Federal Stimulus Package Leverages Several Tax Provisions



Sunday, the second bipartisan effort from Congress was signed into law, finally making a second round of Paycheck Protection Program (PPP2) funding and individual stimulus checks official. Last week, the MICPA broke down the crucial elements of the PPP2, but there is more to the extended coronavirus relief than forgivable loans. Included in this package are a number of critical tax provisions also aimed at providing relief to businesses and individuals that tax professionals and firms will need to review.

Two major components addressed in our previous article include tax provisions for businesses resulting from modification and extension of CARES Act provisions. As part of the PPP2, Congress clarified that forgiveness of PPP debt is not considered part of a business’ gross income. Further, expenses paid for with forgiven loan funds are, in fact, still deductible. The same is now also true for other forgivable loans, Emergency Economic Insurance Disaster Loan (EIDL) grants and other loan repayment assistance provided for under the CARES Act, Deloitte reports1.

According to Accounting Today, other provisions of interest include:

  • Restoring 100% of the business meals deduction from the next two years, something from which the restaurant business stands to benefit.
  • Many tax breaks regularly scheduled to expire in 2020 are now extended, some of them permanently.
  • The employee retention credit has been extended through the end of June 2021.
  • Employers that took advantage of the payroll tax holiday provided by presidential memorandum will have until the end of 2021 to repay the funds.
  • The Families First Coronavirus Response Act’s paid sick and family leave credit is extended through the end of March 2021.
  • COVID-19-releated expenses will quality for the above-the-line educator expense deduction.
  • Low-income families will see enhancements to the Child Tax Credit and Earned Income Tax Credit.
  • Special charitable contributions provisions will be extended through 2021.
  • Clarification that certain financial aid to college students is excluded from income2.

While these are among the most critical, there are countless other provisions included in the bill as either carryovers and modifications of the CARES Act or entirely new measures geared at providing tax relief during a time of great need among taxpayers. A complete list and detailed summary of all the tax provisions included (and excluded) from the new bill can be found here. As tax professionals continue their year-end planning, accounting for all the new tax code adjustments and provisions outlined in the latest relief package from Congress will be paramount. The MICPA will be following these developments closely, including further guidance and clarification regarding the bill’s many provisions.

  1. Brosseau, Alex & Michael DeHoff. “COVID Relief, Tax Extenders Wrapped Into FY 2021 Spending Package.Deloitte. 21 Dec. 2020. Accessed on 28 Dec. 2020.
  2. Russell, Roger. “A Dive Into the Stimulus Package’s Tax Provisions.Accounting Today. 22 Dec. 2020. Accessed on 28 Dec. 2020.

Source: MICPA

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