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Our newsline provides the latest news from the IRS, due dates, reminders, and thoughtful insights on accounting and tax related topics

#IRSTaxTip: Here’s how the third Economic Impact Payment is different from earlier payments. https://go.usa.gov/xHx95

4/6/2021

 
Issue Number: COVID Tax Tip 2021-44
 
Here’s how the third Economic Impact Payment is different from earlier payments
 
The third Economic Impact Payment is different from the first and second payments in several ways.
 
The third Economic Impact Payment is an advance payment of the 2021 recovery rebate credit. The two earlier payments are advance payments of the 2020 recovery rebate credit. Eligible people who didn't get a first and second Economic Impact Payment or got less than the full amounts, may be eligible to claim the 2020 recovery rebate credit and must file a 2020 tax return even if they don't usually file a tax return.
 
The third Economic Impact Payment will be larger for most eligible people. Eligible individuals who filed a joint tax return will receive up to $2,800, and all other eligible individuals will receive up to $1,400. Those with qualifying dependents on their tax return will receive up to $1,400 per qualifying dependent.
 
More people qualify as dependents. Unlike the first two payments, the third payment is not restricted to children under 17. Eligible families will get a payment for all qualifying dependents claimed on their return. This may include older relatives like college students, adults with disabilities, parents and grandparents.
 
Income phase-out amounts are different for the third payments.
Taxpayers will not receive a third payment if their Adjusted Gross Income exceeds:
  • $160,000, if married and filing a joint return or if filing as a qualifying widow or widower.
  • $120,000, if filing as head of household.
  • $80,000 for eligible individuals using other filing statuses, such as single filers and married people filing separate returns
This means that some people won't be eligible for the third payment, even if they received first or second EIPs or are eligible for a 2020 recovery rebate credit.
 
Some people may be eligible for a Supplemental Payment.
The amount of the third payment is based on the taxpayer’s latest processed tax return from either 2020 or 2019. If the taxpayer's 2020 return hasn’t been processed, the IRS used 2019 tax return information to calculate the third payment.
 
If the third payment is based on the 2019 return, and is less than the full amount, the taxpayer may qualify for a supplemental payment. After their 2020 return is processed, the IRS will automatically re-evaluate their eligibility using their 2020 information. If they’re entitled to a larger payment, the IRS will issue a supplemental payment for the additional amount.
 
Changes to earlier eligibility requirements. For taxpayers who file jointly and only one individual has a valid SSN, the spouse with a valid SSN will receive up to a $1,400 third payment and up to $1,400 for each qualifying dependent claimed on their 2020 tax return. For taxpayers who don’t have a valid SSN, but have a qualifying dependent who has an SSN, they will only receive up to $1,400 for a qualifying dependent claimed on their return only if they meet all other eligibility and income requirements. If either spouse was an active member of the U.S. Armed Forces at any time during the taxable year, only one spouse needs to have a valid SSN for the couple to receive up to $2,800 for themselves, plus up to $1,400 for each qualifying dependent.
 
If married taxpayers filing jointly did not receive one or both of the first two Economic Impact Payments because one spouse didn’t have a Social Security number valid for employment, they may be eligible to claim a 2020 recovery rebate credit on their 2020 tax return for the spouse with the SSN valid for employment.


Face masks and other personal protective equipment to prevent the spread of COVID-19 are tax deductible

3/26/2021

 
WASHINGTON — The Internal Revenue Service issued Announcement 2021-7 today clarifying that the purchase of personal protective equipment, such as masks, hand sanitizer and sanitizing wipes, for the primary purpose of preventing the spread of coronavirus are deductible medical expenses.
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The amounts paid for personal protective equipment are also eligible to be paid or reimbursed under health flexible spending arrangements (health FSAs), Archer medical savings accounts (Archer MSAs), health reimbursement arrangements (HRAs), or health savings accounts (HSAs).

​IRS Statement - American Rescue Plan Act of 2021

3/13/2021

 
The IRS is reviewing implementation plans for the newly enacted American Rescue Plan Act of 2021. Additional information about a new round of Economic Impact Payments, the expanded Child Tax Credit, including advance payments of the Child Tax Credit, and other tax provisions will be made available as soon as possible on IRS.gov. The IRS strongly urges taxpayers to not file amended returns related to the new legislative provisions or take other unnecessary steps at this time.
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The IRS will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable. For those who haven't filed yet, the IRS will provide a worksheet for paper filers and work with software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return. For those who received unemployment benefits last year and have already filed their 2020 tax return, the IRS emphasizes they should not file an amended return at this time, until the IRS issues additional guidance.

Taxation Status of Unemployment Benefits

3/12/2021

 
The American Rescue Plan Act exempted the first $10,200 of unemployment retroactive to 2020, thus requiring amended returns unless the IRS automatically adjust returns.  We must wait for guidance from the government to be issued before software developers can implement it and we can begin processing affected returns.

