On Wednesday March 11th 2020, the third stimulus package has officially passed both chambers of congress. The $1.9 trillion relief bill includes unemployment extensions and a tax-free benefit for unemployment benefits of up to 10,200 paid in 2020, $1,400 direct payments for individuals and their dependents, expansion of the Child Tax Credit, expansion of dependent care credit, funding for COVID vaccines, expansion of PPP loans, and more. The final step before becoming official will be a signature from President Biden. President Biden is planning on having an event tonight, Thursday, March 11th marking the anniversary of the pandemic, and is expected to sign the Stimulus package on Friday, March 12th.
Upon signing, Unemployment will be extended by $300 per week through September 2021. Effective 2020, for taxpayers making less than $150,000, the first $10,200 of unemployment checks received will be tax free. The IRS is expected to roll out guidance for this in the coming weeks, but we expect amended tax returns will be required.
$410 billion dollars of this bill are dedicated to direct payments for taxpayers and their dependents. Taxpayers will be entitled to $1,400 per individual and $1,400 per dependent child. The prior two relief packages did not include dependent children above 17 years of age. this bill will include college students being claimed as dependents. Individuals making less than $75,000 per year and Married couples making less than $150,000 per year will receive the entire $1,400 per person. Individuals making more than $80,000 and married couples making more than $160,000 will not be included in this round of payments. For individuals making between 75,000 and 80,000 and married couples making between $150,000 and $160,000 the payments will be phased out.
Changes to the Child Tax Credit have also been made with this bill. Under current law, eligible taxpayers with children receive a $2,000 child tax credit when filing their tax return. Under the new bill eligible taxpayers will receive $3,600 per year for children under 6 and $3,000 for children under 18. These payments will be paid out periodically starting as early as July 1st , as opposed to claimed on the tax return as it currently stands. We are expecting a portal to be opened that will allow taxpayers to opt out of the periodic payments or make changes for newly born children or children who no longer qualify for the payments. This is important because if you are overpaid during the year with this credit you will be responsible to repay it on your tax return.
The bill also increases dependent care credits for families making up to $400,000 per year. Generally speaking, this bill provides $4000-$8000 credits for dependent care expenses, calculated by 50% of eligible expenses between $8,000 and $16,000 may be claimed on your tax return.
Some of the funds in this new bill will go to vaccine funding for COVID treatment.
The bill also provides an additional 7 billion dollars for PPP funding and the timeframe to apply will also be extended.
We will be sorting through our list of clients and contacting those that may be affected from this bill. If you have any questions, please feel free to contact our office at your earliest convenience.