The second coronavirus stimulus package

Miscellaneous and Personal Stuff I Must Share
1

Please note the forum. This is for those interested in the effects on their personal or business taxes without discussing whether it should have been done or done differently. Start a thread in another forum if you want to discuss that kind of thing. It’s odd that there’s no such thread about this anywhere, but maybe it’s just because of my job that this is sorta a big deal.

The package that has passed Congress includes all of the following that I summarized for my boss today to send out to our clients. This is just the tax-related stuff that’s relevant to me and my job. Bullet points didn’t paste over formatted correctly, so it doesn’t look as tidy as it originally did and the bullet points used on the board I don’t like at all. I think it also includes an extension of federal unemployment benefits, but there’s less available to me on that front since the tax research providers don’t care about it (and nor do I professionally).

Individuals:

Individuals:
$600 ($1,200 joint) stimulus awarded as a tax credit and eligible to be received in advance to be given similar to the $1,200/$2,400 stimulus earlier this year. Amount is reduced by $5 for every $100 of income over $75,000 single, $112,500 Head of Household, and $150,000 joint. Like the previous payment, if you qualify based on 2020 income but did not based on 2019 income, you will receive it as a tax credit when filing the 2020 return, and if you qualified for the advance based on your 2019 income, you won’t have to repay it if you don’t qualify in 2020.

The $300 above-the-line charitable contribution available on the 2020 return for those who do not itemize deductions (put in place by the CARES ACT) is increased to $600 for joint returns, and is expanded to include 2021. These contributions must be made in cash directly to charities.

Earned income used to calculate the Earned Income Credit and Additional Child Tax Credit will, for 2020, look back to 2019 and use the larger of the earned income in the two years.

Educator expenses now include personal protection equipment and other supplies used to prevent the spread of COVID-19 incurred since March 12, 2020. The limit is still $250 per year per person in total.

The raising to 100% of the charitable contribution percentage of AGI limit for 60% contributions for 2020 is extended through 2021.

Extensions of expiring provisions:

7.5% AGI floor of Medical expenses on Schedule A becomes permanent. This was scheduled to go back to 10%.
Residential Energy-efficient property credit extended for 2 more years and now includes biomass in addition to solar, wind, fuel cell, and geothermal.
10% Qualified nonbusiness energy property (windows, furnace, circulating fans and other energy efficient improvements qualified by Dept of Energy) credit extended 1 year.

Tuition and Fees Deduction eliminated starting in 2021. American Opportunity Tax credit and Lifetime Learning credit will use same income phaseout rules starting in 2021.

Businesses:

EIDL grants are nontaxable, as are other assistance payments from the CARES act. Expenses paid with these and PPP loan funds that are forgiven are fully deductible, and there are no other adjustments that must be made to tax attributes due to receiving this nontaxable income.

For those that took the payroll tax deferral, the payback period is extended to 12/31/21.

For businesses receiving PPP loans, wages not paid with PPP forgiven funds are eligible for the Employee Retention tax credit. That credit has been significantly enhanced as well

Extends time period through 6/30/21.
Credit rate increases from 50% to 70% of qualified wages.
Per employee creditable wages go up to $10,000 per quarter rather than year.
Gross receipts decline can be only 20% instead of 50% (suspension as a result of government orders still qualifies as well).
Rules allow some employers not in existence in 2019 to be able to claim the credit.

Business meals from restaurants that were previously 50% deductible will be 100% deductible if the expense is incurred in 2021 or 2022.

It also includes a ton of other stuff because it’s part of the entire 2021 appropriations bill, which is the largest bill in the history of Congress at over 5500 pages - coronavirus stuff is just Division N. I read earlier today that the president has indicated he will not sign it, but it was passed with enough votes to override his veto. It remains to be seen what will happen, but there’s little reason it wouldn’t become law unless Congress decides to recess and it gets pocket vetoed.

2

The part that most effects me is they are making the craft spirits modernization act permanent or at least were.

3

There definitely were some things about alcohol that I saw in the summaries, but I don’t have any professional interest in them so I skipped all the details.

4

What I do not understand is how the direct payments (both from this bill and the original CARES act) affect any potential tax payment or refund on the 2020 tax return. I read somewhere (and of course cannot find it now) that the direct payments were a “refundable tax credit” but I have no idea what that means.

So let’s say a family of 4 has W2 wages only, has 2 kids and makes ~$35K per year. That would qualify them for the EIC and the child tax credit (I think). They would be eligible for a sizable refund as they owe no tax so will have their federal withholding refunded. So would their refund be reduced by the direct payments from the CARES act and this bill? If someone’s income is high enough to not be eligible for EIC or do not have children and they normally would neither owe tax or be due a refund, would they then owe the amount of the direct payment back to the feds?

Basically, if your average family of 4 will have received $5800 in cash between these two bills, what does that mean for the 2020 tax obligation / refund?

This is likely a simple thing, but even simple taxes confuse the hell out of me.

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And further, let’s say the bill isn’t signed right away (as what appears will happen) and the direct payments show up after Jan 1. I assume then that those will be addressed on the 2021 1040, filed in 2022?

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I haven’t looked at the “source code” of the new law, but assuming the summaries are correct, the credit will be on your 2020 tax return. I don’t think when the law passes is relevant to what year the credit is for, and it’s not “ex post facto” because it doesn’t change anything in 2020 - it changes what you owe the government or what they owe you on April 15, 2021 (or earlier date for refunds if filed earlier).

