To stimulate an economy struggling after 12 months of pandemic-related lockdowns and quarantines, the U.S. Congress passed the American Rescue Plan Act (ARPA) in March. This $1.9 trillion economic relief package includes $1,400 direct payments to qualified recipients, unemployment benefits and a tax waiver, and expanded child tax credits, all of which should help freelancers.
ARPA provides the third round of stimulus payments up to $1,400 for adults and any dependent. Almost 90 percent of tax filers will receive a payment as ARPA starts phasing out payments at:
● $75,000 for single filers
● $112,500 for Head of Household filers
● $150,000 for joint filers
Households that will not receive payments include those with reported earnings (2019 or 2020 earnings, whichever was most recently filed) higher than $80,000 for single filers, $120,000 for Head of Household filers, and $160,000 for households that are married filing jointly.
Haven’t received your stimulus payment yet? Find when and how the IRS will send your 2021 Economic Impact Payment with the Get My Payment tool.
Extended Unemployment Benefits
ARPA extends three federal unemployment insurance (UI) plans created by the CARES Act through September 6, 2021.
● Pandemic Unemployment Assistance (PUA) ensures that freelancers unable to work due to the Covid-19 pandemic are eligible for unemployment benefits.
● The Federal Pandemic Unemployment Compensation program (FPUC) provides eligible individuals with $300 per week in addition to the weekly benefit amount they receive from other unemployment compensation (UC) programs.
● Mixed Earner Unemployment Compensation (MEUC) provides $100 per week to workers who receive at least $5,000 in 1099 income but are receiving traditional UI benefits because of W2 income.
Unemployment Benefits Tax Waiver
Unemployment benefits are traditionally taxed 10 percent at the federal level, as well as in some states. ARPA waives taxes on up to $10,200 of unemployment benefits. If you’re married filing jointly and both partners received unemployment, the waiver doubles to $20,400. This waiver reduces total taxable income, decreasing the amount you might owe the federal government.
To qualify, individuals and married couples must have filed for unemployment and have an adjusted gross income (AGI) less than $150,000 in 2020. Filers with an AGI in 2020 of $150,000 or more are ineligible to receive an unemployment tax waiver.
Expanded Child Tax Credit
ARPA expands the Child Tax Credit (CTC) by allowing households with children to claim up to $3,600 for children younger than six or $3,000 for children age 6 or older regardless of earned income. Previously, households could only claim $2,000 per child if the filer earned at least $2,500 a year.
Simplifying Finances for Freelancers and the Self-Employed
Lunafi empowers you with the financial tools you need to keep track of all income, both personal and business-related, so you can focus on serving clients. With Lunafi, you can:
● Connect your checking and credit card accounts securely to start managing your expenses and business income.
● Review estimates of your 1099 self-employment and federal income taxes.
● Know how much you will save with each business expense without having to understand IRS deduction rules.
● Uncover more write-offs personalized to your freelance profession.
● Save time by automating your bookkeeping tasks.
Download the free Lunafi app and get started today.