The House-passed legislation, the “American Rescue Plan Act” (the “Bill”), is expected to be considered by the Senate this week.  The Bill includes provisions to provide financial relief to struggling families and ramp up vaccination distribution across the country.  Some of the major provisions included in the Bill are:

Child tax credit

The Bill will modify a refundable child tax credit for the tax year 2021, increasing the amount to $3,000 per child from $2,000.  The credit amount will be $3,600 for children under the age of 6.

Stimulus payments

The Bill includes the third stimulus payment, equal to $1,400 per person, to individuals with an AGI of $75,000 (or $150,000 for married couples) or less.

Unemployment insurance

The Bill extends unemployment programs through August 29, increasing federal payments from $300 per week to $400.

Child and dependent care credit

The Bill makes changes to the Section 21 child and dependent care credit, including making it refundable for 2021.

Family and sick leave credits

The credits for sick and family leave enacted by the Families First Coronavirus Response Act would be extended to September 30, 2021. It increases the limit on the credit for paid family leave to $12,000.

Employee retention credit

The Bill extends the employee retention credit through the end of 2021.  This credit allows eligible employers to claim a credit for paying qualified wages to employees.

Tax exempt EIDL grants

The Bill provides that EIDL grants received from the US SBA are not included in gross income and that this exclusion from gross income will not result in a denial of a deduction.

The FASB issued a proposed Accounting Standards Update that would reduce the complexity for certain private companies and not-for-profit entities when evaluating goodwill impairment triggering events.

Under the current guidance in Subtopic 350-20, Intangibles – Goodwill and Other – Goodwill, an entity is required to monitor and evaluate goodwill impairment triggering events as they occur throughout the year. Because of the uncertainty in the economic environment during the COVID-19 pandemic, some stakeholders expressed concerns about the value of evaluating a triggering event at an interim date when certain private companies and not-for-profit entities report goodwill only on an annual basis.

In response to the concerns expressed by stakeholders, the FASB issued a proposed ASU intended to provide an accounting alternative allowing private companies and not-for-profit entities that only report goodwill on an annual basis to perform the goodwill impairment triggering event evaluation on the annual reporting date only. This option would reduce cost and complexity for preparers and provide more relevant information for users.

This proposed ASU would be effective for annual reporting periods beginning after December 15, 2019 and applied on a prospective basis. The scope of this accounting alternative would be limited to goodwill that is accounted for in accordance with Subtopic 350-20.

Written by Kayla Kwak
Edited by Yejee Won

On February 8, 2021, the IRS announced that certain self-employed individuals who, due to COVID-19, are unable to work or telework for reasons relating to their own health or to care for a family member are eligible for sick and family leave tax credits under the Families first Coronavirus Response Act (FFCRA).

Certain self-employed individuals can claim refundable sick and family leave tax credits to offset their federal income tax using the new IRS Form 7202. To be eligible for the Form 7202, self-employed individuals must meet following requirements:

• Individuals must regularly carry on any trade or business that are qualified as self-employment income.
• Individuals must be eligible to receive qualified sick or family leave wages under the Emergency Paid Sick Leave Act as if the taxpayer was an employee.
• Taxpayers must maintain appropriate documentation establishing their eligibility for the credits.

Eligible self-employed individuals will claim the tax credits on their 2020 Form 1040 for leave taken between April 1, 2020, and December 31, 2020, and on their 2021 Form 1040 for leave taken between January 1, 2021, and March 31, 2021. Maximum amount of credit an eligible self-employed individual can take is limited to $5,110 per year.

Written by Sean Jeong
Edited by Kevin Jang

According to Notice 2014-21 published by Internal Revenue Service (“IRS”), cryptocurrency such as bitcoin is treated as property for federal tax purposes. Therefore, general tax principles applicable to property transactions apply to transactions using cryptocurrency.

As cryptocurrency is treated as property, transactions using cryptocurrency can generate capital gain or loss. Here are some examples of taxable cryptocurrency events: (1) selling cryptocurrency for cash, (2) paying for goods or services with cryptocurrency (3) buying one cryptocurrency with another cryptocurrency (4) receiving mined cryptocurrency, and (5) being paid in cryptocurrency.

In order to calculate your taxable gain or loss from cryptocurrency, you have to determine your basis for cryptocurrency and fair market value of the property or service you received. The basis is the amount you spent to acquire the virtual currency, including fees, commissions, and other acquisition costs. For example, you bought one bitcoin at $10,000. After 11 month, you sold the same bitcoin to purchase a car at fair market value of $12,000. In this case, you must report your capital gain of $2,000 on form 8949 with your basis of $10,000, proceeds of $12,000. Those amounts will show on Form 1040 schedule D.

In order to decide which units of cryptocurrency are deemed sold, exchanged, or otherwise disposed of, you can use two methods. The first method is to identify a specific unit of virtual currency either by documenting the specific unit’s unique digital identifier such as private key and public key, or by records showing transactions information for all units of cryptocurrency. This information must show (1) the date and time each unit was acquired, (2) your basis and the fair market value of each unit at the time it was acquired, (3) the date and time each unit was sold, exchanged, or otherwise disposed of, and (4) the fair market value of each unit when sold, exchanged, or disposed of, and the amount of money or the value of property received for each unit. The second method is on a first in, first out (“FIFO”) basis. The units are deemed to have been sold, exchanged, or disposed of in chronological order.

Starting in 2020, people who have transactions using cryptocurrency will receive either 1099-K or 1099-B. If you receive 1099-K, the amount simply represents the gross proceeds from your reportable transactions but not the amount of taxes owed. Therefore, you will need to report those amounts on form 8949 with your basis to calculate correct capital gain or loss. On form 1099-B, every information you need to report your capital gain or loss will be given.

Written by Jay Jang

Edited by Kevin Jang