Beginning January 30th our office hours will be:

Monday – Friday

8:00AM – 5:00PM

Additional appointment times available by request.

We will begin Saturday hours on February 18th.

Saturday:

10:00AM – 3:00PM

The 2023 tax season (for 2022 returns) officially opens January 23, 2023. Please remember that the deadline for items like W2s and 1099s to be mailed is January 31st; thus, you may not have all your documentation until mid-February. We are currently scheduling future appointments if you’d like to secure your date/time. Please call 715.532.3100 to schedule.

IR-2021-177, September 7, 2021

WASHINGTON — The Internal Revenue Service reminds people that September 15, 2021, is the deadline for third quarter estimated tax payments. This generally applies to people who are self-employed and some investors, retirees and those who may not normally have taxes withheld from their paycheck by their employers.

The U.S. tax system operates on a pay-as-you-go basis. This means taxpayers are to pay most of their tax during the year, as they earn or receive income. Therefore, individuals not subject to withholding may need to make quarterly estimated tax payments.

Who should pay quarterly?

In most cases, taxpayers should make quarterly estimated tax payments for 2021 if both of the following apply:

• Individuals expect to owe at least $1,000 in tax for 2021 after subtracting their withholding and tax credits.
• They expect their withholding and tax credits to be less than the smaller of:
  • 90% of the tax to be shown on their 2021 tax return or
  • 100% of the tax shown on their 2020 tax return. Their 2020 tax return must cover all 12 months.

Taxpayers with income not subject to withholding, including interest, dividends, capital gains, alimony, cryptocurrency and rental income, normally make estimated tax payments.

Special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. Publication 505, Tax Withholding and Estimated Tax, provides more information on estimated tax rules. The worksheet in Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations, has details on who must pay estimated tax.

Penalty for underpayment

If a taxpayer underpaid their taxes, they may have to pay a penalty. This applies whether they paid through withholding or through estimated tax payments. A penalty may also apply for late estimated tax payments even if someone is due a refund when they file their tax return.

To see if they owe a penalty, taxpayers should use Form 2210. The IRS may waive the penalty if someone underpaid because of unusual circumstances and not willful neglect. Examples include:

• casualty, disaster or another unusual situation,
• an individual retired after reaching age 62 during a tax year when estimated tax payments applied and
• an individual became disabled during a tax year when estimated tax payments applied.

How to figure estimated tax

To figure estimated tax, an individual must figure their expected adjusted gross income (AGI), taxable income, taxes, deductions and credits for the year. When figuring 2021 estimated tax, it may be helpful to use income, deductions and credits for 2020 as a starting point. Use the 2020 federal tax return as a guide. Taxpayers can use Form 1040-ES to figure their estimated tax. Nonresident aliens use Form 1040-ES (NR) to figure estimated tax.

Taxpayers must make adjustments both for changes in their own situation and for recent changes in the tax law. For instance, tax provisions in the American Rescue Plan of 2021 may impact an individual taxpayer’s situation. For more information, see Publication 505 under What’s New for 2021.

For information about these and other changes in the law, visit IRS.gov. The instructions for Form 1040-ES include a worksheet to help taxpayers figure their estimated tax. Keep the worksheet for records.

The Tax Withholding Estimator on IRS.gov offers taxpayers a clear, step-by-step method to have the right amount of tax withheld from wages and pensions.

On March 11, 2021 the American Rescue Plan Act of 2021 was passed.  This act excluded up to $10,200 per individual of unemployment compensation from taxation.  If your 2020 tax return contained unemployment compensation and was either filed before March 11, 2021 or did not include the exclusion calculation the American Rescue Plan Act allows, you may be entitled to a refund. 

The IRS has issued guidance stating that they will automatically correct tax returns by excluding up to $10,200 per individual of unemployment compensation and refunding any tax owed back to you.  This refund will be sent to you in the same form as any other refunds you may have been sent this year.  Thus, if you received a direct deposit refund, your unemployment compensation refund should also come as a direct deposit refund.  If you did not receive a refund for anything else, you may just receive a refund check via USPS.  Shortly after receiving your refunded money, you should receive a letter via USPS stating the purpose and explanation for your refund.

