11 Key Tax Changes in COVID Relief Bill, Dec. 2020

1. Stimulus Checks round 2 due by 1/15/21!  Rules are the same as round one.  Amount is $600 Single, $1,200 Joint, and $600 per qualified child.   Based on 2019 tax return.  Potentially could be increased to $2000.
2. Employee Social Security Tax Withholdings from 9/1/20-12/31/2, originally due to be repaid in the first quarter of 2021, now have the full year for repayment.
3. Educator Expense of $250 now includes PPE, disinfectant and other COVID supplies as classroom expense.
4. A Business with a PPP loan does not claim the forgiven loan as income but can deduct the expenses paid as a business expense. The forgiven loan will increase the business owner’s basis.
5. Paid Sick and Family Leave Tax Credit continued from 12/31/20 to 3/31/21.
6. Self-Employed Taxpayers receive all of the benefits that were available for businesses with employees when computing self-employment tax.  These can be enough to not only cover the full amount of SE Tax, but could also be refundable.
7. Employer Retention Credit – if you were shut down or had a reduction of income of 50% or more for any quarter.  Qualify for a credit of up to $5,000 for each employee, including some one that is self-employed.  Prior this credit was not allowed if you had a PPP loan, this has been removed.  The credit has been extended and increased into the first 2 quarters of 2021.
8. Food and Beverage Expense for 2021 and 2022 can be deducted at 100% for a business purpose and purchased from a restaurant.
9. Credits for Earned Income and Additional Child Tax credit can be calculated using either the 2020 earned income or the 2019 earned income.  Can elect to take what is best.
10. Above the line deduction for Charity.  Limit is $300 for 2020.  Goes to $600 on a joint return for 2021.
11. Flexible Spending Accounts – Dependent care and Health accounts. Excess funds can be rolled from 2020 to 2021, and from 2021 to 2022.

These are just the summarized highlights.  Please know that we are constantly keeping abreast of changes and passing that information on to you.  If you have any questions, just give us a call!