Author: Eric Buechler

Americans owe their third round of stimulus payments to the enormous American Rescue Plan Act of 2021. Among its $1.9 trillion of aid, the recent law also issued a couple of tax breaks with broad application.    

Businesses nationwide were allowed to avoid federal taxes for loans that they had taken out and that subsequently were forgiven by the government under the Paycheck Protection Program (PPP).

Many workers who lost jobs also were allowed to exclude the first $10,200 of unemployment compensation they received last year (in 2020). In effect, the law erased that amount from the taxpayer’s income and from federal taxes.  

But what happened in Washington, D.C., hasn’t happened yet in Saint Paul.  Businesses and their workers still owe income taxes on both those “rescues.” A bill authorizing both has been passed by the Minnesota House of Representatives. But a companion bill (SF263) has been bogged down in the Senate, which now has adjourned until early April.

The issue is “conformity,” or adjusting state law to reflect federal changes, Neal Anthony, a columnist for the StarTribune newspaper, notes.

Under the federal PPP, businesses obtain an emergency loan to help pay costs caused by the coronavirus epidemic. If they spend the funds correctly, the federal government forgives the loan and the business does not have to repay it.

Normally, those forgiven amounts of  PPP loans and the first $10,200 of unemployment compensation are taxable in Minnesota. So, unless the Legislature conforms state tax code to exemptions in the federal American Rescue Plan Act, Minnesotans will have to declare both as taxable income.

In fact, last Thursday (March 25), the Minnesota Department of Revenue issued a bulletin telling tax preparers how to add the unemployment compensation into their clients’ state tax returns.

To find expert guidance for planning and filing tax returns, contact EricJohn Ltd. owner Eric Buechler, who is an enrolled agent recognized by the Internal Revenue Service.

Minnesota’s tax collector is just fine with adding about a month to the tax filing season, now underway. The state Department of Revenue announced Friday that it is extending the due date for filing tax returns and paying any taxes until May 17.

The new grace period tracks with last week’s decision by the Internal Revenue Service to accept federal returns for another four weeks, until May 17, before charging any penalties for late filings. They had been due by the normal deadline, April 15.

 The IRS cited effects of the coronavirus epidemic on taxpayers in pushing back the date. So did Minnesota Gov. Tim Walz in a news release.

The Minnesota extension applies to income tax returns and payments for 2020, but it does not cover estimated tax payments for the 2021 tax year. The action was not surprising, because the state tax return draws on figures in the federal return.

Both Minnesota Revenue and the IRS still urge taxpayers to file as soon as possible. But, if a little extra time makes things easier, it’s now officially OK and penalty-free.

For expert advice and tax preparation, feel free to contact Eric Buechler, an enrolled agent and owner of tax service EricJohn Ltd.

By now, you’ve probably heard the timely taxing news. Reacting once again to the COVID-19 crisis, the Internal Revenue Service has extended the deadline for filing income tax returns by about one more month. The new due date is May 17.

But for now, taxpayers in Minnesota still can’t count on having another month to finish all of their tax chores for 2020.  That’s because the federal tax return is a starting point for their state  income tax returns and possibly for those in as many as 41 other states. The IRS postponement does not automatically push back their due dates.

 Generally, Minnesota does follow the federal lead.  Minnesota’s Department of Revenue did not immediately release any change in its April 15 deadline following  the IRS action on Wednesday (March 17).

Here are a few more details about the IRS extension:

• The extension is automatic. No forms or requests are necessary.
• Individual taxpayers can wait until May 17 to pay their federal income taxes for the 2020 tax year. That includes those filers who pay self-employment taxes. Any penalties or interest on amounts due will not begin until the same date.
• Taxpayers asking for a regular filing extension (with Form 4868) will have until Oct. 15 to turn in their returns. As usual, they also must pay income taxes by due date, which is now May 17.  
• The delay does not apply to any quarterly estimated tax payments for 2021 that are due on April 15, the IRS noted in its announcement.
• See https://www.irs.gov/newsroom/tax-day-for-individuals-extended-to-may-17-treasury-irs-extend-filing-and-payment-deadline

Minnesota Revenue has said it will assist individual taxpayers who cannot make tax payments or owe interest on late payments for reasons related to the coronavirus epidemic.