Since the IRS is only refunding taxes based solely on excluding unemployment compensation, your refund may not be accurate.  Thus, you can provide your refund explanation letter to us so we may review your return and ensure you are receiving the full refund you are entitled to.  If you qualify for an additional refund amount, we will assist you with amending your original return. 

The IRS has specifically asked that amendments not be filed for unemployment compensation exclusion until they have issued a corrected refund.  Thus, we will not be able to complete a review of your return for unemployment compensation reasons until we have seen your corrected refund explanation letter.  Once you receive your letter, please provide it to our office via drop-off, USPS, or email.  We will contact you once we have finished our review.

If you have any questions, please call our office Monday, Tuesday, and Thursday during the hours of 9:00am – 4:00pm.

IR-2021-143, June 30, 2021

WASHINGTON — The Internal Revenue Service today upgraded a key online tool to enable families to quickly and easily update their bank account information so they can receive their monthly Child Tax Credit payment.

The bank account update feature was added to the Child Tax Credit Update Portal, available only on IRS.gov. Any updates made by August 2 will apply to the August 13 payment and all subsequent monthly payments for the rest of 2021.

Families will receive their July 15 payment by direct deposit in the bank account currently on file with the IRS. Those who are not enrolled for direct deposit will receive a check. The IRS encourages people without current bank account information to use the tool to update their information so they can get the payments sooner.

The IRS also urges people to be on the lookout for scams related to the Child Tax Credit. People who need to update their bank account information should go directly to the IRS.gov site and not click on links received by email, text or phone.

How to update direct deposit information

First, families should use the Child Tax Credit Update Portal to confirm their eligibility for the payments. If eligible, the tool will also indicate whether they are enrolled to receive their payments by direct deposit.

If so, it will list the full bank routing number and the last four digits of their account number. This is the account that will receive their July 15 payment, and if they don’t change the account, all future payments will go there as well.

Next, if they choose, they can change the bank account receiving the payment starting with the August 13 payment. They can do that by updating the routing number and account number and indicating whether it is a savings or checking account. Note that only one account number is permitted for each recipient—that is, the entire payment must be direct deposited in only one account.

How to switch from paper check to direct deposit

If the Update Portal shows that a family is eligible to receive payments but not enrolled to receive direct deposits, they will receive a check each month. If they want to switch to receiving their payments by direct deposit, they can use the tool to add their bank account information. They do that by entering their bank routing number and account number and indicating whether it is a savings or checking account.

The IRS urges any family receiving checks to consider switching to direct deposit. With direct deposit, families can access their money more quickly. Direct deposit removes the time, worry and expense of cashing a check. In addition, direct deposit eliminates the chance of a lost, stolen or undelivered check.

Families can stop payments anytime

Even after payments begin, families can stop all future monthly payments if they choose. They do that by using the unenroll feature in the Child Tax Credit Update Portal. Eligible families who make this choice will still receive the rest of their Child Tax Credit as a lump sum when they file their 2021 federal income tax return next year.

To stop all payments starting in August and the rest of 2021, they must unenroll by August 2, 2021.

For more information about the unenrollment process, including a schedule of deadlines for each monthly payment, see Topic J of the Child Tax Credit FAQs on IRS.gov.

Who should unenroll?

Instead of receiving these advance payments, some families may prefer to wait until the end of the year and receive the entire credit as a refund when they file their 2021 return. The Child Tax Credit Update Portal enables these families to quickly and easily do that.

The unenroll feature can also be helpful to any family that no longer qualifies for the Child Tax Credit or believes they will not qualify when they file their 2021 return. This could happen if, for example:

• Their income in 2021 is too high to qualify them for the credit.
• Someone else (an ex-spouse or another family member, for example) qualifies to claim their child or children as dependents in 2021.
• Their main home was outside of the United States for more than half of 2021.

What is the Child Tax Credit Update Portal?

The Child Tax Credit Update Portal is a secure, password-protected tool, available to any eligible family with internet access and a smart phone or computer. It is designed to enable them to manage their Child Tax Credit accounts. Right now, this includes updating their bank account information with the IRS or unenrolling from monthly payments. Soon, it will allow people to check on the status of their payments. Later this year, the tool will also enable them to make other status updates and be available in Spanish.