How it basically works is that the new laws created for eligible taxpayers a credit towards your tax bill equivalent to having paid in the amount of the credit, and then for most people gave them an advance on the refund that credit would generate, all things being equal. Those eligible for the credit get to claim an additional $X on Line 30 (in what used to be the “payments” section) if they did not receive the advance credit. If they did receive the advance credit, there’s nothing to report. You can find the instructions for Line 30 in https://www.irs.gov/pub/irs-dft/i1040gi--dft.pdf starting on page 57, including a worksheet to work out all the details.

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To be clear, the money you may have received earlier this year was an advance on your 2020 refund, but that refund is increased by $1200 (or whatever) because the law they passed says that for 2020, eligible taxpayers are treated as though they paid in that $1200. If you received the maximum possible stimulus, there will be nothing to report, your tax return will be normal, and the $1200 you received is just tangentially related. There is only an amount to report if you received less than the maximum but qualify for more due to your 2020 income level.

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$600 is like spitting on a forest fire.

I’ll make another donation to “Feeding America.”

~VOW

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To clarify one thing, Congress cannot prevent a pocket veto if Trump goes that route. Trump has ten days (excluding Sundays) to act. Only the current Congress can override his veto, but the current Congress will not exist when the ten days are up — the current term of Congress ends January 3.

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That depends when it “was presented to him”. It passed on the 21st, so 10 days plus Sundays is just enough. It probably wasn’t presented to him immediately though because of how large it was and require processing. I had also forgotten about the fact that the Congressional terms ended so much earlier. If this is within the pocket veto range because of the delay in presenting it to him, then I guess I’m entirely mistaken that this will become law one way or another. I had thought there was plenty of time in the term.

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What is a pocket veto? It’s one way Trump could block the Covid-19 stimulus bill. - Vox indicates that this is true - it wasn’t presented until the 23rd.

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Checked my bank balance this morning and I had $600 pending from the treasury. That was pretty fast.

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Same for my MIL.

14

Same here!

15

Ours were deposited yesterday. At least 2020 ended on a bit of a positive note, I guess…

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An old bank account of mine sent me an email about a pending deposit. I didn’t know why, as my deposits had been moved. But I was talking to my dad, and he said the the stimulus money would start going out on the fourth, i.e. exactly when it said the deposit would come.

(For some reason, the email notifications on my new account haven’t worked yet.)

I guess that, even after I went to all the trouble to officially switch my disability to go to the new account, the IRS (or whoever sends these) didn’t get the memo. Gonna be interesting transferring the money over. Also, I’m just surprised I got them this quickly, as getting the last one took a very long time to roll around to people like me.

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Got mine yesterday, and the boychik’s too. DH’s, not yet. The boychik’s comes to my account; DH’s will go to his account.

We set up separate accounts when he was in training with the military, and before cell phones were ubiquitous. Poor communication led to all sorts of problems with the joint account, so when he got deployed, he set up his own account, and we’ve kept it that way. We figured an equitable way to divide up the bills, and now that we pay the rent online, we each pay half of it. Paying for food is just a “whoever,” sort of thing, because if one of us needs money, the other one will always give it. It’s never a big deal. We just get on the computer and Zelle it.

We made the boychik put $400 in his savings account, and $100 in his “special wallet,” of emergency cash reserve he keeps in his room (he is expected to pay for repairs to things he breaks, and things that he wants repaired or upgraded that have just worn out or obsolesced, but aren’t necessary). But we’re letting him have $100 for mad money. It is supposed to be for economic stimulus, after all. He was STRONGLY encouraged, but not required, to make a charitable contribution, so he gave $18 to the local Humane Society.

I gave $78 (10% + $18 for good measure) to HIAS, the Hebrew Immigration Aid Society, which help refugees of any origin settle in the US-- it was founded to help Jews, but now it helps everyone with refugee status, or who might expect to get refugee status.

So far mine is just in savings with the dwindling money that we’ve been drawing on while I’ve been on reduced hours at work.

I want to do something a little indulgent with some of it, though, because it’s supposed to be for stimulating the economy, and because I haven’t had any kind of indulgence in so long.

I really need a new cell phone, because my old one first of all, has a crack, but second of all, has been acting squirrelly; it’s unpredictable, and sometimes the touchscreen goes out, and I have to restart it. I was planning to by a barebones, low-end cheap one, but now I’m thinking I’ll get a really nice one, high-end with a lot of storage space.

The other thing I want is some guppies for my fish tank, and there’s a kind of guppy that’s really pretty, but costs about $10 more than an ordinary guppy (which costs about $3). I’m thinking I’ll get a couple of the expensive guppies I’ve wanted for years.

That’s it.

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If you switched your bank account with an agency other than the IRS, they would not have communicated that to the IRS. The IRS did ask the SSA for people’s bank account information if they had it, but that was a one-time thing for the original stimulus to not have to send out as many checks. Despite all the agencies working under the umbrella of the federal government, they generally don’t share information continuously.

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I get that. I wouldn’t expect them to keep constantly updated. I was more surprised that they just reused the information they had, rather than getting the information again (which would have been updated). I guess this explains the much quicker turnaround this time.

Plus there are circumstances I don’t want to get into here for why we stopped using the account, and I know the IRS knows about those circumstances. I’m actually pleasantly surprised that I was still able to get the money in that account.