New COVID Relief Bill
7029639497 • December 30, 2020
Highlights below in case you were not planning on reading almost 5,600 pages!
- Additional round of Economic Impact Payments (EIP) include Direct Payments $600 per eligible family member (includes dependent children under 17 years old). The amount of the payments start to phaseout for single filers earning more than $75,000; married filing joint earning more than $150,000 and $112,500 for heads of household. If the credit determined on the 2020 tax return exceeds the amount of the advanced payment, the taxpayer will receive the difference as a refundable tax credit. Taxpayers who receive an advanced payment that exceeds the credit do not need to repay the amount.
- Unemployment Insurance includes an additional $300 per week for all workers receiving unemployment benefits from December 26, 2020 to March 14, 2021. It extends the PUA (covering self-employed) from 39 weeks to 50 weeks – with benefits ending April 5, 2021.
- Paycheck Protection Program (PPP) Loans are now allowed to deduct expenses associated with their forgiven PPP loans. Small businesses (with less than 300 employees) can receive a 2nd PPP loan if they can demonstrate a revenue reduction of 25%. The new bill also created a simplified PPP loan forgiveness application for loans < $150,000. Borrower signs a 1 page certification for # of employees retained and estimated amount of loan spent on payroll costs. Borrowers are not required to deduct their EIDL Advance from their PPP loan forgiveness amount.
- If you received an Economic Injury Disaster Loan (EIDL) Advance Grant less than $10,000, you can reapply for the difference you received up to the $10,000 maximum amount.
- Lookback for Earned Income Credit and Child Tax Credit will help workers who experienced lower wages this year to get a larger refund that is consistent with their earnings from prior tax filing seasons by using their earned income from tax year 2019 to determine the Earned Income Tax Credit and the refundable portion of the Child Tax Credit (Additional Child Tax Credit) in 2020.
- A 100% Deduction for Business Meals & Beverage provided by a restaurant that are paid or incurred in 2021 and 2022. The deduction is 50% for 2020.
- An increase to $600 non-itemizer Charitable Deductions for cash donations for married filing jointly for 2021. The deduction is $300 in 2020.
- No AGI limit for Cash Charitable Contributions in 2020 and 2021. Previously cash charitable contributions were limited to 60% of AGI.
- Extension on Federal Student Loans interest and principal payments until April 1, 2021.
- The exclusion from gross income of discharge of qualified principal residence debt has been extended through 2025.
- You cannot deduct the interest for acquisition debt greater than $750,000 through 2025.
- Mortgage insurance premiums qualify as residence interest through 2021.
- The Nonbusiness Energy Property Credit for qualified energy improvements to a principal residence is through 2021.
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For Tax Years 2025 - 2028, eligible tipped workers, can deduct $25,000 from their Modified Adjusted Gross Income (MAGI). This phases out for single filers with MAGI over $150,000 and $300,000 for joint filers. The Qualified Tips must be paid Voluntarily. For instance, a restaurant that imposes an automatic 18% service charge for large parties IS NOT CONSIDERED QUALIFIED TIPS.
The BIGGEST difference between the two is that businesses operate to make a profit while hobbies are for pleasure or recreation. Either way, they may receive an IRS Form 1099-K for transactions. These payments are taxable income and must be reported on federal tax returns. Here are some QUESTIONS to help you decide if you have a Hobby or a Business: ? Is there an intent to make a profit? ?? Do you depend on the income for your livelihood? ??? Are losses due to circumstances beyond your control? ???? Are losses normal for the start up or your type of business? ????? Is the activity carried out like a business w/ books & records? ?????? Do you have the knowledge to make it successful? Whether you have a Hobby or run a Business, good record keeping throughout the year will help when you file your taxes.
Are you wondering if your student can be Independent on the FAFSA? The most common question I get from parents is, "Shouldn't my student be independent if they file their own taxes?" The answer often surprises families who hope to qualify for additional aid by pursuing independent student status for their student. According to the Federal Department of Education, an independent student for the purposes of completing the FAFSA, must meet at least 1 of the following: - Age 24 or older by December 31 of the FAFSA year of Submission - Married - Pursing a graduate level or professional degree - A veteran or current armed forces member - An orphan or ward of the court - An emancipated minor - At risk of becoming homeless - Have their own legal dependents Bottom Line - Your student's dependency status is NOT BASED on their tax filing status.
The Pennsylvania Supreme Court decided that the Internal Revenue Code Section 1031, a federal tax provision for deferring capital gains in Like-Kind Exchanges DOES NOT APPLY in PA. This means that when you sell property in PA and you qualify for Like-Kind Exchange on your Federal Income Tax Return, BE AWARE that you WILL PAY PA TAX on Capital Gains on your PA Income Tax Return. GOOD NEWS - PA Income Tax is 3.07%!
Hobbies and Businesses are treated differently when it comes to filing taxes. The biggest difference is a Business operates to MAKE A PROFIT and Hobbies are for PLEASURE . There are a few things that people should consider when deciding whether they have a Hobby or a Business. 1 - Does the time and effort put into the activity show you intend to make a profit? 2 - Does the activity make a profit in some years? And how much of a profit? 3 - Will there be a future profit from the appreciation of the assets used in the activity? 4 - Do you depend on income from the activity for your livelihood? 5 - Are any losses due to circumstances beyond your control or are the losses normal for the start-up phase of your type of business? 6 - Do you change your method of operations to improve profitability? 7 - Do you keep complete and accurate books and records? 8 - Do you have the knowledge needed to carry out the activity as a success business? For more information, Google: Publication 334, Tax Guide for Small Businesses (For Individuals Who Use Schedule C) or Publication 535, Business Expenses.
Educational Assistance Programs Can Help Pay Workers' Student Loans! Employers that offer educational assistance programs can ALSO use those programs to help pay their employees' student loans. Traditionally, education assistance programs are used to pay for books, equipment, supplies, fees, tuition and other educational expenses for the employee. THESE PROGRAMS CAN NOW ALSO BE USED TO PAY PRINCIPAL AND INTEREST ON AN EMPLOYEE'S QUALIFIED EDUCATION LOANS. The tax-free benefit is up to $5,250 per employee per year. Any assistance provided above $5,250 is taxable to the employee as wages. This benefit is available until December 31, 2025. 🤓
$0.67 a Mile for the use of a car, van, pickup truck or panel truck driven for business in 2024. You have the option of calculating actual costs of using your vehicle rather than using the standard mileage rates. BUT YOU MUST OPT TO USE the Standard Mileage Rate the first year the car is available for business use. Then, in later years, you can choose either the standard mileage rate or actual expenses. LEASED VEHICLES must use the standard mileage rate method for the ENTIRE LEASE PERIOD if the standard mileage rate is chosen.
