Dear Gamburg CPA Client,
I hope all is well, and everyone is healthy. With the new vaccines being released for distribution in the past few weeks, we hope that there is a light at the end of the tunnel for this pandemic to cease.
As you may know, the congress and senate passed a $900 Billion Stimulus Package yesterday.
The new relief package is 5,593 pages, and while we didn’t have a chance to read most of it, here are the most relevant points for you on the taxation front:
Individual Stimulus Payment: IRS will direct deposit a stimulus check of $600 for a single taxpayer and $1,200 for joint filers, and $600 per dependent child under the age of 17. Single taxpayers with income below $75,000, heads of households with income below $112,500, and joint filers with income below $150,000 will receive the full stimulus payment. This will be based on 2019 taxes. Unfortunately, this will not apply to most of you, as the payment is phased out completely at the following income levels: $99,000 for single taxpayers, $136,500 for head of household, and $198,000 for joint filers.
Unemployment Insurance: if you are unemployed due to the COVID-19, you can receive an additional $300 per week in unemployment benefits from the end of December thru March 14, 2021. This is instead of the $600 in the original relief package that was passed in March. Freelancers and self-employed individuals will continue to be eligible for unemployment.
Paycheck Protection Program (PPP loans): Additional $284 Billion will be added to the program. Businesses that didn’t participate in the first round of loans, will be eligible. Some businesses that received funds in the 1st round, will be eligible for a 2nd round as well. However, to be eligible, those businesses will have to prove their 2020 revenue in any quarter dropped by more than 25% compared to the same quarter in 2019. Loans are limited to companies with 300 or fewer employees, and the maximum loan amount is dropped from $10 million to $2 million. There will be a simplified forgiveness process for loans under $150,000 in this second round.
THE BIG CHANGE ON PPP LOANS: The bill supersedes IRS guidance on the deductibility of expenses paid with PPP funds. The PPP loan received were not considered income to the business, but the IRS guidance was that expenses paid with PPP funds, wouldn’t be deductible to the entity. The relief bill specifically states: “no deduction shall be denied, no tax attribute shall be reduced, and no basis increase shall be denied, by reason of the exclusion from gross income provided”. Meaning that loan forgiveness is completely tax-free! Which is great news for businesses! We would need to wait to review the full text, to determine if there are any exceptions here.
Thank you, and Happy Holidays!
Ariel Gamburg, CPA, MBA
