My colleague Sarah D. Wire recently broke down ways the package
could affect people’s finances. One big takeaway: There are tax implications, so take a look at these points even if you’ve already filed your tax return.
File quickly if you made less money in 2020 or had a baby
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The Internal Revenue Service is expected to distribute the stimulus money which does not count as taxable income within a few weeks via direct deposit, debit cards and paper checks.
Your most recent income tax return will be used to determine how much money you will receive. If you already filed your 2020 return and it’s been processed before your stimulus money is sent, your stimulus payment will be based on your 2020 income. Otherwise, your pre-pandemic income will be used to determine the amount you receive.
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Delivering the first major legislative victory for President
Biden, Congress passed another COVID-19 relief package that, at a
cost of $1.9 trillion, is almost as much as the $2 trillion
Coronavirus Aid, Relief, and Economic Security (CARES) Act enacted
a year ago in March 2020. The American Rescue Plan Act of 2021 will
provide another round of stimulus checks to individuals and
families, extend federal supplemental unemployment benefits,
provide more funding for state and local governments, expand
subsidies for healthcare insurance, and provide additional funding
for COVID-19 testing, vaccination, and treatment, among a slew of
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On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (“ARPA”). The ARPA provides an estimated $1.9 trillion in stimulus to aid in the COVID-19 pandemic. Below is a summary of the tax provisions of the ARPA:
Individual Provisions
Recovery Rebate Checks. Recovery rebate checks of up to $1,400 ($2,800 for taxpayers married filing jointly), plus $1,400 for each qualifying dependent (which includes full-time students younger than 24 and adult dependents). The payments will begin to phase out for individuals with an adjusted gross income of $75,000 ($150,000 for couples) and will completely phase out for taxpayers with an adjusted gross income of $80,000 ($160,000 for couples) or more.
More than 55,000 Californians have died of COVID-19 in the last year. Their families have struggled to memorialize them as funerals and other gatherings were restricted. The sheer weight of so many lives lost moved Los Angeles County Public Health Director Barbara Ferrer to tears multiple times during news briefings.
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Even those of us lucky enough to keep our jobs and our health have paid a price. We saved lives by complying with California’s strict stay-at-home orders and mask mandates. But we lost a sense of community and felt isolated and alone.
The trade-off almost became too much for Leslie Grossman, 49, an actress and third-generation Angeleno.
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At $1.9 trillion, the American Rescue Plan Act of 2021, signed into law by President Biden on March 11, 2021, is the largest aid package passed by Congress since the start of the pandemic. With the Rescue Act, Congress hopes to provide further assistance to businesses and individuals experiencing financial hardship due to COVID-19. Although many components of the Rescue Act are aimed at providing cash flow to small businesses, other provisions will increase taxes for certain large businesses.
Key Takeaways for Businesses & Their Owners
Revenue Raisers
Deductibility of Excess Business Losses: The 2017 Tax Cuts and Jobs Act (the TCJA) limited non-corporate taxpayers’ ability to deduct excess business losses the excess of the aggregate business gross deductions over aggregate business gross income to $250,000 per year (or $500,000 for joint filers), with unused excess business losses carried forward as net operating lo