Most small business owners have been mainly focused on the SBA loan provisions in the CoronaTax bills such as the PPP (Paycheck Protection Plan) and the EIDL (Economic Injury Disaster Loan).
Who can blame them? It’s Free Money! and New Opportunities!
Some of the best CoronaTax provisions, though, have nothing to do with SBA money.
These are the employee and employer tax provisions that let you both take tax deductions as an employer and not pay tax as an employee.
One example from the popular new “CoronaTax: Free Money! New Opportunities!” is with the changes for student loans.
Employers have long been able to pay for school tuition for related courses for their employees. It’s just one of the many tax-free benefits that employers can provide and still get a tax write-off. The best of both worlds!
Now, though, there are also student loan benefits that employers can pay.
There were a number of student loan relief provisions added or enhanced by the CARES Act.
The following quote comes from “CoronaTax: Free Money! New Opportunities!”
“The CARES Act states that student loan borrowers will not need to pay any interest or make any payments on eligible student loans for a period of six months.
No Interest on Student Loans
Interest will be waived on all eligible student loans effective March 13, 2020 and continuing through September 30, 2020. The adjustment will be automatic; there is nothing borrowers need to do to have the interest waiver applied to their eligible federal loans.
Option to Stop Payment on Student Loans
In addition, payments on eligible student loans will be automatically paused through September 30, 2020; borrowers do not need to take any action to receive this benefit.
There will be no penalties or late fees assessed. Because the relief is in the form of waiving interest rather than the federal government making loan payments for borrowers, borrowers will see no difference in their student loan balances between now and September 30, 2020 unless they choose to continue making payments. Any payments made on eligible student loans during this period will be applied to principal (after paying interest accrued prior to March 13, 2020).
Skipped Payments Counted Toward Forgiveness Programs
Borrowers on an income driven repayment plan may stop payments through September 30, 2020 and still have skipped payments count towards their 20 or 25 years (depending on the plan) of payments.
Similarly, borrowers who are pursuing Public Service Loan Forgiveness (PSLF) may stop payments through September 30, 2020 and still have skipped payments count toward the 120 monthly payments required. The status of this benefit, as it relates to borrowers who were pursuing PSLF but would currently otherwise be considered ineligible for the program due to reduced hours or a loss of qualifying employment, is in need of clarification
Tax-Free Employer Contributions for Student Loans
Employers who pay student loans as an employee benefit may contribute up to $5,250 tax free for 2020.
Suspension of Student Loan Debt Collection
Debt collection on defaulted eligible student loans has been halted. Borrowers whose wages continued to be garnished after March 13, 2020 should contact their employer, and any funds garnished in error will be returned to the borrower.
Borrowers whose federal tax refunds were to be withheld due to defaulted federal student loan debt will have those refunds returned if the process for withholding the refund was not already completed prior to March 13, 2020. Similarly, borrowers who had a portion of their Social Security withheld to repay defaulted student loan debt will have that portion returned if the payment was in the process of being withheld on or after March 13, 2020.
Loans That Are Not Eligible
Private loans are not eligible for these benefits.”
What CoronaTax changes can put more money in your pocket, reduce your taxes and provide deductions you never had before?
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