As an NRI in the US, if your business is affected by the Coronavirus, these 3 credits can be of help

by Mounica Kota | May 11, 2020 | coronavirus, Employee retention credit, Family relief credit, IRS credits, paid sick leave credit

As an NRI in the US, if your business is affected by the Coronavirus, these 3 credits can be of help

The pandemic COVID-19 has had a disastrous impact on the economic lives of the people in the US. The NRIs in the US who are having their businesses have incurred huge losses and many are even on the verge of being shut down either temporarily or permanently. Coronavirus In such difficult times, the Internal Revenue Service (IRS) has introduced three different and new credits which would be helpful for the business owners and their employees as well.

Employee Retention Credit
Paid Sick Leave Credit
Family Leave Credit

The Internal Revenue Service (IRS) has introduced three different and new credits which would be helpful for the business owners and their employees as well.

Employee Retention Credit

1. The major objective behind the design of the Employee Retention Credit is to motivate various businesses to continue keeping their employees on their payroll rather than opting for a lay-off.

2. The Employee Retention Credit would be in the form of refundable tax credit which is 50% of up to $10,000 in wages which are paid by a business owner whose business has been affected due to the outbreak of COVID-19.

3. All business owners inclusive of those organizations which are tax-exempt are eligible to avail this credit irrespective of their sizes.

4. Any business owner whose business has undergone suspension either completely or partially due to COVID-19 is eligible to avail the Employee Retention Credit.

5. Moreover, an employer or a business owner would receive the Employee Retention Credit until the gross receipts of his business are below 50% of the comparable quarter of 2019. However, once the gross receipts are increased to 80% of a comparable quarter of 2019 then the business would no longer receive this credit.

6. Small businesses who might be taking small business loans and other State/Local Government instrumentalities are not eligible for availing the Employee Retention Credit.

Paid Sick Leave Credit

1.Paid Sick Leave Credit would enable businesses to obtain credit for those employees who are unable to work during COVID-19 due to either being self-quarantined or exhibiting symptoms of COVID-19 and are under medical supervision.

2. These employees would be paid sick leave credit for up to 10 days which is equivalent to 80 hours. This credit would be paid at the regular rate of up to $511 per day and $5,110 in total.

3.Those employees who work on a part-time basis would be eligible for receiving paid sick leave based on the number of hours the employee works on an average in two weeks.

Family Leave Credit

1.Business owners or employers would receive credit for those employees who are not able to come to work due to the need for taking care of family member who has been affected by the Coronavirus or due to need for taking care of a child who is below the age of 18 years whose school/daycare is being closed due to the pandemic.

2.These employees are eligible to avail paid sick leave for up to 80 hours i.e. up to two weeks at the rate of 2/3 of his regular pay or up to $200 each day i.e. $2000 in total.

3.Employees can also receive paid family leave and medical leave which is equal to 2/3 of the regular pay obtained by the employee that is up to $200 each day and resulting in $10,000 total. Family leave credit can be calculated towards up to 10 weeks of qualifying leave.

How can business owners/employers obtain credit?

1.The business owners/employers can immediately obtain the entire amount of sick leave credit and family leave credit along with the expenses involved in health care plans plus the employer’s share of the Medicare tax on the leave for the period ranging from 1st April 2020 to 31st December 2020.

2.The business owners would be able to reimburse these credits immediately by making a reduction in their required deposit of payroll taxes which have been withheld from the wages of the employees by the credit amount.

3.Those business owners who are eligible to obtain these credits can report about their total qualified wages and the costs incurred in health insurance for each quarter either by filing Form 941 or by filing their quarterly employment tax returns.

4.In case, the tax deposits of a business owner are not sufficient enough to cover the credits then the owner can receive an advance payment by submitting Form 7200 with the IRS.

Hence, these credits would be of immense help to the NRI business owners to support their employees during this difficult economic period caused by the pandemic.

