Much like everything else in 2020, taxes are going to be… interesting. Here are a few things you should know and be prepared for.
1. Stimulus Payments: As you may already know, the stimulus payments you received are not considered income and are not taxable. The size of stimulus check you qualified for was based on either your 2018 or 2019 tax return, but both the first and second stimulus checks are an advance of a 2020 tax credit. The amount you received from both checks will need to be reported on your 2020 tax return to show how much of the available credit you have already taken (please note if you qualified for the stimulus payment under 2018 or 2019 tax returns but do not qualify for 2020 you DO NOT have to pay your stimulus back). As of right now we do not have a way to look up how much you received for stimulus payments. You will need to provide this number to us, and it must be an accurate number to avoid getting a notice from the IRS.
2. Payroll Tax Credits: Payroll tax credits have been extended through March 31. If you have any employees who get COVID or cannot work due to quarantine, school/daycare closure, or caring for someone with COVID AND you continue to pay the employee you can continue to qualify for payroll tax credits.
3. Self-Employed COVID Leave Credit: There has been a lot of talk about payroll tax credits, but for all our self-employed clients, you may qualify for credits too. If you tested positive for COVID or could not work due to quarantine, school/daycare closure, or caring for someone with COVID please keep written record of what your situation was and provide it to us for preparation of your tax return.
4. 2nd Round of PPP Loans: There is a second round of PPP loan funds available right now. If any quarter of 2020 has at least a 25% decline in revenues from the comparable quarter in 2019, you may be eligible for a second PPP loan. Please direct questions of qualification and application to your bank. Once you know all the information your bank is requesting feel free to reach out to us for assistance compiling the information.
5. Forgiveness and Taxability: The long-awaited answer to the question of taxability of PPP loan forgiveness is finally here. For Federal tax purposes the PPP loan forgiveness is not taxable, and the expenses paid for with PPP loan funds are fully deductible. In addition, the EIDL grant portion of up to $10,000 and loan payments made directly by the SBA (6 payments in total for those who had a qualifying loan) are all non-taxable.
Please continue to check back for future updates as this tax season progresses. As a reminder, we are limiting face time as much as possible this year in lieu of COVID by asking everyone to drop off their tax information instead of having an appointment – if possible. We also have our secure online portal available to upload electronic copies of your tax information instead of dropping it off or mailing it in. If you’d like to get set up on our portal, please give our office a call at 218-631-1405.