To access the Child Tax Credit Update Portal, a person must first verify their identity. If a person has an existing IRS username or an ID.me account with a verified identity, they can use those accounts to easily sign in. People without an existing account will be asked to verify their identity with a form of photo identification using ID.me, a trusted third party for the IRS. Identity verification is an important safeguard and will protect the user’s account from identity theft.

Anyone who lacks internet access or otherwise cannot use the online tool may unenroll by contacting the IRS at the phone number included in the outreach letter they received from the IRS.

Who is getting a monthly payment?

In general, monthly payments will go to eligible families who:

• Filed either a 2019 or 2020 federal income tax return.
• Used the Non-Filers tool on IRS.gov in 2020 to register for an Economic Impact Payment.
• Registered for the advance Child Tax Credit this year using the new Non-Filer Sign-up Tool on IRS.gov.

An eligible family who took any of these steps does not need to do anything else to get their payments.

Normally, the IRS will calculate the advance payment based on the 2020 income tax return. If that return is not available, either because it has not yet been filed or it has not yet been processed, the IRS is instead determining the payment using the 2019 tax return.

Eligible families will receive advance payments, either by direct deposit or check. Each payment will be up to $300 per month for each child under age 6 and up to $250 per month for each child ages 6 through 17. The IRS will issue advance Child Tax Credit payments on these dates: July 15, August 13, September 15, October 15, November 15 and December 15.

Tax returns processed by June 28 will be reflected in the first batch of monthly payments scheduled for July 15.

Taxpayers will receive several letters

Taxpayers will also receive several letters related to the Child Tax Credit. In the next few weeks, letters are going to eligible families who filed either a 2019 or 2020 federal income tax return or who used the Non-Filers tool on IRS.gov to register for an Economic Impact Payment. The letters will confirm their eligibility, the amount of payments they’ll receive and that the payments begin July 15. Families who receive these letters do not need to take any further action. The personalized letters follow up on the Advance Child Tax Credit Outreach Letter, sent in early- and mid-June, to every family who appeared to qualify for the advance payments.

Child Tax Credit 2021

The IRS has created a special Advance Child Tax Credit 2021 page, designed to provide the most up-to-date information about the credit and the advance payments.

Among other things, it provides direct links to the Child Tax Credit Update Portal, as well as two other online tools −the Non-filer Sign-up Tool and the Child Tax Credit Eligibility Assistant, a set of frequently asked questions and other useful resources.

Child Tax Credit changes

The American Rescue Plan raised the maximum Child Tax Credit in 2021 to $3,600 for children under the age of 6 and to $3,000 per child for children ages 6 through 17. Before 2021, the credit was worth up to $2,000 per eligible child.

The new maximum credit is available to taxpayers with a modified adjusted gross income (AGI) of:

• $75,000 or less for singles,
• $112,500 or less for heads of household and
• $150,000 or less for married couples filing a joint return and qualified widows and widowers.

For most people, modified AGI is the amount shown on Line 11 of their 2020 Form 1040 or 1040-SR. Above these income thresholds, the extra amount above the original $2,000 credit — either $1,000 or $1,600 per child — is reduced by $50 for every $1,000 in modified AGI. In addition, the credit is fully refundable for 2021. This means that eligible families can get it, even if they owe no federal income tax. Before this year, the refundable portion was limited to $1,400 per child.

For the most up-to-date information on the Child Tax Credit and advance payments, visit Advance Child Tax Credit Payments in 2021.

The Internal Revenue Service reminds taxpayers who pay estimated taxes that they have until June 15 to pay their estimated tax payment for the second quarter of tax year 2021 without penalty.

Estimated tax is the method used to pay tax on income that isn’t subject to withholding. This includes income from self-employment, interest, dividends, rent, gains from the sale of assets,

prizes and awards. You may also have to pay estimated tax if the amount of income tax being withheld from your salary, pension or other income isn’t enough.

See more at: https://www.irs.gov/newsroom/irs-reminder-approaching-june-15-deadline-for-second-quarter-estimated-tax-payments

What is the Wisconsin Tomorrow Small Business Recovery Grant program? The Wisconsin Tomorrow Small Business Recovery Grant program will award $420 million to small businesses impacted by the COVID-19 pandemic. The program is intended to support businesses who are hardest hit by the pandemic and are key to Wisconsin making a strong recovery. The program is administered by the Wisconsin Department of Revenue (DOR) in collaboration with the Wisconsin Economic Development Corporation (WEDC) and is funded with money received from the federal government through the American Rescue Plan Act.