References

https://www.irs.gov/newsroom/irs-three-new-credits-are-available-to-many-businesses-hit-by-covid-19

https://www.dol.gov/newsroom/releases/osec/osec20200320

https://www.foxrothschild.com/publications/irs-issues-guidance-on-tax-credits-for-required-paid-leave-under-ffcra/

https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs

All you need to know about the relaxed e-filing rules amidst COVID-19 pandemic

by Mounica Kota | May 8, 2020 | COVID - 19, COVID - 19 pandemic, e filing rules, IRS, tax return

All you need to know about the relaxed e-filing rules amidst COVID-19 pandemic

With the impact of the pandemic COVID-19 becoming worse for the Americans, the Government has imposed lockdowns and has been asking people to stay indoors. In such situations, the IRS has also taken certain effective measures to alleviate the distress of the common people. One of the major initiatives taken by the IRS for providing some relief to the people is by the extension of the tax return filing and the tax payment deadline due to 15th April 2020 up to 15th July 2020.

Another important step taken by the IRS amidst the outbreak of the COVID-19 is the relaxation in the rules related to e-filing. The IRS has allowed its employees to accept the documents related to tax by email which can be accompanied by the images of signatures.

IRS announces relaxed e-filing rules

On 27th March 2020, the Treasury Department had announced that the IRS has made temporary provisions for allowing its employees to accept images of signatures and digital signatures in case of determination/collection of taxes. Earlier, the IRS employees were not allowed for accepting any tax-related documents from taxpayers by email; however, the IRS has granted permission for accepting documents and also transmitting documents to taxpayers by email/secure messaging system. This has made it easier for both IRS employees and the taxpayers also to process their requests without any physical contact.

Major security threats due to relaxed e-filing rules

Many tax experts have highlighted their worries about a wide range of security threats that can arise due to the relaxed e-filing rules introduced by the IRS.

Transmitting sensitive data via e-mails has been considered as non-complaint according to several industry standards. If this relaxation by the IRS is considered as normal, then it would lead to an increase in the number of cyber-crimes.
When a taxpayer sends an attachment through the email, the attachment gets saved on the servers of the IRS and is not encrypted. As a result of this, anyone who has access to the emails can get hold of the information easily. This poses to be a big security risk.

However, in these difficult times when it is not advisable to come to offices, it is necessary to have some type of concessions which would make it easier for tax professionals to do their work from home. The IRS has made it necessary for the taxpayers to attach a cover letter which would be considered as a form of consent from the taxpayer. This will act as an acknowledgment that the taxpayer knows about sharing his data, the consequences and the responsibility of any liability are upon him.

Sending data securely to the IRS

1.To have knowledge about where the data is and is being handled by whom

Taxpayers should try and acquire some knowledge about where and how their sensitive data is being stored. They must check with their accountant on where their data is being stored, who has access to their data, and what kind of backup is being utilized for their data.

2.To know about encryption

Encryption is the primary method by which data can be kept secure. Two major types of encryption would be used by the accountant or IRS for keeping data safe i.e. 256-bit AES and SSL/TLS. The 256-bit AES is used in banks whereas the SSL/TLS form of encryption is used by standard internet. Taxpayers must ensure that their tax preparers are using those applications which make use of these two encryption techniques.

3.Utilization of multifactor authentication

Mostly, secure systems use multiple levels of authentication so that malicious parties would not be able to get hold of the data. For instance, if the malicious party gets the password they will not be able to get the data as there would be another level of authentication such as fingerprint authentication. So, the system by which taxpayers are sharing their data must have different levels of authentication such as passwords and then code generated on phone or by the taxpayer’s fingerprint.

4.Avoid sharing sensitive data over emails

Tax experts advise that even though sending data by email is the most common method and have some level of encryption, it cannot be trusted completely. Rather, by encrypted file-sharing system secure connections can be created between the machine and the server where the data is being stored. By using these encrypted file-sharing systems, sensitive data transfer can be done without any threat by a taxpayer and his accountant.

Hence, relaxed e-filing rules by the IRS have made the tax return filing process convenient for both IRS employees and the taxpayers. However, the implementation of secure methods for data transfer would prevent the occurrence of scams and losses.

