When Beth Bennett came to a Kiwanis Club of Gilmer County meeting last week to talk taxes, she may have eased some minds by sharing her knowledge of the “stimulus” checks sent by way of the COVID-19-initiated Paycheck Protection Program Flexibility Act passed by Congress.
However, some members may have been startled when she mentioned the Earned Income Tax Credit — popular with those who have dependents — as being “rife with fraud.” Bennett, who owns the H&R Block franchise in Ellijay and several other North Georgia cities, said some tax filers misrepresent themselves with the EITC.
“Because there's so much money on the table, and you want the person who is really deserving to get it,” she said, explaining that in custody cases some parents will try to file for children as dependents even if they're not keeping them — before the other spouse files — or if they are in the custody of grandparents.
“You really want the people — the single mom or dad with two or three kids, and they're working at the grocery store making their $10 (an hour) — you want them to get that credit,” she said. “There's always an ugly side … (and) I don't know how they figure out the fraud. It used to be, yes, if your children came and lived with me I could claim them. Now it has to be blood relatives, or a stepchild. In order for someone to be a stepchild, you had to be married to that person.
“We have lots of people today … (who) live as couples, raise their children together and one stays at home. Should the other one get to claim the other person's kids? They took care of them all year, they lived in their house, but now I can't do that because we're not married.”
Her summation? “It can be very, very twisted up, but again you can get $10,000 in a credit,” she said. “It's not taxes that you paid in, it's a credit. It's just very complicated.”
The stimulus checks from what is commonly called the PPP Act, and how to handle them tax-wise, is a “big question” her offices are getting.
“It's not taxable,” said Bennett. “However, it does go on your tax return. That's just to reconcile that you got the right amount, or you didn't get any … even though some of them fell in January, they still go on this (2020) tax return. By the way, if you had a child (the IRS) didn't get (on the return), let's add $600 — that's what that's doing … there's a lot of misconception out there.
“If a business owner received the PPP loan and it was forgiven, you are still allowed to take those expenses that were used to get the loan forgiven, and the loan is not taxable.”
Unemployment benefits are another question right now — and they are still taxable.
Bennett said even though there's “no talk of it,” a filer who doesn't itemize can still deduct up to $300 in charitable contributions if they did it by check or cash — but it can't be donations of clothes or furniture. During a Q & A session, Bennett was asked about people taking money out of their 401(k) to help them through the COVID pandemic.
“The IRS is allowing them, through the PPP relief package, to pay taxes on it over three years instead of one year, e.g., $30,000 taken out — which could put one in a higher-income tax bracket (in one year) — could be broken down into three years of paying taxes on $10,000 each year,” she said.
A question was asked what percentage of people utilize withholding.
“It's just all over the place,” Bennett shared. “Some people just have Social Security and retirement, and (one man) came in and got $1,000 back … (but) we tell people 'Why do you let the government hold your money all year? That's your money, (but) you're not getting interest (on it). They're using your money, getting interest' … for me, a perfect world is break-even (on what you owe versus receive).”
She added some people file at certain times of the year to get back $1,000, for example, to go to Disney World in July — using their tax filing as “a savings tool.”
One club member asked about working for an employer who does not take out taxes but pays straight cash, and having to file Form 1099.
“There was a restaurant in town that paid all their employees on a 1099, and that's not the right way to do it,” she said. “If someone tells you when and where, and how long to be there and specifically how to do your job, then that's an employee.
“A contractor — construction is the best for contractor, or contract labor (status). If I'm a builder and I hire a carpenter (or) a plumber, that's contract labor, (for) which you should get a 1099. Because he tells you, hey, I need this job done, but he doesn't tell you be here tomorrow morning at 7 o'clock. That's the big difference. Make sure you have expenses, because that's a red flag to the IRS. Unfortunately, they put the weight on the person claiming the 1099.
“Get one oil change through the year to quantify your mileage — it's very helpful if an audit ever occurs.”
In the interest of transparency, the 1099 question came from your quasi-humble scribe, since I have a handful of them — and sometimes I receive straight cash as payment. No matter how I feel about misuse of tax money, i.e., how it is spent and potential waste of the same, as a Christian believer I've decided to “render unto Caesar” (the government) what he is due, in the words of Jesus. Besides, years ago I heard a message about how God will not bless me unless I adhere to what his word says about taxes, and I latched onto that and declare everything, including itemized deductions. I'm neither going to take money “under the table” nor leave money “laying on the table” for which I've striven.
But I digress.
Bennett said it is currently unclear if the IRS will allow extensions past April 15 to file taxes, but “foresees” one being announced.
Ending on a humorous note, she recalled the era before electronic filing when all forms had to be mailed in, and her offices would “call around and make sure what time all the post offices closed.”
“(Some) were open to midnight (on April 15) back in the day because they had to be filed by midnight,” she said. “Back in the old days when you had to mail them, there were a lot of people scrambling to get to the post office. I betcha the post office doesn't miss that.”
Mark Millican is a former staff writer for the Daily Citizen-News.