American Rescue Plan Act (ARPA?)

[SecondCor521]

DSIL has outstanding student debt under the Federal program. This bill eliminates tax on forgiven student loans thru 2026. As I understand it, the President can forgive up to $50K by executive order. Has anyone heard if such an order is likely?

Nobody knows, it's all speculation about the future.

Technically, the President can't do it himself. But many believe he can direct the Secretary of Education to do so via an executive order.

The $50K amount is what some in Congress are calling on the President to do. The President seems to prefer about $10K through executive order, with any larger amounts being done through law.

I think the removal of taxation of forgiven student loans makes it more likely, because it is more palatable to do so without the taxation of the forgiven amounts.

The logical thing for people like your DSIL to do is be mindful of these potential laws and be strategic about whether and when to pay them down or pay them off. I think there are lots of people with student loans who are holding off on paying them in hopes that either the $10K or $50K or something will happen in the next few years.

 

[FANOFJESUS]

What cliff are you referring to? The ACA subsidy cliff is gone.
KFF has updated their ACA subsidy calculator with the changes in relief plan.
https://www.kff.org/interactive/subsidy-calculator/

Thank You
I am taking gains this year. Looks like about 52.6k is the top of the 12% bracket. Does that look right?

 

[unclemick]

I LOVE big government. As a thirty graduate of the 'Space Program', working with a lot of double dipper retired military folks and USDA including CRP on The Farm the government is my pal. And thanks to Bogle's Folly' I ER'd at age 50.

The age we live it is truly great - in spite of the fact I love to whine and act Curmudgeony.

Heh heh heh - I fully expect the new act will have it's fair share of hits and and misses, unintended consequences, etc. That's life.

P.S. Lest I forget my good buddies at the IRS helping me with my post 70 1/2 RMD. Makes me feel warm and Curmudgeony.

 

[Yoheadden]

To clarify all the relief acts in my own mind I looked them up:

• CARES Act, March 2020, $2.2T, $1200 checks
• Omnibus Appropriations 2021 (COVID portion), December 2020, $0.9T, $600 checks
• ARP Act, March 2021, $1.9T, $1400 checks

So a cool $5T in extra deficit spending = 5 years of pre-COVID deficits all in one year.

Not to mention all of the additional funding for unemployment benefits.

 

[PaddyMac]

I have not done our taxes for 2020 yet because I was waiting for legislation but I sent in $30,000 in estimated tax payments because toward the end of the year I made a boatload in biotech and knew I was going to have to pay back $11,000 in ACA subsidy.

Are you saying I just got a freebie?

Yes, I believe so. I was in the same boat – looking at having to repay over $9K in subsidies. So I bought a tricked-out Mac Pro last December as a write off to get back under the cliff (I did need a new computer, having said that). But now I've decided to depreciate it over 5 years and spread out the deduction. (We will have to update our slogan "Thanks Obama" to "Thanks Joe" now! ).

 

[Surewhitey]

My CPA hasn't filed them yet, he was waiting till the stimulus checks were sent before filing 2020 where we had a large, disqualifiing, jump in income. How fortunate, I'll talk to DW about how to share this windfall.

Same here (except for the "my CPA"). Just showing up in the bank account. Time to file the taxes!

 

[ShokWaveRider]

Well we got our $2,800 yesterday, pretty efficient I think. HOWEVER....... Our Tax bill this year is $2,803. In one day, out (to the same place) 1 month later. We donated the last $1,200 to local charities. This time I really will send it back to pay our 2020 taxes.

 

[meleana]

Just read an article that says first $10,200 of 2020 unemployment benefits would be exempted from federal income. Geesh....what about all the people who already filed their returns and paid someone to do it? Now have to file an amended return and likely pay an additional fee.

Nothing amazes me anymore in regards to how much of a mess our government can create.

Leave it to the government! I did my son’s tax return and though he owed a little money we filed it right away to get it over with. Yes- he was on unemployment for a while and paid taxes and now we have to wait and see what they will do.

My hope is the IRS will be able to just pull the unemployment and income info. from the filed returns and send out automatic refunds. Why shouldn’t they be able to do this?

Would be much better than a ton of people having to amend and pay a fee to do so on top of it. In fact- in that case the amended returns fee should be waived.

 

[MRG]

Same here (except for the "my CPA"). Just showing up in the bank account. Time to file the taxes!