References

https://www.cnbc.com/2020/04/07/irs-relaxed-e-filing-rules-during-covid-19-poses-big-security-risks.html

All you need to know about State-specific Tax deadlines and COVID-19

by Mounica Kota | May 5, 2020 | COVID - 19, tax deadline, tax return, US Government

All you need to know about State-specific Tax deadlines and COVID-19

The pandemic COVID-19 has affected the economic lives of the Americans in a very adverse manner. The Federal Government and the State Government have taken initiatives to reduce the stress of the Americans by bringing up numerous changes in the tax laws.

The Federal Government has extended the deadline for filing tax returns and also payment of taxes to 15th July 2020. There are some states which have aligned to the changes in the Federal tax laws and have extended their deadlines as well. However, there are some other states which are still charging interest on the non-payment of taxes on time.

Let us know about the changes in some of the State-specific tax deadlines made due to the outbreak of COVID-19.

a.Alabama

1.Alabama has postponed the tax returns filing and payment date from 15th April 2020 to 15th July 2020 for the below-mentioned categories of taxes.

Individual Income Tax
Excise Tax for financial institutions
Corporate Income Tax
Business privilege Tax

2.These tax reforms include relief on the payment of tax on self-employment income and the estimated income tax for the year 2020.

3.Penalties for the late payment of Sales and Use tax have been waived for small businesses.

b.Alaska

The Alaska Legislation has extended all tax returns and payments administered by the Alaska Revenue Tax Division due for 15th April 2020 until 15th July 2020.
No penalties or interest would be charged for the late payment of the taxes during this period.

c.Arizona

In Arizona, the deadline for the filing of tax returns and payment of State Income Tax due on 15th April 2020 has been extended to 15th July 2020.
This extension in the deadline is applicable for individuals, corporations, and fiduciaries.

d.Hawaii

In Hawaii, the taxpayers who are due to file their State Income Tax returns or pay the State taxes from 20th April 2020 to 20th June 2020 can do that by 20th July 2020.
This extension is applicable only for the Hawaii income tax return filing and payment; and not applicable for estimated income tax payment, franchise tax, withholding tax, general excise tax or public service company tax.

e.Georgia

The Governor of Georgia has announced that there would be an extension in the deadline for filing of Georgia’s income tax returns.
The new deadline has been determined as 15th July 2020 which is per that of the federal deadline.

f.Idaho

The deadline for filing Idaho’s Income Tax returns has been extended till 15th June 2020.
In this case, it is advisable to complete both Federal and State tax return filing by 15th June 2020 so that the returns can also be obtained on time.

g.North Carolina

In North Carolina, the deadline for filing state tax return has been extended to 15th July 2020.
But, interest would be charged on any tax payment which is made after 15th April 2020. So, taxpayers should pay their tax soon to avoid being charged with interest.

h.Virginia

The Virginian State Government has extended the State Income Tax return filing date to 1st May 2020.
However, interest would be levied on any late payment of State Income Tax which is due within 1st April to 1st June 2020. It is advisable to file the returns and even pay the taxes soon.

i.New Jersey

In New Jersey, the timeline to file and pay the individual gross income tax, corporation business tax, and partnership tax for the year 2019 has been extended until 15th July 2020.
This extension of the deadline is also applicable for the 1st quarter estimated tax payments.

However, all other payments of tax and filing of returns remain de on their original date which also includes the 2nd quarter estimated tax payments.

j.New Hampshire

According to the New Hampshire Department of Revenue Administration, there would be no changes in the deadlines for payment and returns of business profits tax, business enterprise tax or any other tax which is administered by the Department.
The interests on non-payment of taxes would be charged from 15th April 2020 onwards.

k.Montana

Montana has made an extension in the deadline for the filing of tax returns and for the payment of individual State income tax to 15th July 2020.
There has also been an extension in the deadline for making the payment of the 1st quarter estimated tax payments to 15th July 2020.

Hence, these are some of the States which have made certain changes in their tax laws for bringing some relief to the Americans. However, for detailed information on the State tax law changes the State tax Consultant must be consulted.

References

As an NRI in the US, can you claim a Tax Deduction for your Health Insurance?

by Mounica Kota | May 2, 2020 | health insurance, health insurance plan, NRI, self employed, tax deductions

As an NRI in the US, can you claim a Tax Deduction for your Health Insurance?

