As the coronavirus (COVID-19) continues to affect local communities and global economies, our firm remains committed to serving your tax and financial planning needs. As part of this commitment, we want to provide you with some updates, as well as highlight some key tax provisions impacting individuals and businesses contained in the year-end coronavirus relief legislation, known as the Consolidated Appropriations Act, 2021 (H.R. 133), which was signed into law on Dec. 27, 2020.
Additionally, with a new administration in the White House, further changes may be on the horizon. Billed as the American Rescue Plan, the package augments many of the measures in Congress’ $3 trillion coronavirus relief bill from March and in the $900 billion legislation from December. The proposed legislation from President Joe Biden would include provisions that would have a big impact on individuals and businesses. We will continue to update you on this.
INDIVIDUALS
As an individual, there are a number of provisions that may impact you and your tax situation. In our previous communications, we have noted some of those. Below are several additional provisions we have not yet highlighted. If you are interested in reviewing our previous communications, click here.
- The new legislation should make it easier for more taxpayers to take advantage of the medical expense deduction. The threshold for taxpayers to qualify was going to be 10% of adjusted gross income beginning in 2021 but, with the recent legislation, it now permanently remains at 7.5%. Please contact our office if you’d like our assistance with calculations to determine if this deduction is beneficial to you.
- The law allows residents of qualified disaster areas to take a distribution of up to $100,000 from a qualified retirement plan or individual retirement account (IRA) without penalty.
- The mortgage insurance premium deduction is extended by one year (through 2021).
- The legislation extends the $300 charitable deduction (for cash donations) for taxpayers who do not itemize (known as an above-the-line deduction). It also increases the maximum amount that may be deducted on 2021 tax returns to $600 for married couples filing jointly. Keep in mind that for 2020 tax returns, $300 is the maximum allowed per tax return, regardless of filing status.
There are other tax changes contained in the year-end legislation that could also apply to you. Please contact our office if you’d like to discuss your situation further.
BUSINESSES
Many of the provisions in both the March and December COVID-19 relief bill had tremendous operational and tax implications for businesses. In our previous communications, we have noted some of those. If you are interested in reviewing our previous communications, click here. If you have questions about how any of these changes impact your business, please contact our office to discuss further.
The Paycheck Protection Program (PPP) is now accepting applications for first-time borrowers and second-time borrowers. If you did not previously apply for a PPP loan, we urge you to consider whether applying for a PPP loan would be right for your business. If you did receive a PPP loan in the first round, and your business experienced a reduction in revenue in 2020, we urge you to examine your eligibility for a second-round PPP loan.
Additionally, the SBA has released the new, streamlined, PPP loan forgiveness application (form 3508S) for PPP loans of $150,000 or less. This form is much less burdensome, eliminating documentation submission requirements in lieu of certification statements by the borrower. If you have questions or require assistance with the forgiveness process, we are here to help.
Note that if your business is eligible to take advantage of the employee retention tax credit (ERTC), the amount you indicate was used for payroll costs on this form is very important as it impacts the amount of the ERTC your business is eligible for. Please contact our office to discuss this further if needed.
Our commitment to you
Whether you have tax or financial planning questions or need advice on ways to navigate the new tax laws, we’re here for you. If you have any questions or concerns, please don’t hesitate to contact us.
During this unpredictable and challenging time, it’s more important than ever to stay connected. We’re in this together and our thoughts go out to all who have been impacted by this unprecedented situation.
Rest assured, we’re here to help with your questions.