loan forgiveness .
Expenses Used to Calculate PPP Loans . The amount of PPP loans is calculated with reference to payroll and other expenses . There were concerns about whether those expenses would be deductible . The concern was resolved in favor of the borrowers . The general rule is that expenses which generate taxable income are nondeductible . The PPP loan forgiveness does not eliminate the deductibility of expenses used to calculate the amount of the loans . 3 PPP loans are made to sole proprietorships and businesses .
Disaster Relief Payments . COVID-19 has been declared a national “ qualified disaster .” 4 IRC § 139 , titled “ Disaster Relief Payments ,” provides that gross income does not include qualified disaster relief payments . Disaster Relief Payments are payments to or for the benefit of an individual to reimburse or pay reasonable and necessary personal , family , living , or funeral expenses incurred as a result of a qualified disaster . 5 Disaster Relief Payments can be made by employers , or by the government .
What impacts do these have on rebates and retirement plans ?
Advance Payment of Rebates . Advance payments of $ 600 to $ 1,200 ( and maybe more ) tax credits have been paid in anticipation of individuals qualifying for the rebates . This is similar to withholding in reverse . The qualification generally is determined on tax returns for the year of the advance payment . 6 Some recipients do not have to file tax returns . They are permitted to keep the advance payment .
Recovery Rebates and Additional Recovery Rebates . 7 Eligible individuals are allowed a credit of $ 1,200 ($ 2,400 for joint filers ) against their income taxes , plus $ 500 for each qualifying child , on tax year 2020 tax returns . The amount of the credit is phased out between $ 75,000 and $ 150,000 of income . Most people received advance payments , which will need to be paid back if they do not qualify .
Tax Favored Distributions from Retirement Plans . 8 COVID-19 related distributions from retirement plans to participants younger than 59½ made during tax year 2020 are not subject to the 10 % excise tax on early distributions . Additionally , if the distributions are repaid within three years , no income will be recognized . Alternatively , income can be recognized over three years . A COVID-19 related distribution is one which is a made to an individual , their spouse or dependent who is diagnosed with SARS-CoV-2 or COVID-19 , or who experiences adverse financial consequences as a result of quarantine or other COVID-19 related reasons .
Loans from Retirement Plans . 9 Employersponsored retirement plans are permitted to
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