American Rescue Plan Act of 2021

The recently signed American Rescue Plan Act of 2021 provides tax relief for both individuals and employers as the country continues to recover from the COVID-19 pandemic. Below, we will go through a few of the key aspects of this legislation and how they affect Americans:

The Individual relief comes in the form of direct stimulus payments to qualified taxpayers. This round of stimulus payments will be up to $1,400 per taxpayer. Eligibility for the payments starts phasing out for individuals with adjusted gross income (AGI) of $75,000, $112,500 for heads of household and $150,000 for joint filers. The payment completely phases out at $80,000 for individuals, $120,000 for heads of household and $160,000 for joint filers. The adjusted gross income levels being used are from the 2020 tax filing (if filed already) or the 2019 tax year.

The American Rescue Plan also allows the first $10,200 of unemployment relief to be tax exempt for households that have up to $150,000 of income beginning with the 2020 tax year.  If a tax return eligible for the exemption has already been filed without claiming the reduction in taxable income, the IRS is advising that taxpayers not file an amended return at this time.  The IRS will provide additional guidance on what to do but the hope is that they will automatically adjust returns internally without requiring an amendment.  As always, if this applies to you and you receive any communication from a tax authority regarding this or any other matter, please forward to our office ASAP for review.

For employers, the relief comes in the form of an extension of the Paid Sick and Family Leave credits. These credits were set to expire on March 31, 2021 but have now been extended to September 30, 2021. The credit can now be used for time off to receive a COVID-19 vaccine or to recover from any vaccine-related illnesses. The bill also resets the 10-day limit for use of the credit after March 31, 2021. For people who are self-employed, the limit has been increased from 50 days to 60 days and is effective after December 31, 2021.

As more guidance becomes available on this legislation, DKC will send further updates. In the meantime, feel free to reach out to your representative at DKC with any questions about how this bill may affect you.



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