If you received a PPP loan and file taxes in North Carolina, we have some exciting news to share. If the amended return reflects additional tax due, will avoid a lateyou -payment penalty provided the additional tax reflected on the amended return is paid when the amended return is filed. Affected taxpayers must file an amended 2020 NC income tax return on or before March 15, 2022. The following individual state income tax rate reductions are put in place: 2021 - 5.25% (current rate) 2022 - 4.99%. When ¿ling an amended North Carolina individual income tax return, complete Form D-400 for the taxable year you are amending and ¿ll in the "Amended Return" circle located at the top right of the form. Title. House Bill 334, which would allow for expenses of forgiven PPP loans to be deducted from state taxes, has overwhelmingly passed the NC House. We do not believe the NC Department of Revenue will automatically refund this tax. from gross income the amount of forgiven PPP loan. The CARES Act did not amend IRC Section 108. 2021-48, 2021-49 and 2021-50) to address the treatment of tax-exempt income in connection with the forgiveness of Paycheck Protection Program (PPP) loans.. Rev. Procs. Taxpayers must make a North Carolina addition for the amount of expenses deducted on the federal return if the expenses were paid with proceeds from a PPP loan, the loan is subsequently forgiven, and the income associated with the PPP loan forgiveness is excluded from federal gross income. you must file an amended North Carolina return. In both cases, the state provides that the amount of forgiven PPP loan is not included in the calculation of North Carolina taxable income. But North Carolina and California will only adopt one of them . Expenses. Beginning in 2022, NC will allow separate state net operating loss calculations for individuals. Prior to NCACPA's request for a suspension of collection activities, the NCDOR had been advising taxpayers who received the notice to pay the penalties and interest . 5 months. In addition - Federal income, including Economic Injury Disaster Loans ("EIDL") grants, targeted EIDL advances, and certain Small Business Association ("SBA") loan payments or other types of income specifically excluded from Federal income are not taxable for North Carolina. Businesses that paid deductible expenses with forgiven PPP loan proceeds will need to file an amended North Carolina tax return for 2020 to reduce their taxable income according to the new law (and. Proc . The good news is in November 2021 the law was changed (Senate Bill 105) and you can amend your 2020 business and personal tax returns to get a refund of North Carolina tax paid on the PPP loan forgiveness… so give us a call ! Tax-exempt income from PPP loan forgiveness may be reported on a timely filed original or amended income tax return or, in the case of a partnership, on an administrative adjustment request (AAR). The tax rate gradually will be reduced to 0% by 2030. G.S. I cannot figure out how to populate a new NC e-file return for the amended. The North Carolina Department of Revenue has announced that expenses that were funded with forgiven PPP loans are now deductible. Prior to this recent legislation, North Carolina law required taxpayers to addback any such expenses that were deducted on their federal income tax return. North Carolina does not treat PPP loan forgiveness as taxable income. North Carolina also made a change with respect to its treatment of forgiven Payment Protection Program ("PPP") loan amounts. Pass-through entity tax [5] If your tax returns for 2020 have already been filed, the NC return will most likely add back the PPP expenses that were deducted on the US tax return. Proc. In certain circumstances, Rev. DHG Observation - Nearly all taxpayers who received a PPP loan during the first round of funding have filed their 2020 North Carolina returns with an addback for the expenses deducted on the taxpayer's corresponding federal return. Taxpayers will need to amend their 2020 return in order to take advantage of this change for any PPP-related expenses incurred in 2020. TaxSlayer Pro Desktop Users. Back in June 2020, the North Carolina . 2023 - 4.75%. Because the General Assembly chose to suspend the State-level PPP addback until 2023, North Carolina conforms to the federal treatment of expenses . 105-153.5(a1) was amended to increase the amount of the North Carolina child deduction for each dependent child for whom the taxpayer is allowed a federal child tax credit under section 24 of the Internal Revenue Code. IRC conformity, North Carolina treatment of PPP loans and conformity to IRC Section 163(j) The Bill updates North Carolina's conformity to the IRC of 1986, as amended, to that in effect as of April 1, 2021 (from May 1, 2020). Proc. Several states have not yet issued definitive guidance on . 105 provisions require filing amended 2020 tax returns to take advantage of retroactive taxpayer-favorable changes, most notably those related to PPP loans. As tax season is upon us, a quick reminder that North Carolina businesses spending Small Business Administration (SBA) Paycheck Protection Program (PPP) loan proceeds in 2020 will likely need to file an amended North Carolina income tax return. 1 month. North Carolina did not follow all the provisions of the federal Consolidated Appropriations Act, so some items of income that are excluded for federal AGI may need to be included as additions to North Carolina income on Form D-400 Schedule S Part A. Due Date - Individual Returns - April 15 Extensions - To request a six month extension, file Form D-410, Application for Extension for Filing Individual Income Tax Return, by April 15.The form can be e-filed, or it can be completed online here.. Driver's License/Government Issued Photo Identification: North Carolina encourages but does not require this . 2021-48. 2021-50 was released can file amended partnership returns and submit amended Schedules K-1 by Dec. 31, 2021. 