How much are the grant awards? Grants amounts are expected to be $5,000 per eligible applicant.

Who is eligible? An individual or entity who operates a business may apply if all the following criteria are met:

• The business started operating on or before December 31, 2020, is still operating in 2021, and suffered an economic loss as a result of the COVID-19 pandemic. An economic loss may be from lost revenue or increased expenses as a result of the pandemic.
• The individual or entity filed its 2019 federal and Wisconsin income or franchise tax return (see exception in Question 18).
• The business has more than $10,000 and less than $7 million in annual revenues (gross receipts less returns and allowances) shown on their federal tax return, specifically:
  • Line 1c of 2019 Form 1065
  • Line 1c of 2019 Form 1120
  • Line 1c of 2019 Form 1120-S
  • Line 3 of 2019 Schedule C (Form 1040 or 1040-SR)
• At least 75% of the business’s value of real and tangible personal property owned or rented and used by the business is located in Wisconsin. For this criterion, real and tangible personal property owned by the business is valued at its original cost, and real and tangible personal property rented by the business is valued at an amount equal to the annual rental paid by the business, less any annual rental received by the business from sub-rentals, multiplied by 8.
• At least 75% of the amount of the business’s labor costs are incurred by individuals performing services for the business in Wisconsin. For this criterion, labor costs for performing services in Wisconsin include amounts paid to individuals and reported on Forms W-2 or 1099, amounts paid to a professional employer organization or a professional employer group, and the net profit reported by sole proprietors on Schedule C of their federal individual income tax return.
• The individual or entity must not be on one of the following lists:
  • Wisconsin Department of Corrections Sex Offender Registry
  • Wisconsin Department of Workforce Development Debarred Contractors List
  • Wisconsin Department of Administration Ineligible Vendors Directory
• The business must not be a governmental unit or primarily engaged in any of the following North American Industry Classification System (NAICS) codes beginning with:
  • 111XXX – Crop Production
  • 112XXX – Animal Production or Aquaculture
  • 5311XX – Lessors of Real Estate
  • 813XXX – Nonprofit Organizations

When and how can I apply? Apply online at: https://tap.revenue.wi.gov/WITomorrowGrant/.

The application opens at 8:00 a.m. on Monday, May 24 and closes at 4:30 p.m. on Monday, June 7.

For more information, visit https://www.revenue.wi.gov/Pages/TaxPro/2021/WisconsinTomorrowSmallBusinessRecoveryGrant.aspx#2

IR-2021-78, April 8, 2021

WASHINGTON — The Internal Revenue Service today reminded self-employed individuals, retirees, investors, businesses, corporations, and others who pay their taxes quarterly that the payment for the first quarter of 2021 is due Thursday, April 15, 2021.

The extension to May 17, 2021 for individuals to file their 2020 federal income taxes does not apply to estimated tax payments. The 2021 Form 1040-ES, Estimated Tax for Individuals, can help taxpayers estimate their first quarterly tax payment.

Income taxes are pay-as-you-go. This means, by law, taxes must be paid as income is earned or received during the year. Most people pay their taxes through withholding from paychecks, pension payments, Social Security benefits or certain other government payments including unemployment compensation.

Most often, those who are self-employed or in the sharing economy need to make estimated tax payments. Similarly, investors, retirees and others often need to make these payments because a substantial portion of their income is not subject to withholding. Other income generally not subject to withholding includes interest, dividends, capital gains, alimony and rental income. Paying quarterly estimated taxes will usually lessen and may even eliminate any penalties.

Exceptions to the penalty and special rules apply to some groups of taxpayers, such as farmers, fishermen, casualty and disaster victims, those who recently became disabled, recent retirees and those who receive income unevenly during the year. See Form 2210, Underpayment of Estimated Tax by Individuals, Estates and Trusts, and its instructions for more information.

How to pay estimated taxes

Form 1040-ES, Estimated Tax for Individuals, includes instructions to help taxpayers figure their estimated taxes. They can also visit IRS.gov/payments to pay electronically. The fastest and easiest ways to make an estimated tax payment is by using IRS Direct Pay, the IRS2Go app or the Treasury Department’s Electronic Federal Tax Payment System (EFTPS). For information on other payment options, visit IRS.gov/payments. If paying by check, taxpayers should be sure to make the check payable to the “United States Treasury.”

