As farmers put together their financial information for 2020 in preparation for tax filing, there are some new issues to deal with. First, how do I count the stimulus payment? Kim Storen, with Storen Financial, says there is good news, you do not have to pay tax on that money.
“A lot of people think this was an advance on their refund or that they will have to pay tax on it, not true,” she said. “If you got the $1,200 stimulus check plus $500 for each child under 17, it is free money.”
She added that, if you qualified for it you get it and if your income was too high you did not. If, however, your income fell in 2020 from 2019, the year used to originally determine stimulus eligibility, and you now qualify, you can still get the payment.
For the next six weeks, Michigan Ag Today will be airing a special report examining different issues farmers will be facing as they prepare their taxes for 2020. The reports will air each Tuesday morning on MAT stations across the state.
If your farm took advantage of the Paycheck Protection Program (PPP) program, that is another story. Storen said the SBA said you did not have to pay tax on that money, ”but the IRS says you do.”
She said the IRS said that, if you get your PPP loan forgiven, then you cannot write off the expenses for which you used the PPP funds.
“So you either show the income and show the expense or you don’t show the income and don’t take the expense.”
Her advice, do not apply for PPP loan forgiveness now, but wait for Congress to fix the tax issue in 2021.
Another issue is the CFAP program. According to Storen, “Because the payment was price based, it is taxable in the year it was received.”
She added that it is pretty straightforward.
“It is taxable income for farmers.”
For more information, talk with your tax advisor, call Storen Financial at 317 .852.7000, or visit Storenfinancial.com
The Tax Tips series is made possible by First Farmers Bank and Trust.