The state also has measure SB614 SD2 moving quickly that would retroactively exempt unemployment received in 2020 which would also require an amended return.  At present, the senate approved it and it is now in the house for review and approval before it can be sent to the governor for signature.  If it is signed into law we then would wait for guidance from the government to be issued before software developers can implement it and we can begin processing affected returns.
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If any tax is due we highly recommend filing and pay the tax on time to avoid penalties & interest.  We can amend the return later to receive a refund, if any, when the guidance is issued and we are able to begin exempting unemployment compensation.

2020 Tax Changes & Updates

12/24/2020

 
Happy New Year!  This has been an interesting year with ever-evolving changes that will likely keep us guessing into the future and have made tax planning more challenging.

A few changes that will affect almost everyone:

1. There is a new $300 “above the line” deductuion for cash charitable contributions.  Iteminzing deductions is not required, so save your receipts!  Everyone can claim this.

2. The Economic Impact Payments (EIP) were an advance against the Recovery Rebate Credit.  If you did not receive some or all of your EIP, you will be able to apply for the creidt on your 2020 tax return.  Please save the letter you received with your EIP.

3. Unemployment compensation is fully taxable income.  If you did not have taxes withheld, this may increase your taxes and/or create a balance due.

4. Most non-SBA grants and COVID assistance is not taxable.  Check to be sure!

5. If you took a COVID-related withdrawal from a 401(k) and/or IRA you will have the option to repay it within three years or or pay the tax ratably over a three-year period. 

6. Businesses who received an SBA Grant will be subject to tax on it, thouigh SBA Loans are not subject to tax.  

7. Businesses who received a PPP loan are now able to deduct expenses paid with the loan regardless of whether or not it is forgiven.


Potential future change to watch for:

1. No later than February 21, 2021 the Secretary of the Treasury will issue guidance as to whether PPE, cleaning, and sanitizing supplies will be allowed as qualified expenses for the $250 educator deduction.


​Things are still changing so stay tuned for more updates or give our office a call if you have any questions.

Mayor announces Micro Business Loan Program to support small local businesses

4/5/2020

 
Mayor Michael Victorino announced the launch of the Micro Business Loan Program to help business owners impacted by COVID-19.
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Applications and loan criteria and guidelines for applying are available at MauiChamber.com. The chamber’s phone number is (808) 244-0081.
​


​Hawaii Emergency Laulima Partnership (H.E.L.P.) program now accepting applications

4/1/2020

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​Hawaii Emergency Laulima Partnership (H.E.L.P.) program now accepting applications
https://www.mauicounty.gov/civicalerts.aspx?AID=9971
Mayor Michael Victorino announced today that applications are now being accepted for financial assistance though the Hawaii Emergency Laulima Partnership (H.E.L.P.) program. The County of Maui allocated $2 million in general funds to the program to assist families with members who have lost jobs due to the COVID-19 pandemic.
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Unemployment, SBA Loans, Stimulus Checks, and Paid Sick Leave Information

3/29/2020

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   Small Business Admin Economic Disaster Loans
   https://www.sba.gov/disaster/apply-for-disaster-loan/index.html

   Families First Paid Sick Leave Information
   https://www.dol.gov/agencies/whd/pandemic/ffcra-questions

   IRS Stimulus Check Updates
   https://www.irs.gov/coronavirus
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   Apply for Unemployment Benefits
   https://huiclaims.hawaii.gov/#/


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Treasury, IRS and Labor announce plan to implement Coronavirus-related paid leave for workers and tax credits for small and midsize businesses to swiftly recover the cost of providing Coronavirus-related leave

3/24/2020

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WASHINGTON — Today the U.S. Treasury Department, Internal Revenue Service (IRS), and the U.S. Department of Labor (Labor) announced that small and midsize employers can begin taking advantage of two new refundable payroll tax credits, designed to immediately and fully reimburse them, dollar-for-dollar, for the cost of providing Coronavirus-related leave to their employees. This relief to employees and small and midsize businesses is provided under the Families First Coronavirus Response Act (Act), signed by President Trump on March 18, 2020.

The Act will help the United States combat and defeat COVID-19 by giving all American businesses with fewer than 500 employees funds to provide employees with paid leave, either for the employee's own health needs or to care for family members. The legislation will enable employers to keep their workers on their payrolls, while at the same time ensuring that workers are not forced to choose between their paychecks and the public health measures needed to combat the virus. 

​More:  https://www.irs.gov/newsroom/treasury-irs-and-labor-announce-plan-to-implement-coronavirus-related-paid-leave-for-workers-and-tax-credits-for-small-and-midsize-businesses-to-swiftly-recover-the-cost-of-providing-coronavirus
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New American Job Center Maui Website Launched

3/22/2020

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The American Job Center – Maui has launched a website with information to help Maui County residents file for unemployment insurance or register for job searches from the safety of home in the wake of impacts from the COVID-19 (coronavirus) outbreak. https://www.mauicounty.gov/civicalerts.aspx?AID=9937 ​
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