In the tax provisions of the stimulus law

The Senate has approved the House’s $ 1.9 trillion stimulus bill, designed to provide relief and address other issues related to the COVID pandemic.

Even as the American Rescue Plan Act of 2021 was sent back to the House of Representatives for final approval, pundits began to delve into the many tax provisions of the $ 1.9 trillion stimulus bill, and why Lawmakers were eager to get it to President Biden’s office for signature.

“The goal is to make the bill into law by March 14, 2021, when a number of provisions extended by the Consolidated Appropriations Act will expire,” said Mark Luscombe, senior federal tax analyst at Wolters Kluwer. Tax & Accounting.

In addition to grants to schools and state and local governments, the bill includes an additional stimulus payment, or clawback rebate, of $ 1,400. Similar to the two previous stimulus payments, the recovery remission payments are fully refundable 2021 tax credits, payable in advance, Luscombe noted.

“It survived in terms of the amount of stimulus, but in order to get enough Democrats on board, the Senate changed the phase-out range,” Luscombe said. “In the House bill, elimination started at $ 75,000 [adjusted gross income] and ended at $ 100,000 AGI. In the Senate version, phase-out always starts at $ 75,000 but ends at $ 80,000 instead of $ 100,000. Likewise, for joint depositors, elimination always starts at $ 150,000 but ends at $ 160,000 instead of $ 200,000 AGI.

The proposed legislation consists of a set of emergency measures for individuals and businesses who continue to be affected by the pandemic. In addition to the stimulus payments, it includes an extension of the child tax credit, the child care and dependents credit, and the earned income tax credit. It increases tax credits on premiums under the Affordable Care Act, extends credits for paid sick leave and family leave, extends employee retention credit until December 31, 2021, relaxes some retirement provisions and repeals the worldwide distribution of interest provision.

The Senate added a new exclusion for unemployment benefits. “Under the CARES Act, extended unemployment benefits were taxable,” Luscombe said. “The Senate bill added an exemption for the first $ 10,200 in unemployment benefits for households with income up to $ 150,000.”

Some are concerned about the change in the treatment of unemployment benefits, as many taxpayers have already filed and paid taxes on the amount, Luscombe observed. “If the bill is passed with this provision, the answer is simple – just file an amended return,” he said.

The Senate bill also extends the exclusion of canceled student loans, he said. “Under current law, canceled student loans were only excluded under certain conditions such as death or disability. The Senate provision extends the exclusion for whatever reason to loans canceled after 2020 and before 2026. ”

The original intention was for the House to vote on the amended bill on Tuesday, March 9. “But that could slip by a day or two,” Luscombe predicted. “There was a tight margin in the House to begin with [the original House verison passed by a narrow margin of seven votes]. Some of the more liberal Democrats are voicing concerns about the removal of the minimum wage hike. If he had stayed, the question arose as to whether he could pass by a simple majority or whether he would need 60 votes. Some Democrats had offered a workaround by taxing large companies if they did not raise the minimum wage.

“Almost all of the provisions are not effective until tax year 2021,” Luscombe observed. “Making them permanent will have to wait for the next round of laws. “

About Walter Bartholomew

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