Eric Buechler, owner of EricJohn Ltd., can offer expert advice about filing 2020 state or federal income taxes. He is an enrolled agent recognized by the IRS.

Election contributions were flowing in Minnesota in 2020. Did you get into the thick of it with a contribution to your favorite candidate? Hope you kept the right receipt.

Politically active Minnesotans can find at least some reward for their donations in state codes. The Political Contribution Refund promises to repay as much as $50 (individual) or $100 (married couple) for gifts to Minnesota office-seekers and political parties in the state last year.

To claim it, you need only to be a registered voter, or just be eligible to become a voter. Of course, you also must have given one or more contributions during 2020.

Here’s the caution about the receipt. To back up their donations, contributors must submit the original receipt – Form EP-3 – issued by the candidate or party. (No, even a handwritten thank-you from the candidate won’t work.)  Minnesota Department of Revenue warns that, without that EP-3, “We will send your (application) form back to you.”   

Let us mention one other important detail. Taxpayers should not send in the Form PCR with an income tax return. Minnesota Revenue says that could delay processing of both the refund and the return.  See the form with its instructions at https://www.revenue.state.mn.us/sites/default/files/2019-12/pcr_20.pdf

The instructions give some specifics about the state offices and political organizations qualifying for contributions and the refund.

The due date for the 2020 Form PCR is April 15, 2021, the same day as for income tax returns. By the way, the PCR for tax year 2021 also is already online at the Minnesota Revenue site.

 Eric Buechler, owner of EricJohn Ltd., can dig deeper into this Minnesota refund or take on more complicated issues in preparing your state or federal taxes.   

Relax, early filers!  You might be ready for the IRS, but the IRS is not yet ready for you.

Taxpayers itching to file their 2020 tax returns at the first possible moment will have to wait about two weeks longer than usual this year.

The Internal Revenue Service has set Feb. 12 as the first day of the 2021 tax season. That’s when the agency will start accepting and processing an estimated 150 million federal returns. Last year’s kick-off came on Jan. 27.

Tax returns will be due on April 15, according to an IRS announcement. That is the normal deadline date.

The IRS says that it needs time to program its computers for tax-related changes in the latest law sending stimulus payments and other benefits to Americans. President Trump signed the legislation on Dec. 27, 2020.

We should note that many people using tax preparation software can send returns to those software companies right away. However, the returns actually will not be submitted to the IRS until Feb. 12.

As in the past, the IRS advises electronic filing, and direct deposit of refunds. The average refund from 2019 returns was more than $2,500, according to the agency.  

As tax season opens, be sure about your tax situation. Contact Eric Buechler, owner of EricJohn Ltd., for expert advice and preparation of federal and state returns. Eric is an enrolled agent recognized by the IRS.

Small businesses were not left behind in the latest stimulus package. The government again is ramping up “PPP”, the Paycheck Protection Program.

It was revived just before year-end with 284 billion bucks of support for small employers. Among other improvements, Congress managed to clear up a tax dilemma that had troubled many of those companies.

In short, the original PPP has been intended to help businesses reeling from the economic effects of the coronavirus epidemic. It’s a wide-ranging relief measure. The federal government provided $525 billion to fund 5.2 million loans in the first version last spring.
The loans went out at 1 percent interest, with no other fees. But, most of all, they were forgivable. If the business used the money within PPP guidelines, the feds simply wiped away repayment. Of course, a vital use was payroll for employees.

Now, here’s where Congress fixed a tax mess from the initial program.  The money from loans that had been forgiven clearly came tax-free, according to the law. But the Internal Revenue Service was not allowing businesses to deduct expenses paid from those forgiven PPP funds. In the improved PPP, Congress explicitly stated that any forgiven funds simply will not appear in gross income on tax returns. Any spending with them also will not affect business deductions and will not reduce workforce-related tax credits.

Let us offer a rundown of some of the more important features of what we will call “PPP2”:

• Sizes of eligible businesses 500 or fewer employees; if it’s an initial PPP loan; 300 workers for businesses seeking second loan.

