Pandemic Relief - 2021 - CPA Clinics
The following is a brief summary of key tax provisions included in the Consolidated Appropriations Act, 2021, signed into law on December 27, 2020.
A number of provisions that were set to expire at the end of 2020 were extended. These provisions include:
For purposes of determining earned income for the 2020 Earned Income Credit and Additional Child Tax Credit, you may elect to use your 2019 earned income if 2020 earned income is less than 2019.
Generally, the deduction for business meals is limited to 50% of the cost of the meal. For the period January 1, 2021 through December 31, 2022, the limitation is increased to 100% of the cost of food or beverages provided by a restaurant.
PPP loans that are forgiven are excluded from taxable income. Expenses that are otherwise tax deductible and paid for with PPP loan proceeds are allowed as a deduction on your tax return.
The new law clarifies that gross income does not include any amount that would otherwise arise from the forgiveness of a PPP loan. The new law also clarifies that no deduction shall be denied, no tax attribute reduced, and no basis increase shall be denied by reason of the exclusion of gross income under the PPP loan program.
– The credit limit was increased from 50% to 70%.
– The $10,000 limit applies on a per calendar quarter per employee basis, rather than a limit for all calendar quarters.
– A significant decline in gross receipts means less than 80% of gross receipts for the same calendar quarter in 2019.
– You may elect to use the immediately preceding calendar quarter instead of the corresponding calendar quarter in calendar year 2019 for purposes of determining a significant decline in gross receipts.
– The 100 employee threshold is increased to 500 employees.
