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An Overview of The Consolidations Act of 2021

 

The Consolidations Act of 2021 was signed into law on December 27th, 2020 just as the CARES Act was set to expire at the end of 2020. As the pandemic continues, this new bill includes $900 billion in coronavirus relief and work-related provisions. Some of these work-related provisions include the following:

 

Paycheck Protection Program (PPP)

The PPP was introduced in the original CARES Act and offered businesses that had been affected by the pandemic, a loan to help cover certain work-related expenses. The loan could eventually be forgiven if certain criteria were met. This new bill includes an additional $284 billion for the PPP and $20 billion of that will be set aside as Economic Injury Disaster Loan Grants for smaller businesses. Additionally, eligibility has been extended to include all non-profits- including 501(c)(6) organizations and businesses that have already received a loan through the PPP will be eligible for a second one under new terms.

Health & Dependent Care Flexible Spending Arrangements

In the original CARES Act, eligible products to be purchased through pre-tax health plans were increased to include over the counter medicine and a few other essential purchases. This new bill now allows taxpayers to roll over unused amounts in their health and dependent care flexible spending agreements from 2020 to 2021 and from 2021 to 2020. It also allows for employers to make a 2021 mid-year prospective change in contributions amounts and gives employers the choice to let employees temporarily increase the age for Dependent Care expenses from age 13 to 14 for dependents who reached the limiting age (13) during the pandemic.

Deferred Payroll Taxes

On August 8th, 2020, the President issued an executive order allowing for employers to defer withholding employees’ share of social security taxes from September 1, 2020, through December 31, 2020. In turn, employers would then need to increase withholding in 2021 to pay the deferred amounts by April 13, 2021, with penalties set to begin on May 1, 2021. The repayment period has now been extended through December 31, 2021, with penalties now set to start to incur on January 1, 2022.

Employee Retention Tax Credit

The Employee Retention Tax Credit (ERTC) was originally introduced in the CARES Act and was designed to encourage employers to keep employees on their payroll through the pandemic by offering a refundable tax credit of 50 percent of up to $10,000 in qualified paid wages to an employee by an eligible employer experiencing COVID-19 related economic hardship. This was set to expire on December 31, 2020, and has now been extended through June 30, 2021. Additionally, it has changed the following:

  • The credit rate has increased from 50 percent to 70 percent of qualified wages
  • It expands the eligibility by reducing the required decline in gross receipts from 50 percent to 20 percent
  • Allows business with PPP loans to now qualify

Business Meal Deduction

Full deductions are now available for business meal food and beverage expenses that were provided by a restaurant in 2021 & 2022.

The Families First Coronavirus Response Act (FFCRA)

The FFCRA was introduced around the same time as the CARES Act and provided a refundable payroll tax credit for mandated paid sick and family leave. The credit has now been extended from December 31, 2020, to March of 2021 for employers that continue to voluntarily offer paid sick and family leave to their employees.

As the pandemic continues, the conversation about what else is needed is still ongoing amongst lawmakers, and amendments and additions may be possible through 2021.

Is there anything Payroll Systems can help you with as you accommodate rapid legislation changes? Reach out and talk to us about the easy-to-scale solutions you need for your business.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.