Do I need to file my taxes to be eligible to receive a Stimulus check?

by Mounica Kota | Apr 16, 2020 | CARES, COVID - 19, federal government, Form RRB 1099, IRS, Stimulus payment

Do I need to file my taxes to be

eligible to receive a Stimulus check?

In the US, the Federal Government had passed the CARES (Coronavirus Aid Relief and Economic Security) Act to bring some relief to the Americans who are struggling due to the outbreak of COVID-19. Under the CARES Act, the IRS announced that a Stimulus check would be issued to the individuals in the US for financial relief up to some extent.

According to the IRS, most of the Americans would be receiving their Stimulus checks automatically based upon the 2019 tax returns. The information of the 2018 tax returns would be considered if the 2019 tax returns have not been filed by an individual. The Stimulus payments would be done by the Direct Deposit method as it would help in sending the money faster.

Who is eligible to obtain the Stimulus payment?

The majority of the American population would qualify to receive the Stimulus payment. The size of the Stimulus payment would depend on the Adjusted Gross Income (AGI) of the individuals.

For an individual who is filing his tax returns as a single filer and is having AGI below $75,000, the Stimulus payment received would be $1200. He would also receive an additional payment of $500 if he would claim a dependent below the age of 17 years. If the AGI of the single filer is above $75,000, then the Stimulus payment would reduce by $5 for every $100 increase in AGI above $75,000. Also, if the AGI of the individual is above $99,000 and no dependents are being claimed then the individual would not receive any Stimulus payment.

For married couples filing their tax returns jointly and are having an AGI below $150,000, the Stimulus payment received would be $2400. They would also be eligible to receive an additional payment of $500 by claiming a dependent below the age of 17 years. If the AGI of the couple is above $150,000, then the Stimulus payment would reduce by $5 for every $100 increase in AGI above $150,000. Also, if the AGI of the individual is above $198,000 and no dependents are being claimed then there would be no Stimulus payment received.

Need to file tax returns to obtain Stimulus payment

Let us talk about those instances where the filing of tax return is necessary to obtain the Stimulus payment.

Self-employed individuals who have a net income of $400 or more must file their tax return as they would have to pay self-employment taxes on the income of $400 or more.
Those taxpayers whose income is more than the income filing threshold as determined by the IRS need to file their tax returns for obtaining the Stimulus payment. This income filing threshold determined by IRS is $12,200 for single filers, $24,400 for married couples who are filing their tax returns jointly and $18,350 for filers filing returns as ‘Head of Household’.
Those dependents who have an unearned income of more than $1,100 and earned income more than $12,200 must file their tax returns for receiving the Stimulus payment.
If an individual owes taxes on an IRA or Health Savings Account he will have to file his tax returns for obtaining the Stimulus checks.
If an advance payment of the health coverage tax credit has been received by an individual, then he must file his tax returns.

Situations which rule out the need to file tax returns for receiving Stimulus payment

a.Social security recipients and the Railroad retirees who have not filed their tax returns for the year 2019 or 2018 do not need to perform any additional paperwork like filing a tax return for obtaining the Stimulus payment. The IRS would use the information from Form SSA-1099 and Form RRB-1099 respectively to obtain the information needed to send the Stimulus payment.

b.Those Americans who belong to the lower-income group or who have income below the tax filing threshold of IRS and have not filed tax returns for 2019 or 2018 must use the new web tool of the IRS. By using this tool, individuals can enter their basic information like Name, Address, SSN, Dependents, etc. This information would help in calculating and sending the Stimulus payment.

c.Recipients of Supplemental Security Income (SSI) will obtain their Stimulus payments automatically without the need for filing the tax returns. However, if they have qualifying dependents below the age of 17 years must use the web tool of IRS to claim the additional $500 payment. This is also applicable for the Railroad Retirees and Social Security beneficiaries.

Hence, taxpayers don’t need to file tax returns for obtaining the Stimulus checks. It mainly depends upon the circumstances which determine the need to file the returns.

References

All you need to know about Stimulus Payment

by Mounica Kota | Apr 13, 2020 | AGI, COVID - 19, federal government, SSA 1099, Stimulus payment

All you need to know about Stimulus Payment

The US President has signed a relief package of $2 trillion known as the Stimulus package which intends to provide relief to individuals and businesses that have been financially hit due to the outbreak of COVID-19. This Stimulus package would include sending of stimulus checks to most of the Americans, paid sick leave, unemployment benefits, student debt relief for a temporary period, etc. to alleviate the impact caused by the COVID-19.

