As I stated previously, for businesses that received a Paycheck Protection Program (P3) loan that was canceled, it is not income for federal income tax purposes and you are allowed to deduct business expenses that you paid with PPP funds.
For North Carolina tax returns, PPP loan forgiveness funds are not considered income. However, you cannot deduct the amount of business expenses paid by these P3 funds, so this is an adjustment that must be made to the North Carolina tax return.
For those who have received a PPP loan, it is important to remember to ask for forgiveness or those PPP loans will turn into loans that you have to pay back. There are different deadlines for this forgiveness period, so contact now, if you haven’t already, the person who helped you acquire the PPP funds – for many of you it is your local banker. .
At the time of writing, it appears North Carolina is still looking to change its PPP loan law. Right now, it looks like it will stay the same as it started at the start of the year, meaning it’s an addition to North Carolina tax returns – and not “forgiven” as was the case at the federal level.
For 2020, there was a change in the tax law so that $ 10,200 in unemployment per person would be excluded from 2020 federal income tax returns, as long as income was $ 150,000 or less. This is another change that lawmakers in North Carolina are still working on and, again, it looks like it will stay the same, which was an addition to North Carolina’s tax returns.
A change in the child tax credit for federal returns 2021, there will be a monthly prepayment, starting in July of $ 250 per month (under 18) or $ 300 per month (under 6) . For children under 18 (rather than 17 under the previous tax law), the credit will be $ 3,000 per eligible child, instead of $ 2,000 under the previous tax law. For an eligible child under 6 years of age, the credit will be $ 3,600. This credit increase will be reduced when the taxpayer’s income exceeds $ 150,000 for spouses filing joint returns, $ 112,500 for heads of household returns, and $ 75,000 for spouses filing separate returns.
You can go to irs.gov, find the âGet Answers on the Advanced Child Tax Creditâ section and find the option to opt out or opt out of receiving monthly payments. You may prefer to receive the lump sum when you file your tax return as you have done in the past. If so, this is something you need to take care of now.
The IRS has sent letters to inform taxpayers of this change and the options that have qualified for the child tax credit in the past. If you don’t receive a letter, you can always go to irs.gov to check your options.
There is a change in expenses for business meals, restaurants, only for the years 2021 and 2022 at 100% deductibility. This does not apply to meals from prepackaged foods, such as those from grocery stores, convenience stores, pharmacies, kiosks, vending machines or other such businesses, or restaurants operated by the employer.
Remember, in these difficult times, please continue to support your local restaurants and other small businesses. Stay safe and healthy
The information in this article is general in nature and should not be used without first checking its applicability to your situation.
Mary Currie is a chartered accountant practicing in Rocky Mount.