Looking for accounting entry and 1040 entries for the payments received under the CARES Act this year

[tbduvall]

I am using Wave for my personal accounting and for my husband's business separately.  His business income is recorded on Schedule C of Form 1040 as a sole proprietorship.  I use TurboTax for my tax software.

We received payments under the Federal Coronavirus Relief Law (CARES Act), and I am trying to determine how it will affect my taxes.

I know that I will not owe income taxes on the cash and do not need to include it as part of your taxable income on my return.  I have read that the payment is technically being structured as an advance on a temporary, refundable tax credit, but I don’t really understand the impact of that.  Does anyone know exactly what the accounting entry for this would be? And what lines it will actually hit on my return?  Will it be like the tax credit I get under the ACA?

[Critter-3]

For my bookkeeping clients I am logging this as a LOAN not income to balance the books ... later when the forgiven amounts are realized I will make a counter entry reducing the payroll taxes and the loan account.  

[tbduvall]

But this is not business related.  These are funds that we received as individual and have no relation to payroll taxes.

[Critter-3]

If you are not talking about the PPP then what are you referring to ???    The unemployment ? 

[tbduvall]

The cash payment that was sent out by the IRS, $1,200 for adults, $500 (I think) for children.

We did get a PPP, but I'm not sure the AICPA has finalized their recommendations on that.

[Anonymous]

the AICPA has nothing to do with those Stimulus payments.  you are not doing financial statements.   the stimulus payments, the $1200 and $500.  received are non-taxable income.  even if you received too much it will not have to be repaid.  I certainly would not be making a bookkeeping entry for these. 

For any PPP loans even if the AICPA issues guidelines for accounting for them, how they say to record them for book purposes can be completely different from how they are treated for tax purposes. 

[Critter-3]

Per the IRS ...  https://www.irs.gov/coronavirus/economic-impact-payment-information-center

 

Reconciling on your 2020 tax return

Q66. Will I need to provide information or reconcile the Economic Impact Payment on my 2020 taxes wh...

A66. Keep the notice you received regarding your Economic Impact Payment with your 2020 tax records. These notices are mailed to each recipient’s last known address within 15 days after the Payment is made. The IRS will provide information on what actions you need to take when you file your 2020 tax return when they are available.

Q67. Is the Payment includible in my gross income? (updated April 24, 2020)

A67. No, the Payment is not includible in your gross income.  Therefore, you will not include the Payment in your taxable income on your Federal income tax return or pay income tax on your Payment. It will not reduce your refund or increase the amount you owe when you file your 2020 Federal income tax return.

A Payment also will not affect your income for purposes of determining eligibility for federal government assistance or benefit programs.

Q68. I received an Economic Impact Payment. Do I need to pay back all or some of the Payment if, bas...

A68. No, there is no provision in the law that would require individuals who qualify for a Payment based on their 2018 or 2019 tax returns, to pay back all or part of the payment, if based on the information reported on their 2020 tax returns, they no longer qualify for that amount or would qualify for a lesser amount.

For example, you received $500 for your child who, based on your 2018 or 2019 tax return, met the qualifying child requirements. That child turned 17 in 2020 and no longer meets the qualifying child requirements. You will not be required to pay back the $500.

Or, for example, you received $500 for your child whom you claimed on your 2018 or 2019 tax return. You do not claim the child on your 2020 tax return because the child’s other parent claims the child. You will not be required to pay back the $500 even if the child’s other parent claims $500 for the same child on his or her 2020 tax return. 

Keep Notice 1444, Your Economic Impact Payment, with your 2020 tax records. The IRS will mail Notice 1444 to your last known address within 15 days after the Payment is made.

[VolvoGirl]

Here's a whole bunch of questions for it.  The Stimulus Check will not be taxable when you file your return next year.  See Question #67

https://www.irs.gov/coronavirus/economic-impact-payment-information-center

[tbduvall]

HACKITOFF,

I don't think you understood. I did not say that the AICPA had anything to do with the stimulus payments.

I am doing financial statements, both personal and for the business.

Regarding the PPP, I understand that they are treated differently for accounting purposes and for tax purposes, that is why I am asking for both.

I'm sorry, but this just isn't helpful.

[Critter-3]

Not sure how the stimulus payment has anything to do with a personal financial statement ... it is not considered income but it is usable funds for paying bills if that helps.     

[VolvoGirl · Accepted solution]

It's free money.  Either account for it as Misc. or a Gift?

[tbduvall]

I'm just trying to account for the cash coming in.  Sorry, I know this is a bit odd. 

[Critter-3]

Make a new account in your system  ... call it anything you want ... gift, free money, IRS grant, tooth fairy donations....

[AskQuestion4]

As a married couple how do you list it on your tax return?  Is it taxable?

[ThomasM125]

Proceeds from stimulus payments and CARES related advances and grants are typically not taxable and do not need to be entered on your personal tax return. 

However, you will be asked to enter the amount of personal stimulus payments you received when you prepare your tax return in TurboTax to make sure you receive all of the stimulus payments you are entitled to.