will be authorized to reclaim them when they file their 2020 taxes. If they’ve already filed taxes, they can file an amended tax return.

The Act also grants a 100% subsidy of COBRA health insurance premiums so unemployed and furloughed workers, as well as those who’ve had hours reduced, can continue their group health care plans through the end of September.

Expanded Child Tax Credit

For couples who make $150,00 or less in a year ($112,500 or less for single parents), the Act increases the Child Tax Credit maximum to $3,600 a year for each child under age 6, and $3,000 a year for each child ages 6 to 17. The law grants one year of credit payments, which will be sent by direct deposit on a monthly basis, possibly beginning this summer. The remaining amount can be claimed on 2021 tax returns.

Employer Tax Credits

The Act extends tax credits to employers who implement Families First Coronavirus Response Act (FFCRA) emergency paid sick leave or expanded family and medical leave to employees. In addition to previously acceptable FFCRA reasons for sick leave, from April 1, 2021 through September 30, 2021, credits are also available for sick leave wages paid when an “employee has been exposed to COVID-19 or the employee’s employer has requested such test or diagnosis, or the employee is obtaining immunization related to COVID-19 or recovering from injury, disability, illness, or condition related to such immunization.” Too, tax credits for emergency paid family leave are permissible for leave granted when an employee is incapable of working, either in person or remotely, due to the necessity of caring for a child whose school is closed at any point during the pandemic.

Help for Businesses

The “Restaurant Revitalization Fund” is a new program established under the American Rescue Plan Act that allocates $25 billion in pandemic assistance grants to eligible entities such as restaurants, bars, lounges, and caterers. The grants are able to administer up to $10 million per company with a limit of $5 million per physical location. The funds can be used to cover payroll, rent, utilities, and other expenses.

Two programs established under the CARES Act receive additional funding. The Economic Injury Disaster Loan (EIDL) program receives an added $15 billion, and the Paycheck Protection Program receives an added $7.25 billion. The PPP’s current application deadline of March 31, 2021, is not extended.

Daniel Kittell, CPA - Accountant Indianapolis