Publication 505, Tax Withholding and Estimated Tax, has additional details, including worksheets and examples, that can be especially helpful to those who have dividend or capital gain income, owe alternative minimum tax or self-employment tax, or have other special situations.

IRS.gov assistance 24/7

Tax help is available 24/7 on IRS.gov. The IRS website offers a variety of online tools to help taxpayers answer common tax questions. For example, taxpayers can search the Interactive Tax Assistant, Tax Topics, Frequently Asked Questions, and Tax Trails to get answers to common questions.

The IRS is continuing to expand ways to communicate to taxpayers who prefer to get information in other languages. The IRS has posted translated tax resources in 20 other languages on IRS.gov. For more information, see We Speak Your Language.

IR-2021-59, March 17, 2021

WASHINGTON — The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021.

Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.

Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov. Filing Form 4868 gives taxpayers until October 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.

The IRS urges taxpayers who are due a refund to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days.

This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.

Wisconsin:

Wisconsin individual income tax return filing and payment due dates are extended to May 17, 2021. Wisconsin law provides for an extension of time and waiver of interest and penalties when the IRS extends filing deadlines during a presidentially-declared disaster. Individuals do not have to file any extension forms to be eligible for this new due date.

• No interest or penalties will accrue during the period of April 15, 2021 to May 17, 2021. Interest and late filing fees will
apply beginning May 18, 2021.
• No underpayment interest will apply for failure to make quarterly estimated individual income tax payments for the 2020
tax year.
• This relief is solely for 2020 individual income tax returns and payments that are normally due on due April 15, 2021.
• This relief does not apply to:
o 2021 estimated tax payments for individuals, the first payment of which is due April 15, 2021, or to any other returns or tax payments due to the Department of Revenue.

Minnesota:

 In following with the IRS, the Minnesota Department of Revenue has announced a grace period for taxpayers filing their annual Minnesota Individual Income Tax return for tax year 2020. Those taxpayers now have until May 17, 2021, to file and make their payments without any penalty or interest.

“This grace period for the individual tax filing and payment deadline provides timely relief to Minnesota families,” said Governor Tim Walz. “As we work to get through the COVID-19 pandemic together, my Administration will do everything we can to ease the burden on Minnesotans.”

Minnesota is allowing additional time for making 2020 state individual income tax filings and payments to May 17, 2021, without any penalty and interest being applied.

This grace period does not include individual estimated tax payments.

North Dakota:

Commissioner Ryan Rauschenberger announced that individual income tax filers have until May 17, 2021 to file their income tax return and pay the tax. Taxpayers who can file prior to May 17th do not need to take any additional steps if they are able to file by that date. 

The IRS recently announced it has also extended the federal individual income tax filing deadline to May 17, 2021. Rauschenberger has put in place a waiver of income tax penalty and interest allowing taxpayers until May 17 to file and pay, to provide relief to 2021 individual income tax filers impacted by the coronavirus pandemic.

Others (as of March 19th):