2025 - 4.5%. Note - the federal return does not need to be amended. Proc . 2026 and future years - 3.99%. Example: A business receives $50,000 from PPP. To amend a North Carolina individual tax return in the TaxSlayer Pro, follow the steps below: Open the North Carolina return by clicking on 10.State Return and selecting North Carolina from the list. 2021-50 provides an option for eligible partnerships to amend returns pursuant to the provisions of Rev. North Carolina already had one of the lowest corporate income tax rates in the nation at 2.5% in 2020. We intend to prepare amended returns on behalf of all affected clients, but will not be able to e-file the amended returns until the e-file system opens next year. you must file an amended North Carolina return. Important Notice: North Carolina's Reference to the Internal Revenue Code Updated - Impact on North . These tax returns should file an amended return removing this income. [North Carolina] Unemployment and PPP question. 2021-48 provides guidance on the appropriate timing for a PPP borrower to take tax-exempt income into account. North Carolina Governor Roy Cooper recently signed into law H.B. Subsequently, the North Carolina Department of Revenue released a notice on PPP forgiveness. Amended Returns If you have already filed a 2019 North Carolina income tax return and your federal adjusted gross income (for individuals) or federal taxable income (for corporations) is impacted by the . As amended, a taxpayer is not required to add to federal income the amount of otherwise deductible expenses paid with forgiven PPP loan proceeds until tax years beginning on or after January 1, 2023. The taxpayer may file an amended return if the actual forgiveness, including a denial of . Subsequently, the North Carolina Department of Revenue released a notice on PPP forgiveness. North Carolina Not taxable. North Carolina Tax Details. Ohio, New Jersey, New York, Florida, Alabama, Alaska, California, Colorado . You voluntarily filed an amended 2021 federal income tax return with the Internal Revenue Service and the return contains adjustments that increase the amount of your state tax payable. We are listing the states below which announced the taxation of Forgiven PPP loans. Prior to this budget passing, owners of small businesses were required to add back as income (on their North Carolina state tax return) the amount of PPP . General Tax Return Information. Thus, for North Carolina purposes, taxpayers must add back the amount of business interest expenses deducted federally in excess of 30% of adjusted taxable income. That notice provides clear guidance on its treatment of both of these issues for both individuals and corporations. If you received PPP loans in 2020, you may need to amend North Carolina Tax Return for 2020. This will necessitate (at minimum) an amended return for the ultimate taxpayer to claim a refund. We will update the list as more announcements come. That notice provides clear guidance on its treatment of both of these issues for both individuals and corporations. Tax-exempt income from PPP loan forgiveness may be reported on a timely filed original or amended income tax return or, in the case of a partnership, on an administrative adjustment request (AAR). Collection activities will resume on all suspended accounts after March 15, 2022. NC Legislative Change - PPP Expenses. Proc. North Carolina requires taxpayers computing state corporate and personal income tax liability to add back any expense deducted on the taxpayer's federal return if the payment of the expense results in PPP loan forgiveness and the taxpayer excludes that income from federal gross income. New 17534: NC - 2021 Season Delays and Rejects NCBUS-1250 and NCBUS-1255. 15339: States Generally - Consent to Disclosure Note. The state of North Carolina passed their state budget for 2022 and included two items that impact small business and small business owners: PPP Loan Forgiveness not taxable at the state level. But you must check with your state for state level taxation. Taxpayer is required to make an addition on its NC return for the amount of the business expenses deducted on its federal return that were paid with the PPP loan proceeds. This frustrated all of us! ; If the Federal Return is also being amended, the updated information will automatically pull into the state when you open it. However, for Virginia purposes, the deduction will be limited to $100,000 for business expenses funded by forgiven PPP loan proceeds. Forgiven PPP loans are not taxable for federal income tax purposes. In certain circumstances, Rev. If your tax returns for 2020 have already been filed, the NC return will most likely add back the PPP expenses that were deducted on the US tax return. The NC return would need to be amended to get the refund. But North Carolina and California will only adopt one of them . from gross income the amount of forgiven PPP loan. Taxpayers must make a North Carolina addition for the amount of expenses deducted on the federal return if the expenses were paid with proceeds from a PPP loan, the loan is subsequently forgiven, and the income associated with the PPP loan forgiveness is excluded from federal gross income. But North Carolina and California will only adopt one of them . So, I have applied for PPP loan and want to make sure I am following law. The answer is yes, for tax years beginning before January 1, 2023 (i.e., tax years 2020, 2021 and 2022) taxpayers are allowed to deduct such expenses. The federal standard deduction has increased for 2021; however, North Carolina standard deduction for . Modified Date. 2021-50 provides an option for eligible partnerships to amend returns pursuant to the provisions of Rev. Procs. Taxpayers must file amended 2020 returns to claim refunds. Now, North Carolina allows deduction of these expenses for all tax years prior to 1/1/2023. 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