Congress Passes The American Rescue Plan Act (ARP Act)

Today the House passed the American Rescue Plan Act (ARP Act) of 2021 (the stimulus package) with the amendments passed by the Senate, and the Act is expected to be quickly signed by the President. Below are some highlights of the ARP Act.

  • $1,400 per person stimulus payments for taxpayers and dependents.
    • The act uses 2019 tax returns to determine eligibility, unless the 2020 return has already been filed.
    • The payments begins to phase-out at $75,000(ends at $80,000) – single taxpayers or at $150,000(ends at $160,000) – married filing jointly taxpayers.
    • Payments are expected to begin being sent out later this month.
    • If you qualify for this based on your 2020 return which has not been filed, the IRS will send out the payment later in the year when the return is filed.
  • $10,200 exclusion of unemployment income
    • Retroactive for 2020 tax year
    • If your 2020 return has already been filed with benefits being taxed, an amended return may need to be filed, waiting on guidance.
    • Only applies if adjusted gross income in 2020 in under $150,000. There is no phase-out for this provision.
    • The IRS and software will need to release updates on how to file a 2020 return with this exclusion. Currently, a return cannot be filed claiming this exclusion.
  • Expanded Child Tax Credit
    • Change for 2021 tax year.
    • Increases the credit to $3,000 per child, $3,600 for children under 6.
    • IRS will send out payments later in the year for half the expected 2021 credit.
    • The advance credit payments will be reconciled to actual amount on 2021 income tax returns.
    • This begins to phase-out at $75,000 (single) or $150,000 (married filing jointly).
  • Student Loan Forgiveness
    • The Act does not forgive student loans.
    • The Act does allow forgiveness of student loans by the lender to be excluded from taxable income.
  • Extension of Family and Sick Leave Credits
    • The credit of payroll taxes for paid leave for employees affected by COVID-19 has been extended to September 30, 2021.
    • Please see prior communications on what qualifies for the FFCRA Credit or contact your payroll processor.
  • Extension of the Employee Retention Credit
    • The Employee Retention Credit has been extended to December 31, 2021.
    • We are not currently calculating any 2021 credits. We will provide more information in the future as to how to apply for these credits.

As with previous Acts, we will be watching for additional guidance concerning how these changes will be implemented. We will continue to pass along pertinent information as it becomes available.

Robert (Bob) Schmidt, CPA

Principal at BWTP, P.C. Read Bob’s bio here.

Leave a Reply