On August 10, 2021, the IRS and the Department of the Treasury provided new guidelines regarding the Employee Retention Credit (ERC) via a safe harbor, allowing employers to exclude specific items from their gross receipts only when determining if the qualifications for the ERC are met.

Since the closure of the Paycheck Protection Program (PPP), Restaurant Revitalization Fund, and other Small Business Administration (SBA) COVID-19 relief programs, New Jersey and Pennsylvania-area businesses have been searching for funding alternatives. Over the past few months, the Employee Retention Credit (ERC), a payroll-based tax credit, has moved to the forefront. The ERC provides an immediate savings opportunity to businesses that experienced a decline in gross receipts in either 2020, 2021, or both.

When Congress passed the American Rescue Plan Act (ARPA)  in March 2021, it included expansions of the existing child and dependent care credit and the paid sick and family leave credit.  The IRS recently released some guidance on the expanded tax credits here and here.  Keep reading for a brief overview of what taxpayers and employers need to know about the expanded tax credits, why they’re important, and how they could affect you.

Throughout the COVID-19 pandemic, several loans and grant programs were available to help qualifying businesses and nonprofit organizations address working capital needs. One of the most popular economic relief programs has been the Small Business Administration’s (SBA) Paycheck Protection Program (PPP) which has made $798B in loans to small businesses and nonprofit organizations. However, on May 4, 2021, the SBA announced that the PPP funds had been exhausted, leaving many New Jersey and Pennsylvania-area businesses and nonprofits to seek alternative funding options.

On April 8, 2021, the IRS issued Notice 2021-25 in conjunction with the Taxpayer Certainty and Disaster Relief Act of 2020.  This Act grants a temporary exception to the 50% deduction limit for businesses on food and beverages provided by restaurants.

When the American Rescue Plan Act of 2021 was signed into law on March 11, 2021, it included a provision that allows taxpayers that earned less than $150,000 in modified adjusted gross income to exclude up to $10,200 of unemployment compensation claimed in 2020 on their 2020 individual tax returns (up to $20,400 for married couples filing jointly if both received benefits).

On March 12, 2021, President Biden signed the American Rescue Plan (ARP) Act of 2021. The fourth piece of COVID-19 relief legislation passed since the pandemic started, the ARP provides over $1.9T in relief for individuals, families, and businesses.

The fallout from the COVID-19 pandemic created by forced business closures and other government orders continues to challenge New Jersey businesses. Despite the drop in new cases, partially due to vaccination efforts, many have just started the journey back to profitability.

The $1.9T relief legislation provides several provisions to benefit individuals. These include economic stimulus payments, extended unemployment, new subsidies, and increased tax savings through the expanded child tax credit, and more. While the benefit depends on meeting certain income thresholds, it is expected families will now receive the financial boost to carry them to the end of the pandemic.

As vaccinations for COVID-19 continue to be administered, businesses throughout New Jersey and Pennsylvania are excited to see certain government orders slowly rolling back. While this is certainly a promising step towards returning to “normal,” the reality is the damage suffered over the last year is almost impossible. That is why the recently enacted the American Rescue Plan Act of 2021 (ARPA), signed by President Biden on March 11, 2021, provides over $1.9T in relief for struggling individuals, families, and businesses.