@AmyC, thank you so much for your quick and detailed reply! That’s the most information anyone has given me so far. But I still have questions.
Your first link re AR covid treatment only talks about loan forgiveness under PPP, SBA, EIDL and CFAP. No mention of individual income tax treatment, unless I’m missing something.
You said that “Arkansas does not use the Federal AGI, it is state specific with no mention of the federal treatment.” How do you explain the language in the House Bill that states in Section 4: (underline mine)
“...that Arkansas should conform its income tax laws to the federal tax treatment of these loans, payments, and expenses to enable Arkansas taxpayers to receive the full benefit of the tax laws so that they can continue to provide jobs for Arkansans and avoid higher rates of unemployment and financial distress; and that this act is immediately necessary because the 2020 tax return season is underway and immediate conformity to the federal tax laws will assist the state with its economic recovery and will enable businesses to continue providing jobs that are necessary to the public peace, health, and safety.”
I’m still looking for something definitive in writing that says we cannot spread tax liability over three years. Arkansas doesn't use the federal AGI as a general practice or in this situation?
For federal treatment of repayment, you said that we can repay less than the full amount in any of the years and deduct that from the tax bill. Thank you for mentioning that! What would be considered an eligible retirement plan? My plan at work doesn’t accept direct contributions, only what I have withheld from my paycheck. Should I set up a regular IRA?
What’s concerning to me is that Arkansas COULD “benefit by taxing the money again” unless and until a policy is in place to change that. Of course, not directed at you, Amy, but... in what world is it okay to pay income tax twice on the same money? Retirement money, no less!
The last link you provided only addresses the 10% penalty not being assessed for early distributions under the CARES Act.
Thanks again, Amy!
