Top #10 most important things to know about the Economic Impact Payment Information Center

by Mounica Kota | May 27, 2020 | 1040-NR, 1040-SS, AGI, COVID - 19, Economic Impact Payment, federal government, Form 1040, Tax Payers

Top #10 most important things to know about the Economic Impact Payment Information Center

Under the provisions of the CARES (Coronavirus Aid, Relief and Economic Security) Act of the Federal Government, the citizens in the US have been receiving their Economic Impact Payments (EIP). The Economic Impact Payment which is being received by the Americans is calculated automatically by the IRS.

However, there are many Americans, who have several queries related to the Economic Impact Payments such as their eligibility, amount of payments, by when to expect the EIP, etc. The answers to these queries related to the Economic Impact Payments can be obtained by the common people at the Economic Impact Payment Information Center.

Some of the major things which Americans must know about the EIP Information Center can be listed below.

Eligibility for Economic Impact payment
Request for EIP
Calculation of EIP
Receipt of EIP
Non-Filer Tool
Social Security
Railroad retirement
Recipients of the Department of Veteran Affairs benefit
Additional Information
Return of EIP

Americans Must Know About The EIP Information Center

a.Eligibility for Economic Impact Payment

1.US citizens and US resident aliens who are filing tax returns as individuals or heads of households will be eligible for receiving EIP of $1200 whereas those who are married and are filing returns jointly would receive an EIP of $2400.

2. To receive EIP the taxpayers must not be the dependent of another taxpayer, should be having a valid Social Security Number and their AGI (Adjusted Gross Income) must be up to the given limits

For single individuals or married couples but filing tax returns jointly, the AGI should be up to $75000.
For those taxpayers who are filing tax returns as head of household filers, the AGI should be up to $112,500.
For taxpayers who are married and are filing their tax returns jointly, the AGI must be up to $150,000.

3. In case, an individual does not have a valid Social Security Number, is a non-resident alien or has filed Form 1040-NR, Form 1040NR-EZ, Form 1040-PR or Form 1040-SS for the year 2019 will not be eligible to obtain the EIP.

b.Request for EIP

If an individual has already filed the tax returns for 2018 or 2019, then there is nothing more to be done for receiving the EIP.
The IRS would use the information of the 2019 tax returns for calculation of the EIP or would use the information of 2018 in case of non-filing of the 2019 returns.
Taxpayers who have not filed returns for 2019 or 2018 can visit the IRS website and input their payment information in the link provided for Non-filers.

c.Calculation of EIP

Individuals who are eligible for receiving EIP and are filing tax returns with a single status would receive $1200 as the EIP.
If two individuals are filing their tax returns jointly, they are eligible to obtain an EIP of $2400.
The eligible individuals would receive an additional $500 for each qualifying child who has been claimed during the filing of tax returns.

d.Receipt of EIP

If an individual has received his tax refund for the year 2019 or the year 2018 in case of non-filing in 2019 by the method of Direct Deposit, then the IRS would use the latest information ad send your EIP by Direct Deposit.
Moreover, in case of non-receipt of EIP through Direct Deposit the IRS would send the EIP to the mailing address present in the file of the IRS.

e.Non-filer Tool

The Non-Filer: Enter Payment Info Here tool should be used for receiving EIP by those eligible individuals who have not filed tax returns for 2019 or 2018 and do not receive Social Security Retirement, Supplemental Security Income (SSI) or Survivor Benefits, Veteran benefits or any other benefits related to Railroad retirement.
If you have filed your tax returns or you receive federal benefits, then the need for using the Non-filer tool is ruled out.

f.Social Security

The Social Security recipients who might not have filed tax returns for 2019 or 2018 but receive Form SSA-1099 will receive their EIP by the same method as that of the receipt of the Social Security Benefit.

g.Railroad Retirement

The recipients of Rail Road Retirement who might not have filed tax returns for 2019 or 2018 but receive the benefits by RRB-1099 will receive their EIP by the same method as that of the receipt of the Rail Road Retirement Benefit.

h.Recipients of the Department of Veteran Affairs benefit

The recipients of the Department of Veteran Affairs Benefit who might not have filed tax returns for 2019 or 2018 but receive Form SSA-1099 or RRB-1099 will receive their EIP by the same method as that of the receipt of the benefit.

i.Additional Information

Taxpayers need to be cautious about scam artists who would try to use the EIP as a strategy for performing other scams related to stealing. Taxpayers must remember that information about EIP can be obtained only by visiting the official IRS webpage and not by any calls, text, or emails.

j.Return of EIP

For the return of EIP which was in the form of Direct Deposit, check, or money order; money order or personal check must be immediately sent to the IRS with information related to the SSN.
If the payment was received in the form of a paper check, then it can be sent back to the appropriate section of the IRS by writing “Void” on the back of the check.

