The Consolidated Appropriations Act, 2021, signed into law December 27, 2020, introduces several new relief opportunities for both businesses and individuals. Below we have highlighted a few of the key aspects of the legislation that will be beneficial to many businesses.
Extension of Employer Payroll Credits for Paid Sick and Family Leave
Originally part of the Families First Coronavirus Response Act (FFCRA), the Consolidated Appropriations Act, 2021 extends the credit for paid sick and family leave from December 31, 2020, set by FFCRA to March 31, 2021. The new law does not change the qualifying reasons that an employee can take leave, the caps on amount of pay that employees are entitled to receive, or the amount of leave employees can take. For an employee who is unable to work because of COVID-19 quarantine, eligible employers may receive a refundable sick leave credit for sick leave at the employee's regular rate of pay, up to $511 per day and $5,110 in the aggregate, for up to 80 hours. For an employee who is caring for someone, eligible employers may claim a credit for 2⁄3 of the employee's regular rate of pay, up to $200 per day and $2,000 in the aggregate, for up to 80 hours. In addition to the sick leave credit, for an employee who is unable to work because of a need to care for a child due to the coronavirus, employers may receive a refundable childcare leave credit equal to 2⁄3 of the employee's regular pay, capped at $200 per day or $10,000 in total. In addition, the Consolidated Appropriations Act, 2021 does not require employers with less than 500 employees to provide COVID-19 related sick and family leave benefits to employees as set by the FFCRA. It only extends paid sick and family leave tax credits for employers that voluntarily provide these benefits through March 31, 2021.
Temporary Employee Payroll Tax Deferral
On August 8, 2020, President Trump issued a memorandum that allows employers to defer withholding and payment of the employee's portion of Social Security taxes. The deferral was available to any employee with wages less than $4,000 during a biweekly pay period. Employers were required to withhold and pay the deferred payroll taxes from wages paid between January 1, 2021, and April 30, 2021, but the Consolidated Appropriations Act, 2021 extends the deferral of the withholding and payment of the employee's portion of Social Security taxes to December 31, 2021. The provision does not extend the period during which payroll taxes are deferred and does not expand the wages affected. The deferral continues to apply only to wages or compensation paid during the period of September 1, 2020, through December 31, 2020.
Temporary Full Deduction of Business Meals
The Consolidated Appropriations Act, 2021 temporarily allows a 100% deduction for business food and beverage expenses provided by restaurants that are paid or incurred in 2021 and 2022. Currently, the deduction is available for only 50% of meal and beverage expenses. To be deductible, the existing requirements still apply:
- The expense is ordinary and necessary in carrying on a trade or business.
- The expense is not lavish or extravagant under the circumstances.
- The taxpayer or employee of the taxpayer is present when the food or beverages are furnished.
- The food and beverages are provided to a current or potential business customer, client, consultant, or similar business contact.
- Food and beverages provided at an entertainment activity are deductible if they are purchased separately.
Entertainment expenses will remain nondeductible.
As with any new tax legislation, proper planning is important in maximizing new tax savings opportunities. Contact your HLB Gross Collins, P.C. adviser if you have questions regarding this new guidance and its applicability to your specific situation.