New bill passed by Congress

[Julio Gonzalez]

Here’s a very brief summary of a few things it includes: 

- Stimulus checks worth up to $1,400 per person. There are restrictions based on how much you make.

- Unemployment assistance - A $300 federal increase to weekly jobless payments and extending two key pandemic unemployment benefits programs until 9/6.

- State and local aid: The legislation provides $350 billion to states, local governments, territories and tribes.

- Tax credits: The bill increases the child tax credit from $2,000 to $3,600 for each child under 6 and $3,000 for each child under age 18.

That’s just a start.

It’s not law yet though.

How is everyone else handling all of these changes and tax updates? Are you meeting with your CPAs more frequently? 

[Eamonn McElroy]

But the general gist at this time is:

The phaseout for EIP 3 is much more compressed than EIP 1 and EIP 2.  Far less households will qualify.  The definition of dependent for EIP 3 was changed and is more favorable than EIP 1 and EIP 2.

Beefed up child tax credit on the 2021 returns.  Advanced payment of the child tax credit during 2020.  At this time, I believe this to be a wash, and dangerous, as most taxpayers will spend the advance payments, not knowing that the advanced payments reduce their refund / increase their tax due on the 2021 returns via their 2021 child tax credit.

Beefed up dependent care expense credit -- 2021 return.

Changes to the premium tax credit -- including forgiveness of excess credit repayment on the 2020 returns (yes, the current returns we're working on).  This is a boon to the self-employed and those employees that bought their health insurance through the exchange.

Forgiveness of unemployment benefits for certain households on the 2020 returns (yes, the current returns we're working on).

Since the legislation was announced more than a month ago, my firm has been monitoring daily and advising clients appropriately.  Many clients are wrapped up but have gone into a holding pattern pending the bill being signed into law.