In today’s times, health insurance has become a basic necessity of life. With the spread of dreadful diseases across the world and the cost of medical facilities soaring high, health insurance is a must for every individual. By a health insurance policy, the insurance provider would meet the medical expenses that are incurred during any type of treatment undergone by the health insurance policyholder. For availing this, the policyholder will have to pay the health insurance premium regularly. As an NRI in the US, can you claim a Tax Deduction for your Health Insurance.

NRIs who are living in the US and are working sought to purchase health insurance to avoid any financial emergencies at the times of medical emergencies.

NRIs enrolled in an employer-sponsored health insurance plan

When an NRI in the US has taken a health insurance plan which is sponsored by his employer then the premiums which are paid for the health insurance plan are already tax-free. However, if the premiums for the health insurance plan are made by a payroll deduction plan and the premium payment is done by pre-tax dollars then a tax deduction cannot be availed.
Payroll deduction plans are those in which the employers of the NRIs withhold money from their paychecks for the benefits. These plans can include those for Medical insurance, life insurance premium, and retirement savings, other taxes, etc.

Tax deductions for unreimbursed expenses of NRIs

In the case of NRIs purchasing their health insurance on their own by using after-tax dollars, some tax deductions can be done on the health insurance premiums.
In the year 2019, NRIs would be allowed to deduct any qualified unreimbursed health care expenses that they have paid for themselves, their spouses, or dependents if the expenses exceeded 10% of their AGI (Adjusted Gross Income).
However, in the year 2017 and 2018 if the healthcare expenses were more than 7.5% of the AGI of the NRI then it would qualify for a tax deduction.
Apart from the health insurance premium, other expenses which can be included in this category by the NRIs are any expenses which are out-of-the-pocket such as expenses involved in surgeries, doctor’s visit, mental health care, vision care, etc.
If an NRI is interested in making deductions for the medical expenses it is advisable to itemize the deductions. The NRI must ensure that his total itemized deductions would exceed the standard deduction amount.

Tax deductions for self-employed NRIs

For self-employed NRIs living in the US, the entire health insurance premium can be claimed as a tax deduction. This deduction claimed by self-employed NRIs can be said to be a write-off to their personal income tax and will not be deducted when the NRIs are filing on the behalf of any of their businesses. For instance, a sole proprietor must enter the deduction amount in Form 1040 and not in the Schedule C Form.
But, if an NRI is self-employed and also has another job at the same time then he can preclude from this tax deduction.
If a self-employed NRI receives health insurance coverage through his spouse’s health insurance plan which is employer-sponsored, then he can also preclude himself from the tax deduction that can be availed by self-employed NRIs.
Self-employed NRIs are not eligible to claim more deduction than the amount of income they are making through their work.
Self-employed NRIs can choose any one of their businesses as the sponsor for their health insurance plan. It is not permissible for self-employed NRIs to add up their income generated by different companies to claim the maximum deduction. So, it would be wiser if a self-employed NRI would choose his most profit earning business as the sponsor for his health insurance plan.

Reducing of tax bills by NRIs

If an NRI does not qualify to make tax deductions for his health insurance either because of the cost threshold or due to the choice of taking the standard deduction, then he can choose another alternative method for reducing his tax bills.

By electing an HDHP i.e. high-deductible health plan, NRIs can avail the benefits of paying less premium for health insurance plans than normal plans. Through this, NRIs would be able to open a Health Savings Account (HSA). The money which is put into the HSA can be utilized for paying off the health care expenses which are out-of-pocket. The contributions made by an NRI towards the HSA are tax-deductible and when these are used for eligible expenses the withdrawals also become free. In some cases, the health insurance premium can be paid off by using the funds in the HSA.

However, HDHP can offer tax benefits to the NRIs but they are only advisable for the younger masses that do not need health care cover except some health emergency. It is not advisable for those masses that already have pre-existing health issues or are expecting health expenses shortly.

Hence, tax deduction by NRIs for health insurance can be made by thinking wisely and by taking into account the major criterion such as the type of employment and type of health care expenses incurred by the NRIs.

