coronavirus

Student Loan Interest: Can You Deduct It On Your Tax Return?

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The economic impact of the novel coronavirus (COVID-19) is unprecedented and many taxpayers with student loans have been hard hit.

The Coronavirus Aid, Relief and Economic Security (CARES) Act contains some assistance to borrowers with federal student loans. Notably, federal loans were automatically placed in an administrative forbearance, which allows borrowers to temporarily stop making monthly payments. This payment suspension is scheduled to last until September 30, 2020.

Tax deduction rules

Despite the suspension, borrowers can still make payments if they choose. And borrowers in good standing made payments earlier in the year and will likely make them later in 2020. So can you deduct the student loan interest on your tax return?

The answer is yes, depending on your income and subject to certain limits. The maximum amount of student loan interest you can deduct each year is $2,500. The deduction is phased out if your adjusted gross income (AGI) exceeds certain […]

California Tax Updates for May 21st

FAQ

Update 1:

Do you still have questions about how California helps those affected by the novel coronavirus (COVID-19) pandemic? The CA Franchise Tax Board (FTB) has just updated its frequently asked questions (FAQs) by adding a section on the individual status letter (also known as a veteran affairs status letter). These letters help individuals get student loans or Veteran Affairs financing. They also show third parties such as employers that the letter holder has no outstanding CA income tax obligations. If you have questions, please contact your Linkenheimer CPA. You can also learn who may obtain an individual status letter and how, and get answers to a wide variety of questions by visiting the FTB here: https://bit.ly/2AuMxwb 

Update 2:

Are you part of the California gig economy? The CA Franchise Tax Board (FTB) has updated its gig economy webpage, which it created to provide information to those who use platforms such as Uber, Lyft, Airbnb and […]

By |May 21st, 2020|ca, CA tax, california, ftb|0 Comments

Did You Get An Economic Impact Payment That Was Less Than You Expected?

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Nearly everyone has heard about the Economic Impact Payments (EIPs) that the federal government is sending to help mitigate the effects of the coronavirus (COVID-19) pandemic. The IRS reports that in the first four weeks of the program, 130 million individuals received payments worth more than $200 billion.

However, some people are still waiting for a payment. And others received an EIP but it was less than what they were expecting. Here are some answers why this might have happened.

Basic amounts

If you’re under a certain adjusted gross income (AGI) threshold, you’re generally eligible for the full $1,200 ($2,400 for married couples filing jointly). In addition, if you have a “qualifying child,” you’re eligible for an additional $500.

Here are some of the reasons why you may receive less:

Your child isn’t eligible. Only children eligible for the Child […]

By |May 20th, 2020|individuals, New Tax Laws, single family|0 Comments

Fortunate Enough To Get A PPP Loan? Forgiven Expenses Aren’t Deductible

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The IRS has issued guidance clarifying that certain deductions aren’t allowed if a business has received a Paycheck Protection Program (PPP) loan. Specifically, an expense isn’t deductible if both:

  • The payment of the expense results in forgiveness of a loan made under the PPP, and
  • The income associated with the forgiveness is excluded from gross income under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.

PPP basics

The CARES Act allows a recipient of a PPP loan to use the proceeds to pay payroll costs, certain employee healthcare benefits, mortgage interest, rent, utilities and interest on other existing debt obligations.

A recipient of a covered loan can receive forgiveness of the loan in an amount equal to the sum of payments made for the following expenses during the 8-week “covered period” beginning on the loan’s origination date: 1) payroll costs, 2) interest on any covered mortgage obligation, 3) payment on any covered rent, and 4) covered utility payments.

The law provides that any forgiven loan amount “shall be excluded from gross income.”

Deductible expenses

So the question arises: If you pay for the above expenses with PPP funds, can you then deduct the expenses on your tax […]

By |May 18th, 2020|business, New Tax Laws, small business|0 Comments

Subchapter V: A Silver Lining For Small Businesses Mulling Bankruptcy

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Many small businesses continue to struggle in the wake of the coronavirus (COVID-19) pandemic. Some have already closed their doors and are liquidating assets. Others, however, may have a relatively less onerous option: bankruptcy.

Although bankruptcy obviously isn’t an optimal outcome for any small company, there may be a silver lining: A new bankruptcy law — coupled with an under-the-radar provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act — has made the process quicker and easier. It may even allow you to retain your business.

New law made better

The law in question is the Small Business Reorganization Act of 2019. That’s right, it was passed just last year and took effect on February 19, 2020, about a month before the pandemic hit the country full force.

