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What You Should Know About COVID Stimulus Payments

Here’s our tax thoughts on COVID stimulus payments as we approach the close of the year.

Personal Stimulus Payments:

Is the payment taxable? 

No. The payment is actually an advance tax credit to be claimed on your 2020 tax return, filed in 2021.  The IRS does not consider the payment as additional income to you.

What if you did not receive a stimulus payment this year, but you're owed one? 

You can claim the credit on your 2020 tax return, filed in 2021.

What if you received a partial payment?  

If you did not receive the full amount that you were entitled to this year you can obtain the additional amount as a credit on your 2020 tax return.

What if it turns out your stimulus payment was more than you were actually allowed?

Suppose the IRS based your stimulus payment on your 2018 or 2019 tax return, when your income was lower, but your income is much higher for 2020. If someone has income in 2020 that is higher than the tax return to calculate the advance rebate, they will not have to pay the credit back.

Business Stimulus Payments:

What should we know about Advance EIDL loan proceeds?

If you received an Advance EIDL loan payment of up to $10,000, you will not be required to repay this advance if you did not receive a PPP loan. If you did receive a PPP loan, then this advance payment is not forgivable and must be repaid. Repayment is at a 3.75% interest rate for a term of 30 years.

What about PPP loan proceeds?

We are seeing the banks opening up to accept your loan forgiveness application. For businesses that have received $50,000 or less, please use form 3508S for your forgiveness. For loans over $50,000, please use form 3508EZ. If you do not qualify for the EZ form, you must use form 3508 for your forgiveness.

What about EIDL loans?

If your business received an EIDL loan of up to $150,000, you must repay this loan.  

Interest will be assessed at 3.75% from the time the loan is received. Repayment is deferred for the first year; however, interest will accrue. The loan has a 30-year repayment term.

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Have any additional questions about taxes related to COVID stimulus payments? Feel free to give us a call at 609-953-1400.