the money will impact their 2020 income taxes . The answer is no – the checks will not increase the amount of money taxpayers owe on their 2020 tax return . Also , the stimulus funds will not reduce the amount of a taxpayer ’ s refund .
The stimulus checks are not considered taxable income . The funds are actually a “ refundable tax credit .” A tax refund is money that ’ s repaid to those who overpaid their taxes during the year . A tax credit reduces the amount of money a person owes in federal taxes . A refundable tax credit can reduce a person ’ s tax bill to below zero , meaning they would receive a tax refund . So , for example , let ’ s say you owe $ 1,000 in federal taxes , but your refundable tax credit is $ 1,500 . You should receive a $ 500 tax refund check from the federal government . So , with the stimulus checks , the federal government is giving taxpayers their refundable tax credit now , rather than having to wait until they file their 2020 taxes .
Can employers who receive Paycheck Protection Program loans also apply for Employee Retention Credits ?
The Employee Retention Credit , available under the CARES Act , is designed to help businesses impacted by COVID-19 keep their employees on the payroll . It ’ s a refundable tax credit against certain employment taxes ( 50 % of wages paid to employees , up to $ 5,000 ). Employers whose operations were temporarily suspended due to COVID-19 , or whose gross receipts for April-December 2020 were less than 50 % of their gross receipts for April-December 2019 – are eligible for the Employee Retention Credit .
Initially , employers who received Paycheck Protection Program ( PPP ) loans could not also claim the Employee Retention Credit . But now through June 2021 , under the Taxpayer Certainty and Disaster Tax Relief Act ( enacted December 2020 ), employers who received a PPP loan can also claim an Employee Retention Credit on their taxes . The Taxpayer Certainty and Disaster Tax Relief Act also provides for retroactive ability . That means a business that did not take an Employee Retention Credit from March- December 2020 because of PPP loans may amend their quarterly payroll tax returns to take the ERC payroll tax credit .
What about employer-provided student loan payments in 2020 ?
Under the CARES Act , employers can pay as much as $ 5,250 per employee tax-free for reimbursement of the employee ’ s student loan repayments . Previously , employers were only allowed to reimburse employees for eligible education expenses such as tuition , books , and other school fees under this benefit . The employer can deduct the education expense just like they would with the employee ’ s wages , but without the payroll tax . In turn , the employee receives the funds as a tax-free benefit ; in other words , the $ 5,250 is not considered taxable income . ( It ’ s a win-win !). To implement this program , however , the employer would first need an educational assistance policy in place .
The tuition repayment assistance is designed to help those who are struggling with student loan debt , on top of the financial issues related to COVID-19 . Prior to leaving office , President Donald Trump signed the Consolidated Appropriations Act , which extends these provisions through 2025 .
IN THE PROFESSION
[ We ' ve all
JASON WIGGAM been ] effected
Wiggam & Geer jwiggam @ wiggamgeer . com financially and medically ... ****************************
The Coronavirus affects our society financially as well as medically . Congress enacted several laws in response to the financial impact of COVID-19 including the Families First Coronavirus Response Act ( March 11 , 2020 ), the CARES Act ( March 27 , 2020 ), and the COVID-19 related Tax Relief Act of 2020 ( December 27 , 2020 ). These laws are meant to “ provide fast and direct economic assistance for American workers , families , and small businesses .” 1
What are some significant provisions of these federal and state tax law changes ?
A New Category of Charitable Gifts . 2 An individual who does not itemize deductions is entitled to a deduction for charitable contributions in addition to the standard deduction . Non-cash contributions do not qualify for this deduction . The deduction is limited to $ 300 for tax year 2020 . For tax year 2021 , the deduction converted from $ 300 per tax return to $ 300 per person .
Unlimited Deductibility of Charitable Gifts . Cash contributions are generally limited to 60 % of income , but for tax years 2020 and 2021 cash contributions are not limited and may reduce taxable income to zero .
Exclusion from Income / Other Deductions . COVID-19 related Tax Relief Act provides for loans that in most circumstances will be forgiven . The general rule is that the amount of debt forgiven is taxable income . The Paycheck Protection Program ( PPP ) loans that are forgiven are an exception to that rule . No income is recognized due to PPP
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