The Small Business Reorganization Act added a new subchapter to the U.S. bankruptcy code: Subchapter V. Its purpose is to streamline the reorganization process […]

By |May 7th, 2020|business, New Tax Laws, small business|0 Comments

California Tax Updates for May 7th

Pharmacist with surgical mask

Update 1:

Are you selling goods in California? Now that so many people are looking for alternate ways to make an income due to the novel coronavirus (COVID-19) pandemic, selling goods from home is attracting a lot of people. Depending on the details, you may need a seller’s permit. The CA Dept. of Tax and Fee Administration (CDFTA) has issued an updated publication entitled “Do You Need a CA Seller’s Permit?” Generally, if you make three or more sales in a 12-month period, you are required to have a seller’s permit, even if the sales were made through internet auctions houses or websites or offered through online classified ads. Here’s more from the CDFTA: https://bit.ly/353Cd9v

Update 2:

San Francisco will require public health emergency leave for some employees during the novel coronavirus (COVID-19) pandemic. The federal Families First Coronavirus Response Act provides sick leave to employees who are unable to work or telework due to […]

By |May 7th, 2020|business, employer|0 Comments

The CARES Act Liberalizes Net Operating Losses

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The Coronavirus Aid, Relief, and Economic Security (CARES) Act eliminates some of the tax-revenue-generating provisions included in a previous tax law. Here’s a look at how the rules for claiming certain tax losses have been modified to provide businesses with relief from the novel coronavirus (COVID-19) crisis.

NOL deductions

Basically, you may be able to benefit by carrying a net operating loss (NOL) into a different year — a year in which you have taxable income — and taking a deduction for it against that year’s income. The CARES Act includes favorable changes to the rules for deducting NOLs. First, it permanently eases the taxable income limitation on deductions.

Under an unfavorable provision included in the Tax Cuts and Jobs Act (TCJA), an NOL arising in a tax year beginning in 2018 and later and carried over to a later tax year couldn’t offset more than 80% of the taxable income for the carryover year (the later tax year), calculated before the NOL deduction. As explained below, under the TCJA, most NOLs arising in tax years ending after 2017 also couldn’t be carried back to earlier years and used to offset taxable income […]

By |May 4th, 2020|business, deduction, New Tax Laws|0 Comments

Adjust Your Expectations Of Business Interruption Coverage

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A natural place to turn when disaster strikes is insurance. The very reason you pay premiums and deal with the paperwork is to have these risk management policies in place when necessary. But, when it comes to business interruption coverage, you may have to adjust your expectations if you intend to file a claim because of the novel coronavirus (COVID-19) pandemic.

Differing views

Business interruption insurance generally provides cash flow to cover revenues lost and expenses incurred while normal operations are suspended because of an applicable event. So, many business owners are now asking an unavoidable question: Is the COVID-19 pandemic an applicable event?

Many insurers are saying no, claiming the “force majeure” legal defense. This refers to situations in which unexpected external circumstances prevent a party to a contract — in this case, the insurance company — from meeting its obligations.

Insurers are also citing policy language that stipulates coverage applies only when a policyholder suffers a loss of income as a result of physical loss or damage to covered property. COVID-19 doesn’t qualify as a physical loss, they argue. In addition, insurers contend their policies don’t cover loss of income because of market […]

By |April 29th, 2020|business, New Tax Laws|0 Comments

IRA Account Value Down? It Might Be A Good Time For A Roth Conversion

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The coronavirus (COVID-19) pandemic has caused the value of some retirement accounts to decrease because of the stock market downturn. But if you have a traditional IRA, this downturn may provide a valuable opportunity: It may allow you to convert your traditional IRA to a Roth IRA at a lower tax cost.

The key differences

Here’s what makes a traditional IRA different from a Roth IRA:

Traditional IRA. Contributions to a traditional IRA may be deductible, depending on your modified adjusted gross income (MAGI) and whether you (or your spouse) participate in a qualified retirement plan, such as a 401(k). Funds in the account can grow tax deferred.

On the downside, you generally must pay income tax on withdrawals. In addition, you’ll face a penalty if you withdraw funds before age 59½ — unless you qualify for a handful of exceptions — and you’ll face an even […]

By |April 28th, 2020|investment, ira, New Tax Laws, retirement, roth ira|0 Comments

California Tax Updates for April 22

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Post 1:

The California Franchise Tax Board (FTB) has posted frequently asked questions (FAQs), related to tax relief due to the novel coronavirus (COVID-19). The list addresses topics such as: information returns, extensions to file; the postponement periods of March 12 through July 15, 2020; statutes of limitations, and more. Even more recent additions to FAQ topics are: nonresidential nonwage withholding and real estate withholding. Check the latest FAQ here: https://bit.ly/3e2q9cA or contact us with questions.

Post 2:

An extension of time has been issued for California taxpayers to accomplish certain tasks, from the CA Franchise Tax Board (FTB), due to the novel coronavirus (COVID-19). They include claiming a refund, filing a protest of a notice of proposed assessment (NPA) with the FTB, and filing an appeal or petition for a rehearing with the Office of Tax Appeals. The extension also gives the FTB extra […]

By |April 22nd, 2020|california, ftb, irs, New Tax Laws|0 Comments