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A third round of stimulus is poised to infuse the American economy with $1.9 trillion in economic aid with a significant portion going to enhance existing programs that have offered a lifeline to businesses throughout the COVID-19 pandemic. Known as the American Rescue Plan Act (ARPA), President Joe Biden signed it into law on March 11, 2021, and it features a diverse mix of new stimulus offerings and expanded programs aimed at helping individuals and businesses alike. 

Here is a brief overview of the various components of the bill: 

Fueling initiatives to aid businesses 

Businesses will be able to take advantage of a variety of programs and policies to help them as they turn the corner to a healthier economy and improving situation across the country. 

  • An expansion of the Emergency Injury Disaster Loan program (EIDL): There’s an additional $15 billion set aside to help small businesses, with applications accepted in a series of exclusive windows, beginning with businesses that didn’t get the full amount they initially applied for. 
  • More funding, but no extension for the Paycheck Protection Program (PPP): The popular program gets an infusion of $7 billion to help small businesses, but the program has not been extended past its current end date of March 31, 2021. Also, the eligibility criteria for non-profits have been expanded to benefit some larger organizations. 
  • A new grant program for bars and restaurants: The dining industry has been hit hard by the pandemic, and the Restaurant Revitalization Fund now boasts more than $25 billion in tax-exempt relief funds for small and mid-sized restaurants. It’s targeted to individual restaurants, bars, caterers, breweries and food trucks, as well as restaurant groups with fewer than 20 locations. A portion of funding is set aside for restaurants that grossed less than $500,000 in 2019 with the first three weeks of the grant-application cycle prioritizing restaurants owned and operated by women, people of color and veterans. 
  • Expanding the Employee Retention Tax Credit (ERTC): The ERTC has been extended through the end of 2021 and has been broadened to allow certain businesses to claim a credit of up to $33,000 per employee. The bill also expanded the ERTC to cover newly-formed businesses to help spur hiring and economic recovery efforts. 
  • Support for health care: ARPA expands the Paid Sick Leave Credit through September 2021, offering payroll tax credits for employers who voluntarily provide paid leave during that time frame. The bill also subsidizes COBRA premiums at 100 percent, asking former employers to pay the subsidy and then obtain a tax credit against their share of Medicare taxes. 

Additional aid for individuals and families 

The massive stimulus package also includes several significant changes to existing tax credits and federal aid programs designed to support individuals and families. 

  • A new round of stimulus payments: ARPA also features a host of meaningful initiatives for individuals and families, including a $1,400 economic impact payment for single filers who make less than $80,000 annually or jointfilers who earn less than $150,000 each year. This is on top of the $600 issued as part of the December stimulus package.  
  • Expanding federal unemployment benefits: Federal unemployment benefits have been extended at $300 a week through September 6, 2021. ARPA also makes the first $10,200 of unemployment benefits received in 2020 tax free, which might necessitate an amended return if you’ve already filed. This doesn’t apply to households with an annual gross income of $150,000 or more. 
  • A temporarily super-charged Child Tax Credit: The Child Tax Credit is now fully refundable and advanceable. The credit has been increased to $3,600 for each child under the age of 6 and $3,000 for children ages 6 to 17. These changes are for 2021 only, and in the coming months, qualifying individuals will have the ability to choose between having a portion of the credit advanced to them or taking the credit in full at the end of the year. Additionally, the Child and Dependent Care Tax Credit also has been expanded to include $4,000 for one child or $8,000 for two or more children and it, too, is now fully refundable. 
  • Broadening the impact of the Earned Income Tax Credit (EITC): There also has been an expansion of the EITC, reducing its minimum age to 19 and removing the maximum age of 65 while increasing the earned income amount for 2021. Taxpayers also may substitute 2019 income for 2021 income. 

Reach out today if you need help 

It’s important to check with your tax professional to see what you might qualify for. At Padgett, we’ve helped over 1,500 small businesses secure more than $101 million in EIDL and PPP funding since the onset of the pandemic. If you or your business is interested in seeking funding through one of these programs, or need assistance in managing the tax implications of any of the stimulus bills, contact our office today.