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The COVID-19 pandemic has been an economic disaster for many families and businesses. The U.S. Treasury Department, the Bureau of Fiscal Service and the Internal Revenue Service have issued several rounds of economic relief payments to those that qualify. In this article, we discuss the various Acts authorizing economic relief payments that have been enacted in response to the pandemic and eligibility, including the:
- Coronavirus Aid, Relief and Economic Stimulus (CARES) Act
- Tax Relief Act of 2020
- American Rescue Plan Act of 2021
Coronavirus Aid, Relief and Economic Stimulus (CARES) Act
Originally enacted in March 27, 2020, the government provided each eligible adult with up to $1,200 dollars (& $500 for each minor child) under what was called the Coronavirus Aid, Relief and Economic Stimulus (CARES) Act. Individuals with an adjusted gross income (AGI) of $75,000 or higher ($150,000 for married couples) received reduced payments, but a family of four may have been eligible for up to $3,400 in economic relief.
The CARES Act also provided pandemic unemployment assistance (PUA) payments to those who did not traditionally qualify for them: self-employed individuals (aka independent contractors). Under this provision of the CARES Act, self-employed individuals who were willing and able to work remotely, but have been unable to do so for reasons related to the COVID pandemic were eligible for up to $600 in weekly payments for up to 39 weeks. This applied to self-employed workers who were unemployed and partially employed. Those that were eligible for PUA payments were also eligible for an additional $600 in supplemental federal stimulus payments. These payments were set to end in December of 2020.
The CARES Act also paid out interest-free loans to struggling businesses, saved homes by prohibiting evictions and foreclosures, and halted student loan payments and interest. For more information about the CARES Act and student loans check out our article The CARES Act And Student Loan Relief (oflaherty-law.com).
Tax Relief Act of 2020
As the pandemic continued to have a negative economic impact at the end of 2020, the Tax Relief Act of 2020 was enacted in December 2020 to continue relief payments. It authorized an additional $600 in payments for each eligible adult (& 600 for each qualifying child under 17).
The Tax Relief Act of 2020 also extended PUA payments for independent contractors, but limited the relief to $300 per week instead of $600. It also reduced the supplemental federal payments to $300 per week. This was set to continue through March of this year.
American Rescue Plan Act of 2021
In early March of this year, the American Rescue Plan Act of 2021 was enacted. This third round of economic relief payments requires an additional “plus up” payment based on information previously provided (such as last year’s tax return, etc.). This sought to extend relief by providing eligible individuals with up to $1,400 ($2,800 for married couples), plus $1,400 for each eligible dependent. This round is unique in that it provides a credit for adult dependents as well as qualifying children under 17.
Though unique, this round also extends many of the benefits enjoyed in prior rounds. The American Rescue Plan Act of 2021 extends employment assistance payments. It also continues the Child Tax Credit and makes the credit available to a significant number of new families, including those in Puerto Rico & U.S. territories. The child tax credit has been increased from $2,000 to $3,600 for qualifying children under 6 and $3,000 for children between 6 and 17. Additionally, the tax credit is now fully refundable and eligible taxpayers will receive half of their credit in advance of 2022. Payments will be dispersed periodically from July 2021 and December 2021.
Unfortunately, independent contractors are not seeing an expansion of PUA payments. This Act continued the $300 in PUA payments for self-employed individuals, but it removed the supplemental federal stimulus payments entirely. However, the government is making up for this through tax relief. It also waives federal income tax on the first $10,200 an individual with an AGI under $150,000 received in unemployment in 2020. It also continues to provide independent contractors with paid sick and family leave. This will continue to be an automatic benefit for those who are already receiving the benefit.
What Does the American Rescue Plan Act of 2021 Mean for Businesses?
If you are a business owner who uses the services of independent contractors, it is important to pay special attention to the ramifications of the American Rescue Plan Act of 2021 on your business. During this time, an increase in applications for PUA payments is likely. However, because independent contractors are no longer required to designate themselves as self-employed, there is a risk that these independent contractors may be mistakenly recategorized as employees by application reviewers at state workforce agencies who only briefly review applications for the initial eligibility determination.
To avoid this, business owners should contest these applications in a timely manner and learn how to present information to the initial eligibility claims officer in the most compelling manner possible. This could be best accomplished by designating one person to review all applications to determine who is an independent contractor and who is a true employee. This person can then gather the information necessary proof of employment status to appeal the initial determination. This relief package will require that businesses enhance their compliance with independent contractor laws to effectively fight off legal challenges.
Stay afloat of other implications of the CARES Act and its progeny for businesses in our article entitled Bankruptcy Benefits Of CARES Act Set To Expire (oflaherty-law.com).
Economic impact payments have kept many Americans afloat during the pandemic and benefits are continuing throughout the remainder of 2021 and into 2022. Check to see if you are eligible for a benefit today. If you are unsure about your eligibility, schedule consultation. You can also fill out our confidential contact form and we will get back to you shortly.
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