References

Who qualifies for the COVID-19 Stimulus Checks?

by Mounica Kota | Apr 30, 2020 | COVID - 19, single tax filing, Stimulus check, Tax returns Jointly

Who qualifies for the COVID-19 Stimulus Checks?

On 27th March 2020, the US President Donald Trump had signed the CARES (Coronavirus Aid, Relief, and Economic Security) Act into law. This CARES Act also led to the initiation of a $2 billion Stimulus package which can be said as the largest emergency relief bill passed in the history of America so far.

A part of this Stimulus package includes cash payment to the eligible Americans which has been termed as “Stimulus Check” by common people and as “Economic Impact Payment” by the IRS. Technically, Stimulus checks is an advanced tax credit meant to offset an individual’s federal income taxes for 2020.

So, now there are numerous queries related to the eligibility of obtaining Stimulus checks popping up in the minds of the Americans.

Who is eligible to obtain Stimulus checks?

The basic eligibility for obtaining Stimulus checks from the US Government can be summarized below.

You must be a US citizen or a US National or a US resident alien.
You must not have been claimed as a dependent on the tax return of someone else.
Your Adjusted Gross Income (AGI) in 2018 or 2019 should be below the threshold for your filing status.
You should have filed a tax return for the year 2018, 2019 or should have Social Security Benefit Statement, or Form SSA-1099, or Form RRB-1099 or Social Security Equivalent Benefit Statement.

The Stimulus Check payment which would be obtained as per the AGI threshold can be summarized as below.

a.A single individual or married but filing tax returns separately

If your Adjusted Gross Income (AGI) is below $75,000 then the Stimulus Check received would be an amount of $1200.
In case of your Adjusted Gross Income (AGI) being more than $75,000, the amount received as Stimulus Check would be reduced by $5 for every $100 increase in the AGI above $75,000.
You would also receive an additional $500 for each qualifying child who is below the age of 17 years.
In case your AGI is above $99,000 and no qualifying children are claimed, there would be no Stimulus Check obtained.

b.Married couples filing tax returns jointly

If you are married and filing tax jointly with an AGI which is less than $150,000 the Stimulus Check received would be $2400.
In case the AGI is more than $150,000 the Stimulus Check would be reduced by $5 for every $100 increase in the AGI above $150,000.
You can also obtain an additional $500 for each qualifying child who is below the age of 17 years.
In case the AGI is above $198,000 and no qualifying children are claimed, there would be no Stimulus Check obtained.

c.Individuals filing tax returns as the “Head of Household”

1. In this case, if the AGI is less than $112,500 the Stimulus Check received would be $1200.

2. In case the AGI lies in between $112500 and $136500 the Stimulus Check would be reduced by $5 for every $100 increase in the AGI above $112,500.

3. You would obtain an additional $500 for each qualifying child who is below the age of 17 years.

4. In case the AGI is above $136,500 and no qualifying children are claimed, there would be no Stimulus Check obtained.

Qualifying criteria for a dependent to receive the Stimulus payment

You must be claiming your dependents in case of your tax returns.
Your dependents must be below the age of 17 years.
Your dependents should be a US national or a US citizen or a US resident alien.
They must be related to you either by blood, marriage or by adoption.
Your dependents must have lived with you for at least half of the year.

Moreover, some more additional information related to the qualifying criteria of dependents can be noted below.

Your dependent must have a valid Social Security Number (SSN) to qualify for the receipt of Stimulus payment.
There is no limit on the number of dependents who can be eligible for obtaining the additional $500 in Stimulus check from a particular household.
In case you are claiming your child as a dependent and your child also files his tax then he would be qualifying for an additional $500 payment as your dependent. He would not be considered eligible for his Stimulus payment.
In case you have not filed your 2019 tax return and your dependent was 16 years while filing 2018 returns, then he is eligible to obtain the $500 Stimulus payment.

Hence, with the Stimulus Checks being an effective method to overcome the financial crisis caused by COVID-19 it is advisable to file your 2019 tax returns soon if you have not done so yet.

References

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