Eligibility to obtain Stimulus payment

Mostly, all Americans would qualify to obtain some amount of money in the form of Stimulus payment. To obtain Stimulus payment, an individual should be having your Social Security Number and should not be dependent of someone else.

a.Individuals with a single filing status and having an adjusted gross income (AGI) of $75,000 or less would receive the full Stimulus payment of $1200.

When the AGI is above $75,000 then the Stimulus payment would reduce by $5 for every $100 income above $75,000. If an individual is earning more than $99,000 in a year then he is not eligible to obtain Stimulus payment.

b.Married couples who have an AGI of $150,000 or less are eligible to obtain the Stimulus payment. This payment would be $2400 for the married couples. If a couple has an AGI which is more than $150,000 and up to $198, 000 then the Stimulus payment reduces by $5 for every $100 rise in income above $150,000. Those couples who have an AGI of more than $198,000 are not eligible for obtaining Stimulus payment.

c.Those filers who are classified as ‘Head of Household’ and have an AGI of up to $112,500 are eligible to obtain Stimulus payment of $1200. If the ‘Head of Household’ filers has an AGI of up to $136,500 then reduced Stimulus payment would be available in those cases. Also, those ‘Head of Household’ filers who earn more than $136,500 is not eligible for obtaining Stimulus payment.

d.If you have children who are below the age of 17 years then you can receive an extra $500 for each child as the Stimulus payment.

Furthermore, according to an announcement made by the Treasury Department on 1st April 2020 those individuals who are on Social Security do not need to file a tax return for obtaining their Stimulus payment. Their Stimulus payment would be generated by reference to their Form SSA-1099 and Form RRB-1099. This is applicable for the senior citizens, railroad retirees and Social security recipients who do not file tax returns otherwise.However, if an individual is not on Social Security and does not have any income then he needs to file tax returns for obtaining Stimulus payment.

How to obtain the Stimulus payment?

Mostly, there is nothing much to be done by individuals for obtaining the Stimulus payment. If an individual has already filed his tax returns for 2019, then the Federal Government can easily calculate the Stimulus payment and send it. But, those individuals who have not filed their Income tax returns for 2019 must do it immediately to obtain the accurate Stimulus payment. In case, if an individual does not file his tax return for 2019 then the IRS would use the 2018 AGI for determination of the payment which must be done as Stimulus payment.

Retirees can receive their Stimulus payment in the same way as they receive their Social security benefits i.e. by referring to Form SSA-1099. If an individual does have to file a tax return and does not receive Social Security benefits as well, then he can obtain his Stimulus payment by using the ‘Tax Act’s Stimulus Registration’. This can be used to file the Stimulus only return for submission of the necessary information.

How and by when the Stimulus payment would be received?

The Federal Government would send the Stimulus payment to the individuals by direct deposits. This would make the process faster. However, for those taxpayers who do not have the direct deposit option, the payment would be done by sending paper checks. The Government has started the Stimulus payments on 11th April 2020. According to the latest information, around 80 million payments have been already initiated and the process is going on in full fledge.

Additional information on Stimulus payment

The Stimulus payment received by individuals an advance refund or refundable credit based on the income of 2020 and is not taxable.
The Stimulus payment will not affect an individual’s refund for 2019 or the anticipated refund for 2020. Moreover, the IRS guidelines also ensure that even if an individual has obtained more Stimulus payment than the amount he qualifies based on his 2020 return he will not have to pay back any money.
If an individual has filed his 2019 return without using a direct deposit, he can use the web portal ‘Get My Payment’ to update the direct deposit information for obtaining Stimulus payment.

Hence, in these times of distress caused by the COVID-19 the Stimulus payments or otherwise known as Economic Impact Payments are sure to work as a support for the Americans who have been struggling lately due to economic disruption.

Reference

State and Local Tax relief laws for COVID-19

by Mounica Kota | Apr 11, 2020 | COVID - 19, federal government, global income tax, local tax relief laws, state tax relief laws, Tax credits, tax deadline, Tax Extension, tax filing, Tax Payers, taxes, US Government

State and Local Tax relief laws for COVID-19

The novel coronavirus (COVID-19) is spreading rapidly with a huge toll on the lives of common people and the global economy as well. In the US, the number of people being affected by the COVID-19 is on an increase and has reached around 4 lakhs now. The number of people who have died due to COVID-19 in the US is approximately around 11,000. Similarly, many people have even lost their livelihoods due to the closing or the downfall of several businesses.

