Edsel

Thanks for the correction Judy. I was misinformed by a radio tax program where people called in to have their questions answered. If I understand you correctly, the measurement of stimulus versus eligibility goes in only one direction. If people are overpaid then they don't have to pay it back. But if they are shortchanged, they will be entitled to a refundable credit on their 2020 return.

I'm told it will be similar to the ACA credit/tax. Too much ACA benefit results in a tax, too little ACA benefit results in a refundable credit. The amount of stimulus being forwarded now is calculated based on 2019 tax return (or 2018 tax return if 2019 is unavailable). As part of the processing of the 2020 tax return next year, the income criteria on the 2020 tax return (no other year) will be measured and compared to the stimulus payment. If stimulus was overpaid, the difference becomes a separate tax under "Other taxes." If stimulus was underpaid, the difference becomes a refundable credit. It is expected that the overwhelming majority of taxpayers will have neither a tax or a credit.

I read a post from CBSLee - seems like he has been informed that an applicant cannot receive BOTH a forgiveable loan AND a payroll tax credit. Any more on this? A good readable link, maybe?

Yes, listen to the banks because loan terms change every day. The banks are just as befuddled as we are. And they will not be telling their applicants how to report this on their taxes.

I'm getting these calls too - thank goodness many of them have already received. This is an elementary question which has probably been addressed somewhere in the hundreds of posts on this subject: Under what circumstance can a non-filer qualify if they have been claimed as a dependent?

It makes sense that the expenses matched with the loan forgiveness should not be deductible. That lends credence to showing zero revenue. The question becomes: Is the associated amount left over and NOT forgiven deductible? I would think so. Or what about the obverse - If the amount forgiven EXCEEDS the associated expenses, then is the excess taxable? If we're wondering how the forgiven amount can exceed the expenses - it probably cannot. However, also associated with the payroll expenses is a large payroll tax credit. The amount forgiven PLUS the payroll tax credit could easily exceed the associated expenses.

Assume $150,000 in costs eligible for loan forgiveness, and for whatever reason the entire forgiveness is $160,000 and 941 payroll tax credits are $70,000. In other words there is an $80,000 windfall. Which of the above describes treatment on a 2020 tax return? a) Revenue of $230,000 costs of $150,000 for a taxable profit of $80,000. b) Revenue of $0, costs of $0, "Other Income" of $80,000 for a taxable profit of $80,000. c) Revenue of $0, costs of $0 for no taxable profit because the intent of the loan forgiveness stimulus was to not tax the recipient.

Can we conclude that people with 1099s will not qualify for the PPP (or anything else)?

I've looked through 3-4 pages of posts and nothing about 1099s jumps out. Does the PPP program (or anything else) include people with no payroll but issue 1099s as compensation?

Thanks Fresno State guy! I think you have hit the nail on the head. The incidents I remember had no employee vesting. Either entirely funded by employer, or later rolled or transferred into a subsequent 401kl with another employer.

Yes, Randall it seems incredible. In the days when you still had these fees reportable as a 2% deduction, these custodians would have to report their fees on the back of their tax statements (1099-DIV or 1099-B). I would see these things (not associated with a retirement account) every year. A typical statement would have $500 as ordinary dividends and $500 as LTCG distributions, and then have $1700 in custodial fees. The taxpayer would think they were doing a great job because the portfolio would be up $5000. However, the LTCG distributions is a true reflection of what really comes out that isn't fluff - and in a bad year the fluff goes away. It is not uncommon over a 30-year period for a custodian to make more $$ than the participant - if the employer's match is subtracted.

Hi Gail - it seems there are two separate transactions. I'll address the sale to unrelated party only. There is a code section for small business stocks that exempts or postpones the gain if the company qualifies. I dunno what it is, maybe 1222 or something like that. The smart folks on this board will jump in and tell us. I don't know what to make of the related party sale - but it sounds like it might not even be an arms-length transaction.

Employees (at least those who can think straight) enter and fatten up their 401K retirement accounts. A great deal. Well...not entirely. Custodial Fees (on top of mutual fund fees) are heavy and aggressive, and the only thing that prevents the 401k from being less attractive is the employer match - enough to overwhelm the high fees. After the employee retires or quits, and the employer match stops, the real character of the vehicle is revealed. I know people who have retired/quit and five years later they haven't touched the money, yet their balance is no better than it was five years thence. Disclosure of fees hasn't helped a bit since the regulation was adopted a few years ago. It is thus an economic recommendation I give to my customers - get OUT of the 401k, and rollover into a conventional IRA, where hopefully their wealth can grow. However, I'm finding that there is a snag!! The 401k plan is written in such a way that if a participant rolls over the funds into any other vehicle, it is TAXABLE. My contacts in the investment community tells me it all depends upon how the 401k plan is written as to whether the rollover is taxable or not. I am not aware of anything in the Code or Regs that stops free movement in rollovers - and as long as the taxpayer leaves his hands off of it, a rollover should be tax free. If the creators of a 401k plan can make an outbound rollover taxable at their own choosing, how can they get away with it?? Taxability should be defined by the IRS - not by custodians of funds.

