Following the first case reported in Wuhan, China in December 2019, the novel coronavirus (COVID-19) has rapidly evolved into a global pandemic threatening people's lives, and the lockdown measures implemented to contain the outbreak have triggered an economic downturn. In response, a series of measures, including COVID-19 stimulus packages, have been implemented to mitigate the health and economic impacts of the COVID-19 crisis.
In the United States, on March 13, 2020, the President declared the COVID-19 pandemic a national emergency as of March 1, 2020. Enacted on March 18, 2020, the Families First Coronavirus Relief Act (FFCRA) provided free COVID-19 testing, expanded unemployment payments and food benefits, paid sick leave, additional Medicaid funding, and tax cuts. On March 27, 2020, the Coronavirus Relief and Economic Security (CARES) Act implemented a massive $2.2 trillion COVID-19 stimulus package.
Unfortunately, the measures taken in response to the COVID-19 pandemic and its devastating economic impacts have not been sufficient. Therefore, a new COVID-19 stimulus package has been long awaited. Passed by Congress as part of the 2021 Consolidated Appropriations Act (CAA) after much debate and negotiation, the second $900 billion COVID-19 stimulus package (COVID-19 Relief Act) was finally signed into law by the President on December 27, 2020.
The new COVID-19 Stimulus Package provided a second round of direct economic assistance to American individuals and families by renewing and expanding the measures implemented under previous regulations, as well as providing additional support. The highlights of the opportunities offered to individuals and families under the COVID-19 Stimulus Package are listed below.
COVID-19 Stimulus Package Economic Impact Payments
The CARES Law provided for Economic Impact Payments (stimulus checks) of up to US$1,200 per individual ($2,400 for joint tax filers) and up to US$500 per qualifying child. The new COVID-19 Incentive Package provides for a new incentive voucher of US$600 per individual taxpayer (US$1,200 for married taxpayers filing joint returns) and an additional US$600 per qualifying child under 17 years of age.
The adjusted gross income (AGI) limits for stimulus checks and the rules for reducing the amount payable with increasing income are the same as for the initial stimulus payments under the CARES Act. However, because the per capita payment amounts are lower, the income levels at which payments are zeroed out are lower. The amount of the Economic Impact Payment is reduced by USD 5 for every additional USD 100 of income if individual taxpayers' 2019 AGI exceeds USD 75,000 (USD 112,500 for heads of household and USD 150,000 for taxpayers filing joint returns). Therefore, taxpayers with AGI equal to or more than USD 87,000 (USD 124,500 for heads of households and USD 174,000 for taxpayers filing joint returns) will not receive an incentive voucher payment.
Under the previous CARES Act, couples filing joint tax returns could not receive incentive payments if only one of them had a Social Security Number (SSN), unless they were members of the military. With the new provision, these families will be able to receive payments for themselves and their qualifying children with a work-eligible SSN.
In fact, like the CARES Act, the CAA entitles taxpayers to recovery rebate tax credits. It also authorized the Treasury to make advance payments against these tax credits. Economic Impact Payments, also known as stimulus vouchers, are essentially advance payments in respect of this refundable tax credit.
On December 29, 2020, the IRS announced that they began transferring the second round of Economic Impact Payments. Eligible taxpayers do not need to take any action to receive their stimulus checks. As with the first payments under the CARES Act, taxpayers with account information with the IRS will have their payments transferred directly to their accounts as electronic payments. Others will receive the payment by mail as a check or debit card. Taxpayers who do not receive the payment for any reason will be able to claim the amount of tax relief to which they are entitled by filing their 2020 tax return in 2021.
COVID-19 Stimulus Package Extended Unemployment Payments
The CARES Act created 3 new unemployment programs to mitigate the mass unemployment impact of the COVID-19 pandemic:
- Federal Pandemic Unemployment Compensation (FPUC): Provided an extra $600 per week in federal benefits for employees receiving state unemployment payments between April 4, 2020 and July 26, 2020
- Pandemic Unemployment Assistance (PUA): Extended unemployment benefits to the self-employed, independent contractors, or people with limited work histories who were previously ineligible for unemployment benefits. The PUA program provided up to 39 weeks of unemployment payments from 27 January 2020 to 31 December 2020, which can also be received retroactively.
- Pandemic Emergency Unemployment Compensation (PEUC): Until December 31, 2020, it allowed for an additional 13 weeks of unemployment payments after the normal unemployment payments provided by the states ended.
