On December 27, 2020, the president signed the Consolidated Appropriations Act, 2021. The new law funds the government through September 30, 2021, and provides individuals and businesses with another round of relief to mitigate the effects of the coronavirus pandemic.
Several provisions in the law extend benefits established in the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), while also implementing several important changes.
- The Paycheck Protection Program was allocated $284 billion to continue COVID-19 financial support to employers to cover payroll and other expenses. Guidance and details will come from the U.S. Small Business Administration in January. Additionally, the law makes nonprofits eligible for PPP loans, lowers the employee limit to 300, and clarifies that forgiven PPP loans are not included in gross income.
- Extension of employer tax credits for paid medical and sick leave:
- Extension of tax credit for paid family and medical leave through 2025. This tax credit was established with the Tax Cuts and Jobs Act of 2017.
- Extension of the FFCRA tax credit for paid sick and family leave related to coronavirus. The tax credit is extended through March 2021. The mandate to offer coronavirus-related paid sick time expires December 31, 2020. For employers who continue to offer FFCRA emergency sick leave, hours taken in 2020 and 2021 are apportioned from the single 80-hour allotment.
- The employee retention credit established in the CARES Act is extended through June 30, 2021. The new law adds some flexibility to employers using the credit, including increasing the credit rate to 70% of wages, increasing the per-employee limit to $10,000 per quarter, reducing the amount by which gross receipts must have fallen, and allowing the use of prior quarter gross receipts.
- The new law did not extend the deferral of employer Social Security taxes that was part of the CARES Act.
- The employee Social Security tax deferral established via an August 8 presidential memorandum ends December 31, 2020. However, the deadline for collection and repayment of deferred employee Social Security taxes was extended to December 31, 2021, and penalties related to unpaid taxes will begin to accrue on January 1, 2022.
- The new law provides flexibility for employees to roll over remaining flexible spending arrangement accounts for 2020 and 2021. Employees may also change contribution amounts mid-2021.
- The Work Opportunity Tax Credit, a federal credit for employers that hire individuals facing barriers to employment, is extended through 2025.
For information regarding the new law and your business, consult your accounting or legal professional for guidance.