• Alabama: Unlike the IRS, Alabama grants all taxpayers an automatic six-month extension to file penalty-free beyond the April 15, 2021 due date.
• Alaska: Alaska does not have an income tax.
• Arizona: The deadline is still April 15 for state taxes, but the Arizona Department of Revenue says it will consider an extension.
• Arkansas: The deadline is still April 15 for state taxes, but the Arkansas Department of Finance and Administration says it will consider an extension.
• California: The deadline for state taxes has been extended to May 17.
• Colorado: The deadline for state taxes has been extended to May 17.
• Connecticut: The deadline for state taxes has been extended to May 17.
• Delaware: The deadline for state taxes remains unchanged, and will be April 30.
• Florida: Florida does not have a state income tax.
• Georgia: The deadline is still April 15.
• Hawaii: Residents still need to file their N-11 Hawaii state form by April 20, but you can also file for a six month extension.
• Idaho: The deadline for state taxes has been extended to May 17.
• Illinois: The deadline for state taxes has been extended to May 17.
• Indiana: The deadline is still April 15.
• Iowa: The deadline for state taxes is April 30, although it looks like it will be extended soon.
• Kansas: The deadline for state taxes is April 15, although it looks like an extension of that deadline is imminent, presumably for May 17.
• Kentucky: The deadline for state taxes has been extended to May 17.
• Louisiana: The deadline for state taxes has been extended to June 15.
• Maine: The deadline for state taxes has been extended to May 17.
• Maryland: The deadline for state taxes has been extended to July 15.
• Massachusetts: The deadline for state taxes is expected to be extended to May 17.
• Michigan: The deadline is still April 15.
• Mississippi: The deadline is still April 15.
• Missouri: The deadline for state taxes has been extended to July 15.
• Montana: The deadline for state taxes has been extended to May 17.
• Nebraska: The deadline is still April 15.
• Nevada: Nevada does not have a state income tax.
• New Hampshire: New Hampshire does not have a state income tax.
• New Jersey: The deadline is still April 15, although there’s talk of matching the federal deadline of May 17.
• New Mexico: The deadline for state taxes has been extended to May 17.
• New York: The deadline is still April 15.
• North Carolina: The deadline for state taxes has been extended to May 17.
• Ohio: The deadline is still April 15, although it might be extended.
• Oklahoma: The deadline for state taxes has been extended to June 15.
• Oregon: The deadline for state taxes has been extended to May 17.
• Pennsylvania: The deadline for state taxes has been extended to May 17.
• Rhode Island: The deadline is still April 15, although an announcement on a possible extension is coming soon.
• South Carolina: The deadline for state taxes has been extended to May 17.
• South Dakota: South Dakota does not have a state income tax.
• Tennessee: Tennessee does not have a state income tax.
• Texas: Texas does not have a state income tax.
• Utah: The deadline for state taxes has been extended to May 17.
• Vermont: The deadline for state taxes has been extended to May 17.
• Virginia: The deadline for state taxes is May 17.
• Washington: Washington does not have a state income tax.
• West Virginia: The deadline for state taxes has been extended to May 17.
• Wyoming: Wyoming does not have a state income tax.

IR-2021-28, February 4, 2021

WASHINGTON — Eligible educators can deduct unreimbursed expenses for COVID-19 protective items to stop the spread of COVID-19 in the classroom. COVID-19 protective items include, but are not limited to:

• face masks;
• disinfectant for use against COVID-19;
• hand soap;
• hand sanitizer;
• disposable gloves;
• tape, paint or chalk to guide social distancing;
• physical barriers (for example, clear plexiglass);
• air purifiers; and
• other items recommended by the Centers for Disease Control and Prevention (CDC) to be used for the prevention of the spread of COVID-19.

Rev. Proc. 2021-15 PDF, issued today, provides guidance related to educators and their expenses under the COVID-related Tax Relief Act of 2020, which was enacted as part of the Consolidated Appropriations Act, 2021. The new law clarifies that unreimbursed expenses paid or incurred after March 12, 2020, by eligible educators for protective items to stop the spread of COVID-19 qualify for the educator expense deduction.

The educator expense deduction rules permit eligible educators to deduct up to $250 of qualifying expenses per year ($500 if married filing jointly and both spouses are eligible educators, but not more than $250 each).

Eligible educators include any individual who is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in a school for at least 900 hours during a school year.

This deduction is for expenses paid or incurred during the tax year. Taxpayers claim the deduction on Form 1040, Form 1040-SR or Form 1040-NR (attach Schedule 1 (Form 1040)  PDF).

For additional information regarding the deduction for certain expenses of an eligible educator, see the Instructions for Form 1040 and Form 1040-SR PDF or the Instructions for Form 1040-NR.

For more information about this, the COVID-related Tax Relief Act of 2020 and other tax changes, visit IRS.gov.

The federal Consolidated Appropriations Act, 2021 (Public Law 116-260) was enacted on December 27, 2020. The following are significant provisions of the Act that affect the filing of 2020 Wisconsin income/franchise tax returns. As of the date of this publication, there are no pending bills before Wisconsin’s legislature that would change the tax treatment described below.

Note: Instructions to Wisconsin 2020 tax forms have been updated to explain how to report the differences described below.

