by Trent Krassow
After much hubbub, including "months of negotiations" between an ever bickering Congress followed by a temporary refusal by President Donald Trump to sign the new legislation, the 5000+ page relief and stimulus bill is finally law (for those keeping track, yes, this is actually longer than the Affordable Care Act, known as "Obamacare").
So what is in this tome, and how does it affect you? Well, in the interest of fairness, Congress allocated "free" (remember - nothing is free) money for some, but not all, tax benefits for some, but not everybody, specific economic relief due to Covid-19, and then some stuff that has nothing to do with Covid-19 at all -- essentially, it is a pretty typical piece of Congressional brilliance, just with extra pages this time.
Ok, to be "fair" regarding the extra pages, there are actually a few different bills stuffed inside this: COVID-19-Related Tax Relief Act, Economic Aid to Hard-Hit Small Business, Nonprofits, and Venues Act, No Surprises Act, and the Taxpayer Certainty and Disaster Tax Relief Act of 2020. But still, over 5,500 pages . . .
Probably the item that impacts the most people directly is the "free money". Remember those checks some folks got back in the spring of 2020? There is another round coming! I think Congress wants everybody to spend it, but my personal recommendation would be to save as much as possible, spend some, and maybe use some to help somebody you know who is having a rough time right now. There are probably families or individuals who immediately come to all of our minds, as there are certainly some hurting folks around us. There are also lots of worthy charities that can do lots of good with our help.
Here is the math: If you are single and your 2019 Adjusted Gross Income (AGI) was less than $75,000, you get $600 for you and each of your dependents on your 2019 tax return. If you are married, same $600 per person, but your 2019 AGI can go up to $150,000. This is a credit on your 2020 taxes. Does that mean you will have to pay tax on it? No - it is not income for your tax return. Does that mean you will owe more on your 2020 return or get a smaller refund? Again, no. Think of it more like Congress added a tax benefit that you would otherwise have received when you filed your taxes, but just advanced it to you before actually filing. You will still owe or get back the same amount you would have otherwise without this. If you have questions about this, give us a call.
Also within these thousands of pages, Congress again added $300 to the weekly unemployment benefit, so if you are one of the millions that have lost your job during this pandemic, this might provide a little boost for your family. If you are not among the unemployed, find some way to help out somebody you know who is looking for a job right now, whether financially or otherwise: helping review and edit their resume, keeping your ears open for opportunities that might be a good fit, or maybe you can entertain their kids while they have that zoom interview (through zoom on a different computer?)
The next far-reaching provision of the legislation is regarding Paycheck Protection Program (PPP) loans - yes, the PPP is back for another round! I won't go into the details of the rules here (changed from the last go-around of PPP in 2020), but Congress did allocate a large amount of money for this, as well as make very clear that forgiven PPP loans would not be taxed, either as income or by the disallowance of deductibility of expenses paid with these funds. Normally deductible expenses remain deductible, even if paid with forgiven PPP funds. Look for subsequent postings on this. Prior to this new law, grants given to businesses under the Economic Injury Disaster Loan program reduced the amount that was forgiven from that business's PPP loan. For example, if a business had a grant of $5,000 and a PPP loan of $40,000, only $35,000 would be forgiven. This law reverses that practice so that such a business would now receive forgiveness on the full $40,000. If such a business already took a forgiveness haircut based on the old rules, the Small Business Administration (SBA) will be working with banks and borrowers to credit those unforgiven amounts if under $10,000.
Another component of the law is the No Surprises Act. While not really a tax provision or a Federal budget provision, it bars the practice of medical providers and insurers billing patients for services by out-of-network providers while performed at in-network facilities. Here is an example (actually from my own family's experience): you have a medical need, and dutifully research the facilities and providers that are within your coverage network so that you do not have to pay higher fees - after all, isn't that supposed to be one of the benefits of paying the premiums for that network? You intentionally avoid the out-of-network hospital down the road so that you can avoid those much higher fees. However, unbeknownst to you, the in-network hospital has staffed its emergency room with doctors who are out-of-network. When you finally get the bill some months later, you almost have to be re-admitted to the hospital because the bill is 10x more than you thought you were going to pay! But you went in-network! Right, you are being billed for the services provided by those out-of-network physicians that you assumed were employed by the in-network hospital, and for which you were not given a choice of another doctor nor even made aware that they didn't work for that hospital. This law makes that practice illegal. I guess the tax implication here is that some medical providers may make less money, and pay less tax. But the inverse of this is that some patients may have more money to spend somewhere else, so perhaps that extra tax will be paid by the local plumber, grocer, or dry cleaner.
There are additional business provisions within the Act, and a whole host of individual and business tax credits, deductions, and special rules, some temporary, and others permanent. Many of these have some complexity and deserve more than a cursory mention, so I will not delve into those technicalities here but will address some of these separately. However, if you have questions about any of this, do not hesitate to contact us at 970-287-1818, or through email, and we will be happy to address your concerns.