This may be his last year, his value add seems diminished over the last couple years.n

 

[SecondCor521]

My hope is the IRS will be able to just pull the unemployment and income info. from the filed returns and send out automatic refunds. Why shouldn’t they be able to do this?

The problem is that this particular provision in the law affects AGI, which in turn affects a huge number of other items on the federal return, as well as probably the beginning point for state returns. There really is no practical way I can see for the IRS to make all of the necessary adjustments correctly for all affected taxpayers in any sort of reasonable time frame.

For those who have not yet filed and are affected by this, the IRS has published a procedure for how to enter it on the 2020 return. States still need to decide if they're going to go along with this exclusion or not. Tax prep software is being rewritten now to handle the exclusion.

For those who have already filed and are affected by this, the IRS has asked people not to file an amended return just yet. Not sure what they still need to figure out, but that's what I've read.

 

[harley]

As someone who files at the last minute every year, I don't see the problem. Procrastinators rule!

 

[frank]

if I remember the 1040x is a lot more work than the original and it has to be mailed in. any changes been made to that in the past while? I filed my grandaughter's taxes and she got unemployment, was wondering if filing a 1040x woulld be worth the hassle.

 

[Leo1277]

To clarify all the relief acts in my own mind I looked them up:

• CARES Act, March 2020, $2.2T, $1200 checks
• Omnibus Appropriations 2021 (COVID portion), December 2020, $0.9T, $600 checks
• ARP Act, March 2021, $1.9T, $1400 checks

So a cool $5T in extra deficit spending = 5 years of pre-COVID deficits all in one year.

It's worse than that, according to https://www.thebalance.com/us-deficit-by-year-3306306, counting backwards from 2019, your $5T is roughly the sum of deficits of the last 7.5 years. If this happened to a normal citizen, we would ask them to go to debt counseling. I have a hard time imagining how this can end well.

 

[Nightingale9]

I would like to share a trick I am using in 2021. 2021 happens to be the year my wife and I both turn 72, so it’s our first RMD year. Our normal size RMD would take us over $160,000 and disqualify us from obtaining a Rescue credit. (We are already disqualified for 2019 and 2020.) But we will only take part of our RMD in 2021, to stay under $150,000 AGI in 2021, and take the balance in 2022 before April 1. You can only take advantage of this delay in your first RMD year, so we lucked out that ours is 2021. This trick also enables us to delay the IRRMA increase by one more year. Life is good.

 

[SecondCor521]

if I remember the 1040x is a lot more work than the original and it has to be mailed in. any changes been made to that in the past while? I filed my grandaughter's taxes and she got unemployment, was wondering if filing a 1040x woulld be worth the hassle.

Yes. The IRS is accepting e-filed 1040x for 2019 as long as the original 2019 return was e-filed. I expect them to announce that the same holds true for 2020. Stay tuned.

I would like to share a trick I am using in 2021. 2021 happens to be the year my wife and I both turn 72, so it’s our first RMD year. Our normal size RMD would take us over $160,000 and disqualify us from obtaining a Rescue credit. (We are already disqualified for 2019 and 2020.) But we will only take part of our RMD in 2021, to stay under $150,000 AGI in 2021, and take the balance in 2022 before April 1. You can only take advantage of this delay in your first RMD year, so we lucked out that ours is 2021. This trick also enables us to delay the IRRMA increase by one more year. Life is good.

This works. But remember you and your wife will also need to take an RMD in 2022. So the remainder of your 2021 RMDs and your 2022 RMDs both in 2022 will result in a pretty high income for you. It still may be good planning, but its something you should be aware of.

 

[MichaelB]

<mod note> Multiple posts deleted that were snarky or getting into politics. Please keep the discussion focused on how this affects us as individuals and what actions we should consider.

 

[target2019]

FYI there is IRS guidance that an amended return is not necessary for the unemployment exemption passed.

 

[rodi]

Here's a question for the wisdom here....

For 2020 tax year, Older son filed as independent (it was borderline, and 2020 stimulus pushed it that way.) He works full time, pays bills, and even though he lives at home, he contributes monthly to the household expenses. Previous years he was listed as a dependent on our taxes. Our 2020 taxes filed also reflected that he was no longer a dependent in 2020.

Stim showed up in our account that included him. He did not get a stim payment (though did receive his refund several weeks earlier.).

So - how to resolve this. I assume when he files in 2022 for 2021, he can claim that he didn't receive it and get it applied to his refund. I assume when we file in 2022, for 2021, we will report the overpayment, and owe the money. Do we need to do anything before this? I'm happy to pay it back now - but haven't figured out how to do so.

