Joplin accountant answers questions about stimulus relief and taxes
JOPLIN, Mo. – Taxes can be a headache, but this year it’s even more complicated with people coming across conflicting information about stimulus checks.
“I’ve seen articles that have said, ‘Yes, you’re gonna have to pay this back.’ I’ve seen articles that say, ‘No, you don’t.’ I’ve seen articles that say, ‘This is an early advance on your 2020 tax return that you would get back,’ but we don’t usually get money back, so does that mean I have to pay it back? That’s really my biggest concern,” said Sarah Neet, a school teacher in Miami, Oklahoma.
It’s a concern for a lot of people, but it doesn’t need to be. The stimulus checks are not taxable, don’t have to be paid back and shouldn’t impact your refund whether you needed the money or not.
“If someone got a payment and they weren’t supposed to, they don’t have to give that back and they’re not gonna take it away from them…but if somebody didn’t get a payment, let’s say somebody had a baby this last year, if they didn’t get a payment, and they’re supposed to get one because everything is reconciled based on your 2020 status, so if you were supposed to get money then that will be added onto your refund,” explained Chris D. Churchwell, a CPA with Churchwell Hedman Tax Group.
For small businesses, the Payroll Protection Program and loans fall under the same category of tax free, deductible expenses.
“It’s ended up not being based on need. Just like those stimulus checks, it becomes part of their cash flow and they can spend it for however they want to because its not gonna be any kind of requirement they pay it back,” Churchwell stated.
The first round of stimulus checks really helped out Sarah’s family. Her husband was able to find a new job and they’re catching up on their bills.
“While the boat still has a hole in it, the bucket that we’re bailing water with is at least bigger than the hole now, so there is light. I just can’t afford anymore extra thousands of dollar payments, especially to a federal government that isn’t as fiscally responsible as my 2-year-old,” Neet said.
One big thing to keep in mind is that unemployment benefits are taxable income. That means, if you received unemployment benefits without withholdings, you could end up with a much smaller return or actually have to pay in this year.
“For example, I’ve got one client that got like $31,000 [in unemployment], nothing withheld, so people are gonna be surprised how much their refund is cut back, or that they owe money because when they declare that unemployment as income, because of the extra amount the federal government put in, they’re gonna end up having to pay income taxes on that,” Churchwell emphasized.
CARES act payroll credits have been extended through March 21. For larger employers, payroll retention credits have also been extended through June 30.
Learn more here.