Many businesses, individuals, and other entities on the Kenai Peninsula have received assistance from CARES Act funding. The same is true for municipalities across the nation. What all parts of the nation have in common is there is a consistent level of confusion regarding whether CARES grants and stimulus payments will be subject to federal income taxation.
To clarify the Kenai Peninsula Borough Assembly’s stance on the matter, they unanimously passed an ordinance on Tuesday, calling for Alaska’s Congressional delegation to put effort into enacting legislation that would “prevent federal pandemic relief funds from being subject to federal income tax.”
The IRS’ web site dedicated to answering questions regarding COVID grants offers details on what they currently know: “The receipt of a government grant by a business generally is not excluded from the business’s gross income under the Code and therefore is taxable… Generally, the receipt of loan proceeds is not included in gross income. However, if the government forgives all or a portion of the loan, the amount of the loan that is forgiven is generally included in gross income of the business and is taxable…”
With regards to individual stimulus payments, Mark Steber with Jackson-Hewitt Tax Services says to keep the forms that you may have received with your stimulus payments: “Keep that letter that came some time after your payments. If we have another round of economic stimulus payments, keep the letter that comes with those, too. When you start to do your tax return for 2020, you will need that information. If you’re eligible for more credit, you’ll be able to receive that as part of your tax filings in 2020. This will be particularly tricky come tax-time if you don’t have that letter and some way to remember how much money you have and to put that on your tax return. Your taxes could even be delayed if you put the wrong amount or if you, for some reason, have to adjust the amount of credit you received. The good news: if you received too much credit, you don’t have to pay that back.”
Copies of the resolution are being sent to Senators Lisa Murkowski, Dan Sullivan, and Congressman Don Young.