Will i need to pay taxes of free daycare in NJ?

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scorcher31
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Will i need to pay taxes of free daycare in NJ?

Post by scorcher31 » Mon Jun 29, 2020 6:12 pm

Due to COVID-19, NJ paid for the daycare of essential workers regardless of their income for 3 or so months (I forget how long). The money was from the state and paid directly to the daycare to cover tuition. There has been no mention of any kind of taxes for this down the road, but there is no one to really call to ask either. Any idea if I would have to pay taxes on this next year as income of any sort?

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scorcher31
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Re: Will i need to pay taxes of free daycare in NJ?

Post by scorcher31 » Tue Jun 30, 2020 3:46 pm

Figured I would bump it one more time to see if anyone had any thoughts.

go140point6
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Re: Will i need to pay taxes of free daycare in NJ?

Post by go140point6 » Tue Jun 30, 2020 6:32 pm

For a non-Covid event, yes it was taxable at the fed level and I assume my state (California). My wife's employer paid a small amount ($800) in 2019. I had to go back and check, and sure enough it was carried over to "Worksheet for Wages not on W2". But to me the worst effect of that small amount was that we were forced to paper file our return for Fed, and therefore for State... for whatever reason, I couldn't e-file because of this employer paid child care. That sucked.

I say non-Covid event because who knows if they will exempt (or have exempted) that money from taxable, either fed or state. But I bet a dollar to a donut you have to paper file 2020.

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Cubicle
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Re: Will i need to pay taxes of free daycare in NJ?

Post by Cubicle » Tue Jun 30, 2020 9:24 pm

Wait & see. There will be a lot of shakeout regarding what spent during Covid is & isn't taxable.

Pure speculation: Feds will tax it (they love taxing things) but NJ will exempt it.
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celia
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Re: Will i need to pay taxes of free daycare in NJ?

Post by celia » Tue Jun 30, 2020 10:46 pm

Probably too early to know (unless you want to dig through the rules). Some government benefits this year are tax-free, such as the stimulus check. But some government benefits were taxed in the past, such as unemployment insurance. Then there's always the government benefit called "Social Security". It's tax-free if that is your only income, but it could also be taxed (up to 85 percent of it) if you have other income.

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scorcher31
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Re: Will i need to pay taxes of free daycare in NJ?

Post by scorcher31 » Wed Jul 01, 2020 6:52 am

Thanks for the input. Just for reference this was the executive order that triggered this in NJ (executive order 110)

https://nj.gov/infobank/eo/056murphy/pdf/EO-110.pdf

along that talks about the payment but can't find the actual law for this:

https://www.nj.gov/humanservices/news/p ... 0428b.html

I read this when it came out and didn't see any mention of whether this was taxable or not. I also didn't know if because it was a direct payment from the state to the daycare and did not involve my employer, income, etc if that made a difference. I wonder if they will even notify us in some way down the road if this is taxable or not, for some reason I don't have a ton of faith in that. This would easily over $1000 in taxes owed for me which is why I was curious.

Katietsu
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Re: Will i need to pay taxes of free daycare in NJ?

Post by Katietsu » Thu Jul 02, 2020 10:53 am

I would speculate that it will be tax free. When the government provides a benefit to an individual that is not cash in hand, the citizen receiving the benefit rarely has a tax obligation. I suspect the daycare provider will receive a 1099 form for reporting on their taxes but that the OP will receive nothing.

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Re: Will i need to pay taxes of free daycare in NJ?

Post by 123 » Thu Jul 02, 2020 11:04 am

Katietsu wrote:
Thu Jul 02, 2020 10:53 am
...When the government provides a benefit to an individual that is not cash in hand, the citizen receiving the benefit rarely has a tax obligation...
+1 This is an insightful "Big Picture" observation by Katietsu. Other non-taxable non-cash government benefits would include food stamps/EBT and Medicaid medical care. I would hope daycare for the children of essential workers would be treated in the same manner. An interesting aspect of daycare for children of essential workers is that in some areas where childcare centers are closed due to COVID19 it is a government benefit that is not available from other sources. In San Francisco the City is using closed public library sites to provide this service.
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celia
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Re: Will i need to pay taxes of free daycare in NJ?

Post by celia » Thu Jul 02, 2020 12:12 pm

Since this was a state benefit, you could probably have your representative at the state level look into the answer for you. After all, he/she either voted for it or not.

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