Hence, taxpayers can avoid calling up IRS for queries related to the EIP and rather visit the Economic Impact Payment Information center for resolving their queries.

References

Top #5 things to know about the 2020 IRS Form-W4

by Mounica Kota | May 24, 2020 | 2020 IRS Form W4, IRS, Tax credits, Taxation

Top #5 things to know about

the 2020 IRS Form-W4

Employees need to fill the IRS Form-W4 to intimate their employers about the amount which must be withheld from their paychecks. This amount which is to be withheld usually depends upon the filing status, tax credits, dependents, and deductions of an employee. In case the IRS Form-W4 of an employee is not filled correctly, then the employee might owe paying tax while filing tax returns.

The IRS has designed the new 2020 IRS Form-W4 by closely working with the payroll and tax community to help the taxpayers. By the new IRS Form-W4, taxpayers would be able to find out their correct withholding value. There have been various changes such as a reduction in the tax rates, changes in itemized deductions, the introduction of other dependent credits, etc. which led to the revamping of IRS Form-W4 in 2020.

Major 5 things to know about the 2020 IRS Form-W4

Major 5 things to know

about the 2020 IRS Form-W4

1.Different versions of Form-W4 on file

All the employees don’t need to fill the 2020 IRS Form-W4. The IRS has also designed withholding tables which can function with the new 2020 IRS Form-W4 and the previous versions of the Form W4.

The revamped 2020 IRS Form-W4 must be filled in by the below-mentioned employees.

Those employees who have been newly hired in 2020 or
Those who are willing to change their withholdings in 2020

2. The layout is completely different with new tax withholding tables

The layout of the 2020 IRS Form W4 looks completely different from systematic division into five steps and forms an entire page.

The first step would contain the entry of personal information and the anticipated filing status of an individual.
The second step is necessary for those employees who have either more than one job at a time or is married with working spouse and filing returns jointly.
In the third step, the child tax credit and credit for other dependents can be determined that can be claimed while filing returns.
This fourth step provides instructions for determining any other estimated income of the year, deductions other than standard deductions, and any other additional tax which the employee wants to be withheld.
The last step contains the employee’s signature and date below the penalties of perjury.

Moreover, two new tables align with the new IRS Form-W4.

For Automated Payroll Systems, percentage method tables can be used.
For Manual Payroll Systems, wage bracket method tables can be used.

3. Personal withholding allowances are eliminated

This is the most important change in the IRS Form-W4 which distinguishes itself from Form-W4 of 2019. Previously, withholding allowances were used by employers for the determination of the income tax withholding. Personal withholding allowances are the exemptions from the Federal Income Tax and the more allowances an employee claim the less amount would be withheld from his wages for income tax. However, now employees can easily claim dependents or other deductions on Form W4 rather than claiming withholding allowances for the reduction of federal income taxes.

4.Additional Adjustments

The fourth step of the 2020 IRS Form-W4 is associated with the additional adjustments that can be made. However, this step is optional and would be feasible in instances such as

Adjustments for additional withholding can be made if there are other income sources like retirement income or any income from dividends.
The withholdings can be reduced in this section if any such deductions are different from standard deductions like interest on a student loan, any additional tax deductions, etc.
Any additional income tax can be entered such as any amount which can be deducted from paychecks including any amount which needs adjustments.

5.Importance on dependents and other tax credits

The 2020 IRS Form-W4 helps employees in indicating if they are eligible for availing the Child Tax credit and any other dependent credits. Employees who are interested in the actual refining of their withholding amount more accurately can also include additional credits such as Education tax credits. These credits can be included in the Form W4 by Step 3 of the Five-Step Process.

Hence, it can be said that the new Form-W4 can be filled if there are any changes in the financial situation of an individual.

