The American Rescue Plan Act (ARPA) has already delayed the tax filing deadline to May 17, but what else should tax professionals know about the bill? The American Rescue Plan of 2021 is summarized below and how it may affect you, your clients, and your tax return next year.
Continue reading to learn more about ARPA and professional tax preparers software.
What Resulted from the American Rescue Plan?
The American Rescue Plan was formed to provide financial assistance to families and people while recovering the economy from the COVID-19 pandemic’s effects. Much of the $1.9 trillion bill’s financing went directly to states, counties, and other local governments or went toward expanding existing programs in education, food aid, healthcare, and other social services.
The ARPA’s parts relating to direct financial aid, such as unemployment, stimulus payments, tax credits, and the PPP, are the ones that have the largest impact on your clients.
Unemployment Benefits Increased
The ARPA extended many of the increased unemployment benefits granted in the CARES Act. The ARPA, in particular:
- Extends the $300 weekly payment until September 6, 2021 (Though many states have now chosen not to offer this additional benefit).
- Extends Pandemic Unemployment Assistance (which allows independent contractors, part-time workers, and other workers who would not normally qualify for unemployment insurance to receive benefits) and Pandemic Emergency Unemployment Compensation (which allows those who have already used standard unemployment benefits to continue receiving benefits) until September 6, 2021. (It increases a person’s eligibility for PUA payments from 50 to 79 weeks and PEUC benefits from 24 to 53 weeks.)
- Provides a tax credit for certain unemployment benefits received in 2020. Unemployment payments up to $10,200 are not taxable for persons with an annual income of less than $150,000.
The Child Tax Credit
The Child Tax Credit saw considerable adjustments as a result of the ARPA. However, most of these modifications are only temporary and will expire in 2021. Families will receive a fully refundable $3,000 credit for children ages 6-17 and $3,600 for children ages 0-5. (The old CTC gave each child a $2,000 tax credit, of which only $1,400 was refundable.)
The EITC (Earned Income Tax Credit)
For your clients without dependents, the maximum Earned Income Tax Credit (EITC) will rise from $540 to around $1,500. Furthermore, the EITC income level will be raised from around $16,000 to at least $21,000, and age limits will be temporarily lifted.
If you need help preparing EITCs, you can use tax preparer software.
The Child and Dependent Care Credit
The Child and Dependent Care Credit enhanced 35% to 50% of qualified child and dependent care expenses. A credit of up to $8,000 per child and $16,000 is available to families. For the tax year 2021, the credit is also refundable.
The FFCRA and Paid Leave Credits
The Families First Coronavirus Response Act (FFCRA) was extended by the American Rescue Plan until September 30, 2021. The FFCRA, on the other hand, is no longer required. The FFCRA previously required employers to provide paid sick, and family leaves to employees who had COVID-19 or cared for a COVID-19 family member.
Employers were entitled to claim these expenses as refundable tax credits. Employers are no longer required to give this paid time off, but if they do, they can still collect FFCRA Paid Leave Credits for any qualifying time off taken before November 20, 2021.
Employee Retention Credits
Employee Retention Tax Credits for Small Enterprises were also extended by the ARPA until December 2021, motivating and making it simpler for small businesses to retain staff.
The Paycheck Protection Program
The Paycheck Protection Program received additional funds from the American Rescue Plan, creating a second application period that closed on May 31.
Payments for Economic Impact
The third phase of economic impact payments of $1,400 per person was included in the ARPA for persons with an AGI of less than $75,000. Dependents above the age of 17 were also eligible to receive a payout, unlike the previous two stimulus checks.
Conclusion
The American Rescue Plan Act, which Congress passed and which President Biden is anticipated to sign on March 12, will benefit tens of millions of people, alleviate high levels of suffering, assist school districts in addressing student learning loss, and strengthen the economy. If you’re having difficulty preparing taxes, just like the ARPA, the best professional tax software is here to lessen your load and ease the process.
For tax preparers, Keystone Tax Solutions offers the best professional tax software to boost accuracy and simplify the process. For a free demo, contact us today!
