All Tax Things COVID Related



COVID Relief for Small Businesses


****News Alert – Second COVID Relief Package Passed****

Stimulus checks could mail as early as next week

Both houses of Congress voted to pass the latest COVID relief legislation and all indications are that the president will sign it into law. We know that more guidance will be provided as this rolls out, but here are the highlights as we know them:

PPP and small business support: New COVID-19 relief package provides much needed support for small businesses. Business expenses paid for with the proceeds of PPP loans are tax deductible, consistent with Congressional intent in the CARES Act. In addition, the loan forgiveness process is simplified for borrowers with PPP loans of $150,000 or less. Unspent funds totaling $138 billion will be reinvested in the PPP program.

For a more in-depth analysis of the new PPP provisions click here.

Economic impact payments (EIP): The bill includes a second round of EIPs for qualifying Americans.

The IRS will use the data it already has in its system to begin making payments at the end of December through the first two weeks of January. If the IRS has your direct deposit information, you will receive a payment that way. If it does not, you will receive your payment as a check or debit card in the mail. If you are eligible but don’t receive your check for any reason, you can claim the payment when you file your 2020 taxes in the spring of 2021.

In regards to eligibility, any person who has a valid work-eligible Social Security number (SSN), is not considered as a dependent of someone else and whose adjusted gross income (AGI) does not exceed certain thresholds (see below) is eligible to receive the credit. This means workers, those receiving veterans’ benefits, Social Security beneficiaries and others are all eligible.

  • Spouses of military members are eligible without an SSN
  • An adopted child can use an Adoption Tax Identification Number to be eligible

Under the CARES Act, joint returns of couples where only one member of the couple had an SSN were ineligible for a rebate. This latest round of relief changes that provision. These families will now be eligible to receive payments for the members of the family who have SSNs. This change is retroactive, meaning those who fall under this category who missed out on the first round of EIPs can claim that money when filing 2020 tax returns in the spring of 2021.

The full credit amount is $600 per individual, $1,200 per couple and $600 for children. It is available for individuals with AGI at or below $75,000 ($112,500 for heads of household), and couples with AGI at or below $150,000. If you have children, you will receive an additional $600 per child.

For those above this income level, your tax rebate amount will be reduced by $5 for each $100 your AGI exceeds the above thresholds.

This means:

  • An individual without children will not receive any rebate if their AGI exceeds $87,000.
  • A couple without children will not receive any rebate if their AGI exceeds $174,000.
  • A family of four will not receive any rebate if their AGI exceeds $198,000.

The IRS will use the same methodology for calculating payments as it did for the first round of economic impact payments.

Unless obtained by fraud, rebate checks do not need to be repaid. If an individual experienced an income loss in 2020, or if they have an increase in family size, they may be able to claim an additional credit of the difference when the individual files their 2020 tax federal income tax return in spring of 2021.

If you are eligible and the IRS does not have your direct deposit information, you will receive your payment as a paper check or a debit card as long as the IRS has your address. If the IRS does not have updated contact information for you, you can claim the payment when you file a tax return in spring 2021.

Someone who is claimed as a dependent on another taxpayer’s tax return is not eligible to receive the $600 refund check themselves. Children 17 and older are not eligible for the $600 per child tax credit.

For those with taxable income, you will need to file a tax return for the 2020 tax year, which you can do during the coming filing season that is expected to begin in late January and end on April 15, 2021. Those with little or no taxable income are encouraged to use the IRS’ free file program.

Other than Social Security beneficiaries (retirement and disability), railroad retirees and those receiving veterans’ benefits, individuals with no taxable income will be able to file a simple form provided by the IRS specifically for the purpose of receiving the rebate check.

Social Security retirement and disability beneficiaries, railroad retirees and those receiving veterans’ benefits do not need to file to receive their rebate. The IRS has worked directly with the Social Security Administration, Railroad Retirement Board and the Veterans Administration to obtain information needed to send out the rebate checks the same way benefits are paid.

The credit is not taxable, consistent with other refundable tax credits.

The rebate is considered a tax refund and is not counted towards eligibility for federal programs for both income and asset test purposes. The rebate checks are not subject to the majority of offsets, including student debt and state debts. The only administrative offset that will be enforced applies to those who are subject to a child support garnishment court order.

A family with a child born in 2020 is eligible for the $600 per child rebate amount (assuming all other requirements are satisfied). The IRS will calculate the payment based on the most recent tax data in its system. If a child was born since the family’s last filing, the family will not automatically receive the $600 rebate amount for the child born in 2020. To receive the credit the family can claim the $600 credit on their 2020 tax return filing made in spring 2021.

If you believe you are eligible for an economic impact payment but did not receive a round one or round two payment, you will have the opportunity to claim the payment on your 2020 tax return. This year’s tax forms will provide a place for individuals to claim the payments. If you don’t normally file taxes and are eligible for a payment, make sure to file a return this spring to claim the payments.

The IRS has not announced the exact date the coming filing season will begin, but it typically begins near the end of January. If you need to update your information by filing your tax return, keep an eye out for an IRS announcement about the start of the filing season.

Individuals can claim the payment by filing a simple tax return when the tax filing season opens in late January 2021.

Unemployment assistance:  An 11-week extension of the unemployment insurance (UI) compensation benefits first provided in the CARES Act that are due to expire on December 26. This includes the Pandemic Unemployment Assistance (PUA) that extends UI benefits to workers who traditionally are ineligible, such as gig economy workers and independent contractors, and Federal Pandemic Unemployment Assistance (FPUA), which will provide an additional $300 per week supplement to state UI compensation.

Pandemic Emergency Unemployment Compensation (PEUC) originally providing an additional 13 weeks of UI benefits will also be extended for 11 weeks (for a combined maximum of 50 weeks) and will expire on March 14, 2021. Individuals receiving benefits beyond the standard 26-week period as of March 14th will continue receiving them through April 5th if they have not reached their maximum number of benefit weeks. Federal funding will be extended for states waiving their waiting week for benefits. Workers with at least $5,000 in self-employment income may be eligible for an additional $100 per week benefit as part of the Mixed Earner Unemployment Compensation to adjust for a lower UI base payment. $120 billion is allocated for the UI benefits in the bill.

Rental assistance: The current CDC eviction moratorium will be extended until Jan. 31, 2021.

Student loans: Extension of student loan forbearance provisions created in CARES and extended by executive order, from the current expiration date of Jan. 31, 2021 through April 1, 2021

Flexible Spending Accounts:  Flexible Savings Account (FSA) balances can be rolled from the 2020 tax year into 2021, and 2021 balances can be rolled into 2022. This will help taxpayers with unused balances such as for childcare expenses who would normally lose the value of the FSA balance at the end of the tax year.

Charitable Contributions: The above-the-line charitable contribution is extended through 2021 at $600 for those married filing jointly and $300 for other filers. This means taxpayers will be able to take the standard deduction and deduct up to $600 in charitable giving when calculating their taxable income. For the 2020 tax year, taxpayers could deduct up to $300 above-the-line for charitable contributions.  This does not apply to donations of goods or services.  Your donation must be in the form of cash, check or credit card in order to take advantage of the “above-the-line” deduction.

Child Tax Credit & Earned Income Tax Credit: Adjustments to how the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC) are calculated for the 2020 tax year. During the pandemic, many individuals eligible for those credits have earned lower incomes due to job loss or underemployment. This may reduce the credits they are eligible for when filing taxes next spring. This provision would use 2019 income to determine an individual’s credit eligibility for the 2020 tax year.