COVID-Related Tax Relief Act of 2020 (COVIDTRA) Summary

covidra 2020 tax impact on nh residents and business

Below are some of the relief advantages that are in the COVID-Related Tax Relief Act of 2020 (COVIDTRA) that was signed by President Donald Trump. Like the first CARES Act, there are many things that are going to require clarifications and addendums, but below is a generalized interpretation of what we have read.

  • New Recovery Rebate. The additional 2020 recovery rebates are a refundable tax credit of $600 per eligible family member. The Phase out is at the same income as the prior rebate. Single Phase out starts at $75,000 modified Adjusted Gross Income (112,500 for head of household and $150,000 for married filing jointly). The phase out is going to be a reduction of $5 for every $100 over the threshold. In this round of rebates, eligible family members are residents with social security numbers under the age of 17.
  • Changes to the Paycheck Protection Program (PPP).
    • There is going to be a second opportunity for a forgivable PPP loan to companies with less than 300 employees who can show that they received a loss of 25% in gross receipts for any quarter of 2020 when compared to their 2019 gross receipts for that same quarter. PPP maintains that 60% of the loan needs to be used for payroll costs and recipients can choose either 8 or 24 week period.
    • Simplifies the forgiveness process for loans under $150,000.
    • Repeals the deduction of the EIDL advance from the forgivable amount of the PPP loan. This is made retroactive to March 26, 2020.
    • Expenses used to have the PPP forgiven are still deductible, making the PPP a nontaxable event.
    • Expands the second round of the PPP loan to local newspapers, TV and Radio broadcasters, housing cooperatives and 5(c)6 nonprofit organizations as well as local chambers of commerce.
    • Small businesses in Hospitality including restaurants are going to be allowed 3.5 times the average monthly payroll rather than the 2.5 times payroll for other businesses for the second round.
    • Add PPE and outdoor dining and supplier costs to expenses allowable for forgiveness.
    • Add accounting costs as allowable expenses for PPP forgiveness.
  • Employer Retention Credit. COVIDTRA is going to allow PPP recipients to claim the employee retention credit up to $10,000 per employee per quarter. It is still uncertain how this credit is going to be claimed in prior periods.
  • Coronavirus retirement distributions. COVIDTRA states that all distributions from retirement plans where the recipient is still employed will qualify for the Cares Act Exception to the 10% penalty. This is made retroactive to March 27, 2020.
  • Additional Unemployment benefits. COVIDTRA is including an additional $300 per week of unemployment benefits for eleven weeks starting December 26, 2020 and ending March 14, 2021. This is again being extended to self-employed and part time individuals as well as those who have already exhausted their unemployment benefits.
  • SBA Debt Tax Relief. COVIDTRA will resume three months of debt relief payments on microloans approved by the SBA prior to the CARES Act. The borrowers will receive Principal and Interest payments applied to their loans starting in February 2021, capped at $9,000 per month.
  • 50% Business Meals limitation suspended. COVIDTRA is suspending the 50% limitation on meals paid and incurred after December 31, 2020 and before January 1, 2023 as long as they are provided by a restaurant.
  • Cash Charitable Contributions. There is an above the line charitable contribution deduction that can be taken this year for cash contribution paid to charitable organizations up to $600 Married Filing Jointly and $300 for all other filing statuses. This means that you get to add this as a deduction against income even if you do not itemize your deductions.

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