References

Key Take-away from the IRS’ announcement on “cross-border tax guidance related to travel disruptions arising from the COVID-19 emergency”

by Mounica Kota | May 21, 2020 | COVID - 19, COVID - 19 pandemic, IRS, Tax benefits, Tax guidance, Tax Payers, taxes, US Government

Key Take-away from the IRS’ announcement on “cross-border tax guidance related to travel disruptions arising from the COVID-19 emergency”

Due to huge adverse impacts being created by the outbreak of the pandemic COVID-19, social distancing and restrictions on the travel of people residing in the US have been imposed by the US Government. These restrictions imposed on the travel of the people residing in the US are sure to raise queries on the taxation policies and guidelines.

The IRS and the Treasury Department of the US have together issued tax guidelines which would help provide some relief to those people/businesses which have been impacted by these travel restrictions imposed due to COVID-19.

The major highlights of this tax guidance can be listed below.

Revenue Procedure 2020-20
Revenue Procedure 2020-27
An FAQ

The Highlights Of This Tax Guidance

1.Revenue Procedure 2020-20

The Revenue Procedure 2020-20 provides the guidance that under specific circumstances up to a period of 60 consecutive calendar days of presence in the US due to travel disruptions caused because of COVID-19 would not be counted for determination of the US Tax Residency and for other purposes such as qualification for tax treaty benefits for income obtained from the personal services that have been performed in the US.

a.The pandemic COVID-19 has affected the travel plans of many foreign travelers who had planned to leave the US. Even though foreign travelers who test negative for COVID-19 are not being able to leave the US due to cancelation of flights, border closures, and other disruptions.

b.An alien individual would be considered as a US resident for a year under the substantial presence test in the calendar year if

The individual has been present in the US on at least 31 days during the tested calendar year.
The sum of the number of days of presence in the tested calendar year plus one-third of the number of days of presence in the previous calendar year plus one-sixth of the number of days of presence in the second preceding calendar year equal to 103 days or more.

c.Medical condition exception means an alien individual would not be considered as present in the US on those days when he intended to leave the US but was not able to do so due to serious medical condition which arose when the person was in the US.

d.Those individuals who are claiming the Medical Condition Exception need to file the Form 8843, Statement for Exempt Individuals and Individuals with a Medical Condition for filing Form 1040-NR. However, under certain circumstances, the need for timely file Form 8843 might be not taken into consideration.

e.The COVID-19 emergency would be considered as a Medical Condition Exception while determining his eligibility for treaty benefits and revenue procedures. For revenue procedure, an individual would be considered to have intended to leave the country unless he has applied for becoming a resident of the US. Also, for obtaining treaty benefits an individual would be presumed to be unable to leave the country during the period of COVID-19.

2.Revenue Procedure 2020-27

The IRS and the Department of Treasury have provided a waiver of the time requirements for revenue procedure and eligibility for treaty benefits. This Revenue procedure provides the qualification for being excluded from gross income under the IRC Section 911 and would not be impacted because of the days spent away from a foreign nation due to COVID-19.

a.A qualified individual can elect to exclude from the gross income of the individual’s foreign earned income and the housing cost amount.

b.The IRS and the Treasury Department have determined that the COVID-19 is an emergency. For IRC Section 911, an individual who had left China on/ after 1st December 2019, or any other foreign nation on/after 1st February 2020, but on/ before 15th July 2020, would be considered as a qualified individual concerning the period during which he was present in, or was a bona fide resident of, that foreign nation if the individual can establish an expectation that he would have met the requirements of the IRC Section 911 for COVID-19 emergency.

c.To qualify for relief for the revenue procedure, an individual must have been physically present, in the foreign nation on/ before the applicable date specified for this revenue procedure. An individual who was physically present or in China after 1st December 2019 or another foreign nation after 1st February 2020 would not be eligible to use this revenue procedure.

d.Individuals trying to qualify for the section 911 foreign earned income exclusion as they have been expected to be present in a foreign country for 330 days for the outbreak of COVID-19 and have met the other 4 requirements for qualification may use any 12 months to meet the qualified individual requirement.

3.FAQ

FAQ specifies that specific business activities which are conducted by foreign corporations or by a non-resident alien will not be considered in the 60 consecutive calendar days for determination if the individual or the business is engaged in some US business or has a permanent establishment in the US only if those business activities would not have been conducted in the US due to the travel disruptions caused due to COVID-19.