I'm back to the "qualified" wages. Thanks, Medlin, for sending your suggestion my way. Even after reading this, the language is so stilted and circular that I don't know what wages qualify for the credit. Form 7200 is really for an "advance" credit and only exists when the credit is anticipated to be more than the taxes themselves. Maybe the example in the instructions is clear enough. A credit is available (on the 941) of 50% of "qualified wages" Emphasize this is a credit and not a deduction. Payroll taxes (and deposits) for the 2nd qtr are $8,000 and the credit is $5000. This results in an overpayment and the future payroll tax deposits may be reduced by $5000 to take advantage of the credit. Form 7200 is not appropriate. Payroll taxes (and deposits) for the 2nd qtr are $8,000 but this time the credit is $10,000. Again, the overpayment of $8000 can be applied to future tax deposits, but this still leaves $2000 on the table for the employer. Form 7200 is now filed to claim the extra $2000, and should result in a cash refund. No problem with the Form 7200, but still stuck on what qualifies as "qualified wages." Seems to be a double threshold - one for companies with up to 500 people, and another for companies with up to 100 people.

Thanks to all. It was not as easy as it sounds to "google up" and search for the free fillable forms. Some of them are "free" like TurboTax is "free." The least little thing you enter forces you to buy a "premium version." Others are free with a paid subscription. Still others are free but require you to provide login credentials with an e-mail address, after which you get bombarded with spam that you have to delete every day. Thanks to friend I now have a version (which will change next calendar quarter). Ironically, it comes from Papa Joe's irs website, but does not come when you do a conventional "search" for forms. Perhaps Dumb I are - I won't argue with anyone who believes that. But not as Dumb as it first may have appeared.

Lion, you're one of my favorites. I'm lucky in the sense that there is very little tax work going on in my life. Postponed quite a bit until June or whenever this virus thing lets up. Best wishes.

Hello my friend from CT - It must be annoying to those of us who are well-versed to read questions from people like myself who ostensibly do not do the least bit of research on our own. A probable misuse of what this forum is intended for. I lean, perhaps unfairly, on other members to minimize problems in reading material. There are a couple of factors which can send me to forum when dealing with reading. Let's take this CARES Act that you wish for me to read: Have you read the act? It is several hundred pages long. If I can ask a question on a forum such as this, I will do so. Even if I had the act in front me for 24 hours, I could not understand the language written by legislative legal assistants who try to leave no stone uncovered in their verbose styles. Even still, their writing will invite "technical corrections". Lion, you are great and helpful member and I would not provoke you for any reason. Sometimes "reading the act" will work for me, but often it will not.

Thanks for this Dan. The aforementioned credit is 50% of wages for "qualified" employees. That's where I'm stuck. Tax jargon uses the word "qualified" to avoid having to tell you more.

Thanks for responding Grandma. I am a Drake user.

This is off-topic, but some of you may find welcomed relief from the cares of the virus and the pressure placed on us by stilted reading of the CARES act and other mind-bending storms of the day. Many of us attended Rita's gathering a couple years ago - I was very happy to meet many of you in person. In her area of the country there is a unique natural phenomenon. Probably very familiar to Rita, but for the rest of us? So unique there isn't any more of it anywhere in the world. Crab Orchard Stone. So-named from the small village which in days past grew several groves of crabapple trees. The stone is multi-colored sandstone - predominantly rose-colored, but with gorgeous streaks of blue and other colors. It is found in layers of limerock/sandstone in a small area near the town. And not found anywhere else on earth. Several houses in the area are built with this, compiling cut stone upon stone. Sandstone is so gritty it can be broken in two with your bare hands. But this stone can be shaved into very thin siding for houses as well as simply stacked one upon another. Houses that use this siding showcase streaks of colors - not vivid but quite pastel. In spite of being easily broken, this sandstone is geologically indestructible. Nothing erodes it - not rain, not wind, not acid, nor any pollutants. The houses built with this look just as beautiful as when first built. Even the huge limestone caves are formed because rain will erode limestone and leave the sandstone intact. There are more limestone caves in Kentucky, Tennessee, and North Alabama than the rest of the world combined. Crab Orchard Stone was discovered about 100 years ago, and commercial mining began in 1926-27. It was sent all over the world, but nowhere can it be seen in greater abundance than a 30-mile radius of the town. By 1961 it was felt that the availability of the stone was becoming depleted. One of the mines still exists, but the stone is now harder to find, and harder to reach, thus the mining process is not as economic as in days gone by. The small town of Crab Orchard is easily seen from I-40, stretching narrowly for about a mile parallel to the interstate. Next time you're in Tennessee and travel from Knoxville to Nashville, you can't miss it in daylight. And now you will know what it is known for.

Is there a fillable .pdf form 941 available without having to pay for it? Sometimes these fillable forms are available on irs.gov - sometimes not I suppose.

Among the hundreds of posts, there may already be one that exists on this topic. If so, please indulge. What is this "payroll tax holiday" in 200 words or less. Do the payroll taxes just go away, or does the company simply have longer to remit them? If the latter, it would appear the employer could be painting themselves into a corner.

Please disregard. CBSLEE has a great post just below.

There may be other posts - if any one of us takes the time to read each one (there are hundreds on this subtopic alone). But Congress passed Public Law 116-127 on March 18th, and it deals with various business tax credits. It is several dozen pages long and extremely verbose with stilted legal language. Can anyone point me to a good "plain English" interpretation? I have several links to the law itself as passed by Congress.

...if they ever pass it. But it will happen, or rather "something" will happen. Even though it will most likely be filled with goodies, I suspect it will be a train wreck for us having to deal with it. I keep hearing about payroll tax holiday. No rush to do this until it becomes official, but maybe someone will post a (not too lengthy) synopsis of what is in the stimulous that will affect us. Often Judy puts a sticky post containing salient features.