Anyone know of a way to resolve this before next year when we file our taxes?

 

[SecondCor521]

Here's a question for the wisdom here....

For 2020 tax year, Older son filed as independent (it was borderline, and 2020 stimulus pushed it that way.) He works full time, pays bills, and even though he lives at home, he contributes monthly to the household expenses. Previous years he was listed as a dependent on our taxes. Our 2020 taxes filed also reflected that he was no longer a dependent in 2020.

Stim showed up in our account that included him. He did not get a stim payment (though did receive his refund several weeks earlier.).

So - how to resolve this. I assume when he files in 2022 for 2021, he can claim that he didn't receive it and get it applied to his refund. I assume when we file in 2022, for 2021, we will report the overpayment, and owe the money. Do we need to do anything before this? I'm happy to pay it back now - but haven't figured out how to do so.

Anyone know of a way to resolve this before next year when we file our taxes?

There is a second checkpoint between July 15th and September 1st where the IRS will check for taxpayers like your son, so he may receive his stimulus payment then.

If he doesn't get it then, he can get it via the Recovery Rebate Credit on his 2021 return which he will file about a year from now.

Your assumption is incorrect - you will not be obligated nor legally required to repay the stimulus payment which you received for him (which was probably based on your 2019 tax return that listed him as a dependent). You neither need to repay it now nor later.

 

[rodi]

Thanks for your quick response.

Your assumption is incorrect - you will not be obligated nor legally required to repay the stimulus payment which you received for him (which was probably based on your 2019 tax return that listed him as a dependent). You neither need to repay it now nor later.

Wow!!! That doesn't seem right.... I will put the money aside, just in case.

 

[The Cosmic Avenger]

Thanks for your quick response.

Wow!!! That doesn't seem right.... I will put the money aside, just in case.

If you search this long article for the word "clawback", you'll find this:

One critically important planning consideration is that the ‘Checkpoints’ described above represent a one-way opportunity to increase the amount of a taxpayer’s 2021 Recovery Rebate Credit.
Any amounts correctly paid based on the taxpayer’s income on file with the IRS at the time of payment can be kept by the taxpayer. There is no clawback on a taxpayer’s 2021 tax return of previously paid 2021 Recovery Rebate amounts, even if the taxpayer’s 2021 income is high enough to completely phase them out of receiving such credit. Which makes it especially important for those with income that was lower in 2020 to ensure they file in time to satisfy Checkpoint 2 (by the earlier of 90 days after their tax filing deadline, or September 1st, but not by just waiting until the latest possible due date for their extension!).

 

[SecondCor521]

Thanks for your quick response.



Wow!!! That doesn't seem right.... I will put the money aside, just in case.

:shrug: Suit yourself.

Here's the relevant text from Section 9601 of the American Recovery Plan Act (https://www.congress.gov/bill/117th-congress/house-bill/1319/text):

"‘‘(f) COORDINATION WITH ADVANCE REFUNDS OF CREDIT.—
‘‘(1) REDUCTION OF REFUNDABLE CREDIT.—The amount of the credit which would (but for this paragraph) be allowable under subsection (a) shall be reduced (but not below zero) by the aggregate refunds and credits made or allowed to the taxpayer (or, except as otherwise provided by the Secretary, any dependent of the taxpayer) under subsection (g)."

(Emphasis added by me.)

You can also google and find the same information stated in quite a number of news articles.

 

[rodi]

Thanks for the info. I really appreciate it.

 

[mitchjav]

Just wondering if anyone has heard any more news with regard to how the implementation of the ACA changes in this law is being implemented.

In particular:

- Changes in 2021 ACA Subsidies - especially on the state exchanges (I'm in NJ which has a state exchange) - do you need to take action to get the new subsides or does it happen auto-magically?

- Refunds of "clawback" from 2020, for those that already filed 2020 taxes?

Thanks

 

[cathy63]

The only statement the IRS has made so far is "We’re reviewing the tax provisions of the American Rescue Plan Act of 2021, signed into law on March 11, 2021. Taxpayers who filed a 2020 tax return and reported an excess advance premium tax credit repayment on Line 29 of Form 8962, Premium Tax Credit, should not file an amended tax return only to get a refund of this amount. The IRS will provide more details soon. For the latest updates, check IRS.gov/coronavirus."

https://www.irs.gov/affordable-care...estions-and-answers-on-the-premium-tax-credit