• Expanded types of businesses: Included in PPP2 are sole proprietors, independent contractors, self-employed workers, seasonal employers, (generally operating no more than seven months a year) and certain types of non-profit organizations not covered in the prior round.

 • Financial losses: For a second loan, a 25% decline in gross receipts in any quarter in 2020 compared to the same one in 2019.

• Maximum loan in new round: $2 million. Business still must establish necessity for loan.

• Simplified forgiveness app:  Businesses that obtained loans smaller than $150,000 can use a single-page application for forgiveness. The U.S. Small Business Administration is required to produce the application this month (January 2021).

• Types of expenses allowed:  Expanded to include business software, unreimbursed expenses to repair property damage from civil unrest that happened in 2020, costs of protecting workers, especially from COVID-19, and some expenses owed to suppliers, experts at National Law Review note.

The new PPP is authorized until March 31, 2021. Like the latest stimulus package, it was part of the enormous Consolidated Appropriations Act of 2021. To decide how PPP2 fits your small business, feel free to contact Eric Buechler, owner of EricJohn Ltd. and an enrolled agent recognized by the IRS.

Here’s some good news for generous taxpayers who will not be itemizing deductions on this year’s federal tax returns. They will be able to deduct as much as $300 in cash donations to their favorite charities with ease on their 2020 returns. One important note:  This new deduction is limited to cash donations; gifts of household goods, clothing, stocks, etc., don’t qualify.

This is a change from past years. Charitable contributions were one of several types of spending that were grouped together as “itemized deductions.” The entire group had to reach a certain level before it made sense to claim the deduction.  Most people took the simpler “standard deduction” instead. In fact, the Internal Revenue Service figures that 87 percent of taxpayers went with standard deduction in 2018, the latest figures available.

Congress placed the new tax break in its coronavirus relief package (the CARES Act) earlier this year.  “So, if someone makes a cash donation to a qualifying charity before the end of 2020, they can get a deduction of up to $300,” said Edward T. Killen, the IRS commissioner for tax-exempt entities. “It will be easy to report when they (taxpayers) fill out their Form 1040 in 2021,” he promised in an announcement.

The new deduction is limited to $300 per return. From the taxpayer’s standpoint, it lowers taxable income, leading to savings of taxes that are due. Of course, some taxpayers who have larger charitable deductions still can benefit by itemizing as in the past. However, they cannot double-dip by claiming the $300 tax break as well.

One other objective of Congress, besides taxpayer relief, was to encourage more donations to tax-exempt organizations during the crisis caused by COVID-19.

Currently, the tax break for charitable contributions is available only for the 2020 tax year.  Donations must be made by Dec. 31, the IRS noted. For more information, check IRS Publication 526 dealing with charitable contributions.

Minnesotans have been able to subtract some charitable contributions without itemizing on their state income tax returns in previous years, but that deduction kicked in after $500 worth of donations.  

With tax season on the horizon, contact EricJohn Ltd. owner Eric Buechler for expert advice about individual or business tax returns. He is an enrolled agent recognized by the IRS.

Thursday (Oct. 15) is the last deadline for 2019 income tax returns. It really only affects those who asked to delay filing earlier.

For those taxpayers, here’s your reminder. If you applied for an automatic extension to file with the IRS around Tax Day – which, you’ll remember, was moved from April 15 to July 15 because of the coronavirus epidemic – your time is almost up. The 2019 return is due to the Internal Revenue Service by 11:59 p.m. on Thursday.

Most likely, you estimated and paid an amount of income tax back then. Now is the time to add in the rest of the actual amount.  You’ll avoid penalties if you already have paid at least 90% of the total tax due for 2019. There may be exceptions to the deadline for taxpayers who live overseas or who are serving in the military.

One note for Minnesota taxpayers. The state Department of Revenue has said it will consider abating penalties or interest due if any part of taxes were unpaid due to situations involving COVID-19. That includes job losses or layoffs because of the epidemic.

Of course, EricJohn Ltd. can help taxpayers meet federal or state tax deadlines, as well as advise on wise tax moves