By Cody Gehman, CPA
The $1.9 trillion American Rescue Plan Act of 2021 (ARPA) was signed into law earlier this month, and it’s as massive as its price tag suggests. While small business recovery was not the primary focus of the legislation, it still extended some of the COVID-19 recovery programs that small businesses are using. As with previous COVID-relief measures passed over the last year, these provisions are available for a limited time only, so businesses are encouraged to act quickly to ensure they understand the relief available and take full advantage of provisions in the law.
Employee Retention Tax Credit
If your business was partially or fully suspended due to a COVID-19 governmental order or the business recorded a significant decline in gross receipts (50% drop in 2020 or 20% drop in 2021 when compared to 2019), please consult your CPA, as you may be eligible. Use the helpful table below to assist in determining eligibility.
In 2020, eligible wages are capped at $10,000 per employee for the year. Your max credit is 50% per employee, or $5,000. For 2021, the credit is increased to 70% of wages per quarter, again capped at $10,000 per employee.
- The Employee Retention Tax Credit (ERTC), which was created in the CARES Act and provides tax relief for employers on employee wages, has been extended from June 2021 to the end of the year. ERTC eligibility for two additional quarters translates to up to a possible additional $14,000 in savings per employee.
- The ARP also creates a $50,000-per-quarter limit on the ERC for periods after June 30, 2021, for certain employers established after Feb. 15, 2020, with average annual gross receipts under $1 million.
- Businesses that saw a huge drop in gross receipts (90% or greater) are now eligible for the ERTC regardless of size, and the IRS statute of limitations on assessing the credit was extended.
FFCRA Paid Sick and Paid Family Leave Tax Credits
The paid leave tax credit created in the Families First Coronavirus Response Act (FFCRA) has also been extended, from March 2021 to the end of September. As of April 1, 2021, employers are eligible for an additional tax credit if they voluntarily provide an additional 10 days of paid sick leave and an additional 10 weeks of paid family leave.
The limit on the size of the tax credit has been increased to $12,000. In addition, new qualifying reasons for FFCRA paid leave have been added, mostly related to COVID-19 vaccines — for example:
- If the employee is awaiting a diagnosis.
- Will be receiving immunization from COVID-19.
- Is recovering from any complications related to the immunization.
Expanded Unemployment Benefits
Federal supplemental unemployment benefits of an additional $300 per week over and above the state benefits have been extended through Sept. 6, 2021, and the first $10,200 in unemployment paid in 2020 is exempt from federal income tax.
This extension increases the total time an individual may be eligible for unemployment benefits to 74 weeks, up from 50.
“For those who received unemployment benefits last year and have already filed their 2020 tax return, the IRS emphasizes they should not file an amended return at this time until the IRS issues additional guidance,” said the IRS recently.
COBRA Subsidy Credits
The ARP provides a 100% subsidy for employee COBRA premiums between April 1 and September 30 for any employees who were not voluntarily separated from employment. This credit is allowed against employee Medicare tax and may be claimed on the quarterly 941 filing.
Expanded Marketplace Premium Subsidies
People up to 150% FPL (federal poverty level) can now get silver plans for zero premium with vastly reduced deductibles. Premium subsidies will also increase for people at higher income levels among those currently eligible for help with incomes up to 400% of the poverty level. People with income of 200% FPL had been required to contribute $1,664 toward the cost of the benchmark marketplace plan this year; now, under the ARP, they will have to contribute just $510. At income of 400% FPL, people were required to contribute up to $5,017 toward the benchmark plan premium; now, they will be required to contribute no more than $4,338 toward that plan.
People with income above 400% FPL will be newly eligible for marketplace premium subsidies. They will be required to contribute no more than 8.5% of household income toward the benchmark plan.
The Biden Administration has reopened marketplace enrollment through May 15.
Small Business Grants
Impacted businesses in certain industries, including the restaurant industry, may be eligible to receive Small Business Administration (SBA) grants. These grants:
- Will be calculated based on pandemic-related revenue loss.
- Are limited to $5,000,000 per location or $10,000,000 per entity.
- May be reduced by PPP forgiveness already granted or other federal relief already received.
Paycheck Protection Program
The bill includes $7.25 billion in new money for the small-business loan program known as PPP and will allow more nonprofits to apply, including groups that engage in advocacy and some limited lobbying. It also allows larger nonprofits to be eligible.
Still have questions about ARPA’s implications for you and your business? As your financial advisors in Harrisburg, PA, Stonebridge Financial Group can provide additional insights. Read our blog to learn more about other COVID-19 measures or speak to a financial advisor about your unique needs.
Cody is a graduate of Shippensburg University with bachelor’s degrees in both Accounting and Finance. He obtained his CPA license in 2016.