Earned Income Tax Credit

The Act provides that if a taxpayer’s earned income for 2020 is less than the earned income for 2019, the taxpayer may elect to use their 2019 earned income to compute the 2020 federal earned income tax credit (see sec. 211 of Division EE of Public Law 116-260). Taxpayers must use their 2020 income to compute the Wisconsin earned income tax credit. Therefore, if a taxpayer elects to use their 2019 earned income to compute their 2020 federal earned income tax credit, they must recompute the federal earned income tax credit using their 2020 earned income amount for Wisconsin purposes.

Original Paycheck Protection Program Loans

Federal and Wisconsin law provide an exclusion from income for forgiveness of debt on the original Paycheck Protection Program (PPP) loans. The Act provides that expenses paid with original PPP loan proceeds are deductible for federal tax purposes (see secs. 276(a) and 278(a) of Division N of Public Law 116-260). Wisconsin law follows federal law prior to amendments made by the Act. Therefore, expenses incurred that are paid with the forgivable PPP funds (original) are not deductible for Wisconsin income/franchise tax purposes and must be added back to Wisconsin income in the year incurred or paid.

Wisconsin follows federal law prior to modification by the Act, which is described in Revenue Ruling 2020-27:”A taxpayer that received a covered loan guaranteed under the PPP and paid or incurred certain otherwise deductible expenses listed in section 1106(b) of the CARES Act may not deduct those expenses in the taxable year in which the expenses were paid or incurred if, at the end of such taxable year, the taxpayer reasonably expects to receive forgiveness of the covered loan on the basis of the expenses it paid or accrued during the covered period, even if the taxpayer has not submitted an application for forgiveness of the covered loan by the end of such taxable year.”

Note: Although Revenue Ruling 2020-27 was made obsolete as a result of the Act, it still describes federal law prior to the Act.

Subsequent Paycheck Protection Program Loans

The Act provides that subsequent PPP loan proceeds that are forgiven are excluded from gross income for federal purposes (see sec. 276(b) of Division N of Public Law 116-260). For Wisconsin income/franchise tax purposes, taxpayers must include in Wisconsin gross income any subsequent PPP loan proceeds forgiven. However, taxpayers may deduct expenses paid with subsequent PPP loan proceeds that would otherwise be deductible.

Emergency Grants of Economic Injury Disaster Loans (EIDL) and Targeted EIDL Advances

The Act provides that emergency EIDL grants and targeted EIDL advances are excluded from gross income for federal purposes (see sec. 278(b) of Division N of Public Law 116-260). For Wisconsin income/franchise tax purposes, taxpayers must include the grants or advances in Wisconsin gross income. However, taxpayers may deduct expenses paid with EIDL grants or advances that would otherwise be deductible.

Subsidy for Certain Loan Payments

The Act provides that a subsidy for certain loan payments is excluded from gross income for federal purposes (see sec. 278(c) of Division N of Public Law 116-260). For Wisconsin income/franchise tax purposes, taxpayers must include the subsidy in Wisconsin gross income. However, taxpayers may deduct expenses paid with the subsidy that would otherwise be deductible.

Grants for Shuttered Venue Operations

The Act provides that grants for shuttered venue operators are excluded from gross income for federal purposes (see sec. 278(d) of Division N of Public Law 116-260). For Wisconsin income/franchise tax purposes, taxpayers must include the grants in Wisconsin gross income. However, taxpayers may deduct expenses paid with grants that would otherwise be deductible.

Applicable Laws and Rules

This document provides statements or interpretations of the following laws and regulations enacted as of January 22, 2021: Chapter 71, Wis. Stats.

Laws enacted and in effect after January 22, 2021, new administrative rules, and court decisions may change the interpretations in this document. Guidance issued prior to January 22, 2021, that is contrary to the information in this document is superseded by this document, pursuant to sec. 73.16(2)(a), Wis. Stats.

FOR QUESTIONS OR COMMENTS CONTACT:

MS 5-77
WISCONSIN DEPARTMENT OF REVENUE
Customer Service Bureau
PO Box 8949
Madison, WI 53708-8949
Phone: (608) 266-2772
Fax: (608) 267-1030
Email additional questions to DORIncome@wisconsin.gov

The department welcomes your input on our guidance. Submit comments on this guidance document.

Guidance Document Number: 100277

Posted at: https://www.revenue.wi.gov/Pages/TaxPro/2021/news-2021-CAA-Impact.aspx