Hence, these tax guidelines framed by the IRS are also being continuously monitored by the IRS and the Treasury Department. Taxpayers can visit the IRS website and obtain further information related to this.

References

How does the coronavirus stimulus package help the NRIs in the US?

by Mounica Kota | May 18, 2020 | AGI, CARES, coronavirus, COVID - 19, IRS, US Government

How does the coronavirus stimulus package help the NRIs in the US?

The US Government has passed and signed a $2 trillion coronavirus bill otherwise known as the CARES Act. This is one of the largest emergency aid packages in the history of the country which has led to most of the taxpayers in the country receiving stimulus checks. These stimulus checks have helped in reducing the plight of the coronavirus affected Americans up to some level.

Along with the provision of all Americans receiving stimulus checks, this bill also includes $500 billion as loans for the struggling businesses, $150 billion for the local and state governments, $377 billion as grants for small businesses and $130 billion for the hospitals which are dealing with a very difficult situation as of now. To date, the IRS has sent around 140 million stimulus checks to the Americans who qualify for receiving the package.

Eligibility for receiving the Stimulus package

Major Queries

One of the major queries troubling the minds of the common people is what are the qualifying criteria for obtaining the Stimulus package? Are the NRIs living in the US eligible to obtain the Stimulus package or not?

All the US residents qualify to receive the Stimulus package as long as they possess a work-eligible Social Security Number (SSN) and can meet the income specific requirements.

a. The IRS will be determining the eligibility of an individual for the Stimulus package based on his adjusted gross income (AGI) on his 2019 tax return or 2018 tax return if not filed for 2019 yet.

b.The residents of the country who are filing their tax returns as individuals and have an AGI less than $75,000 would receive an amount of $1200 whereas residents who are married and are filing their tax returns jointly having an AGI less than $150,000 would receive an amount of $2400 as Stimulus payment.

c.An additional amount of $500 can be claimed for each dependent child who is below the age of 17 years, has been claimed in the tax returns of 2019 or 2018, and satisfies the other qualifying criterion.

d.Residents of the US who have nontaxable income such as Social Security benefits or Railroad benefits, etc. also qualify for receiving the Stimulus payment. These individuals do not need to file tax returns for obtaining Stimulus payment.

e.Residents filing tax returns as singles and having an AGI in between $75,000 and $99,000 would have their stimulus amount reduced by $5 for each $100 increase in the AGI above $75,000. Similarly, for married couples who have filed their returns jointly and have an AGI above $150,000 will have a reduction of $5 in their stimulus amount for every $100 increase in the AGI above $150,000.

Use of the Stimulus payment by NRIs in the US

a. The usefulness of the Stimulus payment obtained by the NRIs in the US depends upon various scenarios.

With the impact of the dreadful COVID-19 spreading rapidly across the US, many Americans have lost their jobs and livelihood. Businesses are being closed down and millions of workers across the country have become jobless. The Stimulus package announced by the Federal Government would include a weekly pay boost of $600 which is funded federally for the unemployed along with the regular State unemployment benefits.

However, for the NRIs in the US, there are no provisions to avail of the general state unemployment credit. So, if an NRI in the US loses his job during this pandemic it is difficult for him to manage his finances in the lockdown. The Stimulus package would be the savior for the NRIs at this point and can be used to meet the various financial needs.

b.In case an NRI in the US is into a profession where he would not be able to work from home during the corona times. NRI workers/employees from several industries such as Non-IT, retail, hospitality, restaurants, live entertainment, nightlife, etc. cannot perform their operations from home and thus, experience a partial or complete layoff from work. This would affect the livelihood and finances of the NRIs and the Stimulus checks can be used at this instance.

c.Moreover, since the pandemic COVID-19 is spreading widely across the country; an NRI might experience the situation of his family member or close relative being affected by the disease. In such a scenario, for availing the medical facilities good financial backup is necessary. The amount received by NRIs through the Stimulus package can be utilized for availing good medical facilities for their family members

