Dark Horse CEO, Chase Birky, details what businesses and individuals need to know about what’s in President Biden’s stimulus package, slated to become law in March.
hello and welcome to taxes. Made simple, not a speed round this time. Nope. You’ve got some one-on-one time with your boy chase Berkey today. I wanted to run you through what you need to know about the upcoming $1.9 trillion stimulus bill that president Biden promised, and that Democrats will be passing without Republican support.
So what’s in and what’s out. And what should you be considering as you plan for the next round of relief? Let’s dive in and to be clear, we’re only focusing on the elements that directly financially impact individuals and businesses. So we’ll exclude funding for state and local governments, vaccines and testing, et cetera.
So what do we know is in this bill and is likely to stay for starters, there will be stimulus checks. And they will be for $1,400 per person in a tax household. This means that all dependents children and adults will qualify for $1,400 each on top of the $1,400 for the taxpayer and spouse. In other words, a family of five gets $7,000 in order to qualify for the full amount singles must make less than 75 K and that’s in terms of their adjusted gross income.
And married couples must make less than 150 K the payments would be phased out for those making more than those amounts with singles likely to be completely phased out at a hundred K and married at 200 K as was the case with previous stimulus checks. Next enhanced unemployment benefits of $300 a week that are set to expire on March 14th will be extended through the end of August.
And the amount will be bumped up to $400 a week. It appears likely that the increased amount would kick in after the original expiration date of March 14th, the child tax credit will increase to $3,000 per child from its current $2,000 amount for children under age six, the credit would be $3,600. So a pretty substantial increase here further.
The credit would be made refundable, which basically means you’d get it regardless of whether you made any money during the year. This is only going to be in law for 2021. But Democrats will likely seek to make this permanent at a later date. Also the earned income tax credit would nearly be tripled and would be available to those 19 years of age and older.
Currently the credit is only available to those between ages 25 to 65 and is for a much smaller amount. For employers, the paid family and sick leave tax credits would be extended through October 1st. This tax credit is for employers who pay their employees sick leave either because they got COVID or they are caring for a family member who contracted the virus.
Next $15 billion would go to an additional round of emergency injury, disaster loans. It K E I D L loans for small businesses, businesses with less than 10 employees would be given priority for this round. Also $25 billion would go to a new grant program for bars and restaurants. A restaurant or bar could receive up to $10 million to use for many of their major expense categories.
Another $7 billion would go to the paycheck protection program and more nonprofit organizations would be eligible. Then there’s money for housing specifically, $19.1 billion is being set aside for low income households to cover back rent, rent assistance, and utility bills. $10 billion will be set aside for struggling homeowners to help pay their mortgage, property taxes and utilities.
And finally, $5 billion would go to assist those at risk of becoming homeless. All of this funding would be administered by state and local governments. So what’s out currently the salt tax cap removal did not make it into the draft bill. As a refresher, the salt cap refers to the state and local tax deduction, limitation of $10,000 when a taxpayer itemizes deductions Democrats wanted to repeal this.
But for one reason or another, have not included the repeal in this bill. And what’s on the brink. The minimum wage is scheduled to increase from its current $7 and 25 cents an hour to $15 an hour over the course of five years. But there is a lot of uncertainty as to whether this will be allowed to be passed via the budget reconciliation procedure.
The president himself, after all has expressed doubts on whether this will be able to be included. And one other thing worth mentioning. That’s not part of the stimulus bill is that schedule C businesses, AKA sole proprietors, independent contractors, and the self employed can now use their gross revenue instead of their net profit for purposes of determining their triple P loan amount.
So obviously this will make for a much higher loan amount. And unfortunately, if you already got your triple P loan, you’re not going to be able to go back to the bank to get topped off at the higher loan amount. So this really only is a benefit to those who haven’t taken their first and or second triple P loan.
So that about wraps it up. There’s a lot of moving parts here that you want to be cognizant of to take advantage of in the here and now, so that you’re not waiting until next year to realize the tax benefits. It’s likely that you’ll be able to get an advance on the increased child tax credit. And for all of the other tax benefits, you could take advantage of those now by lowering your withholdings and or estimated tax payments, dark horse CPAs are here to help you navigate through all of this.
And as a parting thought, it’s highly likely that this tax season will once again be extended beyond April 15th, most likely to July 15th. There’s a host of reasons for this, from weather disasters to a late start to the filing season, to another round of COVID legislation. And it all adds up to pushing the IRS to extend the filing deadlines.
So thanks for tuning into TMS, or if you’re not into the whole brevity thing, taxes made simple because there’s TMI and then there’s Tim.
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