The FPUC expired on July 25, 2020, while the PUA and PEUC expired on December 26, 2020. With historic levels of unemployment due to the COVID crisis, the COVID-19 Stimulus Package provided an additional $120 billion for unemployment insurance and extended the CARES Act's expiring unemployment programs until the week ending March 14, 2021:
- FPUC payments are set at $300 per week, down from $600 per week previously. Eligible employees receiving state unemployment benefits will receive an additional $300 per week from the week ending January 2, 2021 through the week ending March 14, 2021. FPUC will not be paid for weeks in the interim period (the period between weeks ending after July 31, 2020 and weeks ending on or before December 26, 2020).
- The number of weeks for which PUA payments can be claimed has been increased by 11, from 39 to 50. For individuals who received PUA payments at the end of the program but have not exhausted their entitlement for up to 50 weeks, payments are allowed until April 5, 2021. However, no new applications will be accepted after March 14, 2021.
- The number of weeks for which PEUC payments can be claimed has been increased by 11 (from 13 to 24). Employees who received PEUC payments at the end of the program but have not yet exhausted their PEUC entitlements are allowed to claim PEUC payments until April 5, 2021. However, no new applications will be accepted after March 14, 2021.
With these extensions, they will be able to receive up to 50 weeks of unemployment payments through regular state unemployment payments and additional PEUC payments or through the PUA program.
In addition, the recent COVID-19 Stimulus Package allowed some workers with mixed income, both wage income and self-employment income, to receive a new Mixed Earnings Compensation (MEUC) payment until March 14, 2021. Under the provisions of the CARES Act, such individuals could receive regular unemployment payments but were excluded from the PUA program. Therefore, mixed earners could not receive unemployment benefits based on their total earnings like others. With the new regulation, individuals with self-employment income of at least USD 5,000 per year will be able to receive an additional PUA payment of USD 100 per week in addition to other benefits. However, participation in the MEUC program is left to the discretion of the states.
The COVID-19 Stimulus Package also extended other unemployment-related provisions of the CARES Act until March 14, 2021, including the reimbursement of payments made during the waiting period if the waiting period is waived for states with a waiting period for unemployment payments, assistance to government agencies and non-profit organizations, and incentives for short-term compensation programs.
On the other hand, the new Law also includes some provisions to prevent corruption and abuse in unemployment programs:
- As before, applicants' declaration will not be sufficient; workers will need to document their earnings and employment history. In addition to this documentation obligation, states should establish processes to verify the identity of the applicant and ensure timely payment.
- States are required to establish a reporting mechanism for employers to report people who refuse job offers and to inform applicants for unemployment benefits of the requirement to accept suitable job offers.
COVID-19 Incentive Package Employment Support
While the additional unemployment payments described above were introduced to assist workers who lost their jobs, the COVID-19 Stimulus Package also extended programs to support employers, especially small businesses, to keep their employees employed during the pandemic.
Salary Protection Program
The Wage Protection Program (PPP), introduced by the CARES Act, has supported more than 51 million workers by providing 5.2 million forgivable loans worth $525 billion to American small businesses. The new COVID-19 Stimulus Package renewed the PPP by allocating an additional USD 284.45 billion, specifically targeting hard-hit small businesses and expanding the scope of forgivable costs. With the largest allocation of resources for small businesses in the COVID-19 Stimulus Package, the PPP will continue to be a critical support for workers to stay in business despite the challenges facing their employers.
Paid Leave Tax Deduction
The FFCRA introduced mandatory paid sick leave and extended family and medical leave for certain public employees and employees of private businesses with fewer than 500 employees until December 31, 2020. This allows employees of covered employers to take up to 12 weeks of paid leave for their own health conditions, to care for others with health conditions, or to care for their children whose schools or daycare centers are closed due to the COVID pandemic. Employers are also entitled to tax deductions for payments made for this purpose, within certain limits.
The COVID-19 Stimulus Package extended the tax deduction provided to covered employers for paid sick leave and family and medical leave for their employees until March 31, 2021. However, it is no longer mandatory for employers to provide these leaves. However, voluntary provision of paid leave by employers may be a good option to help their employees in difficult circumstances and to retain their employees.