References

https://www.cnbc.com/2020/04/01/whos-eligible-for-covid-19-stimulus-checks-your-questions-answered.htm

lhttps://www.forbes.com/sites/advisor/2020/04/28/real-stories-of-filing-for-unemployment-during-covid-19/#7b11b36715dd

https://www.forbes.com/sites/advisor/2020/03/25/what-you-need-to-know-about-expanded-unemployment-benefits-for-covid-19/#3e56a0436e4a

https://www.latimes.com/business/story/2020-03-27/who-qualifies-for-the-stimulus

Filed your 2019 Tax Returns with the IRS? Here’s all you need to know

by Mounica Kota | May 15, 2020 | CARES, coronavirus, COVID - 19, IRS, tax return

Filed your 2019 Tax Returns with the IRS? Here’s all you need to know

Under the provisions of the CARES Act, the Americans have been provided with Stimulus payment for certain relief from the economic distress caused due to the pandemic COVID-19. The amount you would receive as Stimulus payment or as the Economic Impact Payment (EIP) is being calculated by the IRS based on the information provided while filing tax returns for the year 2019.

However, there can be instances in which even if the tax returns for 2019 have been filed but the amount received as Economic Impact Payment (EIP) is quite different from the amount expected.

Economic Impact Payment (EIP) is quite different from the amount expected

a.If the 2019 tax returns have not been filed or the processing of the 2019 tax returns have not been completed by the IRS

The calculation for the amount you would receive as Economic Impact Payment is done based on their data of 2019. In case you have not filed his tax returns for the year 2019, then in such a case, the IRS would consider the information of the tax returns for the year 2018.

Moreover, suppose you have already filed your tax returns for the year 2019 but the returns have not been processed by the IRS. In such a case, the IRS would use your information of the year 2018 and calculate your EIP. This might lead to receipt of a different amount as the various life events which might have occurred in 2019 would not have been included during the calculation.

b.If the qualifying criteria for the additional $500 are not clear

You would receive an additional $500 if you have claimed your children for the Child Tax Credit during filing your tax returns. To claim a child for the Child Tax Credit, you must be related to the child, lived with him for more than half of a year, and must be bearing half of his expenses. The child must be below the age of 17 years at the end of the year for which you have filed the tax returns.

You can also claim your foster/adopted children, your siblings, your nieces, or nephews if they satisfy the qualifying criteria. If the claimed child has an individual taxpayer identification number (ITIN), then he would not be considered for an additional payment of $500 in the EIP. You would receive an additional $500 only if the claimed dependent has a valid Social Security Number (SSN) or an Adoption Taxpayer Identification Number (ATIN).

c.If you have claimed a dependent who is a college student

According to the CARES Act, if you have claimed your child or dependent who is a college student then you would not be eligible for receiving the additional $500. Suppose, you have claimed your dependent who is a college student in your 2019 federal income tax returns. However, your dependent is more than 17 years of age and would not be eligible for getting you the additional $500 in the EIP.

d.If claimed dependents are above the age of 17 years or are your parents/relatives

In case during your tax return filing, you have claimed your parent or any other relative who is of the age 17 years or older, then that dependent will not be eligible to receive a $1,200 Stimulus payment. Also, you will not be eligible to receive an additional $500 in your EIP because your parent or other relative is not satisfying the qualifying criteria i.e. being above the age of 17 years.

However, if you are not claiming your parent or relative as a dependent and neither anyone else is doing so for their tax return of 2020, then your parent or relative would be eligible to obtain the $1200 stimulus payment on the tax return filed for 2020 next year.

e.If past-due support to a child is deducted from the EIP

Your past-due child support can be a reason for the offset of your EIP. In such a case, if an offset occurs you would receive a notice from the Bureau of the Fiscal Service. In case you are married and have filed your tax returns jointly, along with filing an injured spouse claim during your tax returns of 2019 or 2018(in case the tax returns for 2019 have not been filed) the payment would be equally divided and sent to you and your spouse. Your EIP or your spouse’s EIP would be offset depending on who owes the past-due child support.

If you received an incorrect EIP

You need to be very clear about the eligibility criteria, know the eligibility requirements of your family, and ensure that you meet the qualifying criteria.
You might have received a lesser amount of EIP than that you expected. However, you might be eligible to receive an extra amount of EIP next year while filing your tax returns for 2020.
If you are eligible, you can claim additional credits on your tax returns for the year 2020 while filing for the tax returns.
You must keep the letter you receive by mail after obtaining your EIP as records for future use.

References

https://www.irs.gov/newsroom/why-the-economic-impact-payment-amount-could-be-different-than-anticipated