Also, the amount of paid leave an employee can take has not been increased. Therefore, voluntary paid sick leave or family leave in excess of the allowed amounts will not be covered by the FFCRA paid leave tax relief, but general paid leave can be used for tax relief.
Labor Protection Tax Deduction
In addition to the Salary Protection Program (PPP), the CARES Act introduced the Employment Retention Credit (ERC), a refundable tax credit to encourage businesses to continue to employ their employees. The recent COVID-19 Stimulus Package extended the ERC, which was due to expire on December 31, 2020, until June 30, 2021. It also made some important improvements to the ERC, effective from January 1, 2021:
- The tax deduction rate was increased from 50% to 70% of eligible wages.
- The cap on the total amount of qualifying fees is increased from $10,000 to $10,000 ($10,000 per quarter).
- The minimum gross income deduction required for employers to qualify for tax relief has been reduced from 50% to 20%.
As a result, the maximum ERC per eligible employee increased from $5,000 (50% x $10,000) to $14,000 (2 x 70% x $10,000) for 2019.
Pandemic Relief for Aviation Workers
The COVID-19 Stimulus Package provided up to $15 billion in subsidies to airlines and up to $1 billion to aviation sector contractors. In order to receive this financial assistance, airlines must accept certain conditions:
- Use the funds only for the continued payment of employee wages, salaries and benefits
- Until March 31, 2021, refrain from terminating employees against their will, placing them on unpaid leave, or reducing their wages or other benefits
- Recall, within 72 hours of entering into a grant agreement with Treasury, all employees who were terminated or placed on unpaid leave as of March 27, 2020 (if they did not receive financial assistance under the CARES Act Salary Support Program) or October 1, 2020 (if they did not receive financial assistance under the CARES Act Salary Support Program)
- Paying the salaries and rights of returning employees for the period they were unable to work
- Reinstate the rights and protections for returning employees as if they had never been dismissed or placed on unpaid leave
- Comply with the limitations on salaries and similar payments for the two-year period beginning on October 1, 2020 and ending on October 1, 2022
Similar provisions apply to aviation contractors.
COVID-19 Incentive Package Other Supports
The COVID-19 Stimulus Package includes some additional direct and indirect support for individuals and families. Below is a summary of the COVID-19 Stimulus Package programs that provide direct financial assistance to individuals and families.
Emergency Rent Assistance
The COVID-19 Stimulus Package also provided an additional $25 billion in emergency rental assistance to help pay past due and future rents and utility bills for eligible tenants who have lost income due to the pandemic. Tenants will be eligible for emergency rental assistance if the following conditions apply
- Household income is not more than 80% of the area median income (AMI)
- Risk of losing their homes
- A member of the household is eligible for unemployment benefits or has lost at least part of their income due to the COVID-19 pandemic
A household will be able to receive emergency rental assistance for up to 12 months (up to 15 months if necessary to prevent the family from becoming homeless). Priority for emergency rental assistance will be given to households with a household income of 50% or less of AMI and households where one or more members of the household have been unemployed for 90 days or more.
Emergency Rental Assistance is not taxable for households receiving it.
Nutrition Assistance
The $900 billion COVID-19 stimulus package allocated $13 billion to increase the Supplemental Nutrition Assistance Program (SNAP) and other child nutrition benefits. In this context, monthly SNAP benefits were increased by 15% from January 1, 2021 to June 30, 2021, unemployment benefits were excluded from household income in determining SNAP eligibility, and SNAP was expanded to college students.
Emergency Broadband Internet Assistance Program
Due to the COVID-19 pandemic, millions of students are continuing their education online and many are working from home. The COVID-19 stimulus package includes a $3.2 billion Emergency Broadband Assistance program to provide up to $50 per month to low-income families for the cost of broadband internet service (up to $75 per month for those living on Tribal lands). Eligible households will also be able to receive up to $100 towards the cost of a connected device (laptop, desktop or tablet). Discounted internet service or connected devices will be offered by service providers, the costs of which will be reimbursed to service providers by the Federal Communications Commission.
Funeral Expenses Assistance
The COVID-19 stimulus package allocated $2 billion to the Federal Emergency Management Agency (FEMA) - Disaster Relief Fund to provide financial assistance to families for coronavirus-related funeral expenses incurred through December 31, 2020.
If you have any questions or need professional assistance regarding benefits for individuals and families under the new $900 billion COVID-19 stimulus package, you can contact us.