However, Tax relief laws the Federal Government has been extremely considerate towards the sufferings of the common people and has taken several initiatives for providing some relief to them. The income tax payment and return filing deadline for the taxes due on 15th April 2020 has been postponed to 15th July 2020 by the IRS. Also, several new laws have been implemented by the Federal Government for the support of individuals, small and medium scale businesses even. The Coronavirus Aid, Relief and Economic Security Act (CARES), Families First Coronavirus Response Act, Stimulus Package, etc. are some of the major initiatives taken by the Government for providing support and assistance to people.

Tax relief laws by State Government

In the US, the tax rules and laws associated with the Federal Government and the State Government are different from each other. In this distressful period, the State Government of different states of the country has announced various changes and new rules related to the tax laws.

Let us talk about some of the major tax relief laws imposed by the State Government in the different states to deal with the economic disruption caused by COVID-19.

Alabama

In Alabama, the Revenue Department has announced on provisions for tax relief to small businesses that would not be able to pay their Sales tax for February, March, and April. Those small retail businesses whose monthly sales in the previous year have been $62500 or less on average can have the liberty to file their sales tax return for February, March, and April without paying the State Sales tax. There will be a waiver of late tax payment penalties for these small retail businesses through 1st June 2020.
The deadline for motor vehicle registration and vehicle property tax payment for March 2020 has been extended through 15th April 2020. Moreover, tax relief would be available for State lodgings tax account holders who are unable to make their payment for February-April 2020.
The due date for payment and filing returns for 2019 Income tax and 2020 estimated Income tax which were due on 15th April 2020 has been extended to 15th July 2020.

California

The Income Tax deadline for return filing, payment for 2019 and 2020 estimated tax payments Quarter 1 and Quarter 2 has been extended to 15th July 2020. This is also applicable for 2020 LLC taxes, fees, and 2020 non-wage withholding payments.
The Californian Employment Development Department (EDD) has declared that the employers in the State who have been impacted by COVID-19 can request a delay of up to 60 days in filing their State payroll reports or in the deposit of their payroll taxes without the payment of any penalty. The employers must provide a written request for this extension within 60 days of the original tax filing/payment due date.
Moreover, there has been an announcement on the deferral of business taxes for supporting small businesses that have been affected by the COVIS-19.

Connecticut

The Department of Revenue Services in Connecticut has extended the deadlines for filing the annual tax returns due on or after 15th March 2020 and before 1st June 2020 to 15th June 2020.
Also, the tax payments which are associated with these tax returns have been extended to the due date available in June.
The personal income tax return filing deadline has been extended to 15th July 2020 and this extension is also applicable for estimated tax payments of 2020 Quarter 1 and Quarter 2.

Columbia

For income tax returns, the deadline for tax payment and return filing which was due on 15th April 2020 has been extended to 15th July 2020.
In the District of Columbia, penalties/interest will be waived for the failure of sales tax payment for a period that ends on 29th February 2020 or 31st March 2020 if all the taxes are paid completely on or before 20th July 2020. This waiver does not apply to hotels or motels which can defer property tax under another emergency legislation.
This legislation states that hotels/motels can avail penalties waiver for the delay in payment of the property tax’s first installment of 2020 if the installment is paid by 20th June 2020.

Texas

In Texas, the Comptroller has declared that the sales tax collected in March 2020 would be remitted and would be available for emergency health care and other emergency operations for the people.
The Texan Comptroller has also insisted on the businesses in the State to make use of short term payment agreements for meeting the deadline of March 2020.

Massachusetts

The Department of Revenue in Massachusetts has implemented an emergency regulation amendment. According to this amendment, the sales and use tax return filing and payment which are due for the period of 20th March 2020 to 31st May 2020 will remain suspended. These tax return filing and tax payments would be now due for 20th June 2020.
Marijuana retailers, marketplace facilitators or motorcycle vendors are not included within this amendment. Any penalties or interest would be waived but the accumulation of statutory interest will continue.

Virginia

In Virginia, the Department of Taxation has announced that all the income tax payments which are due from 1st April 2020 to 1st June 2020 can be paid at the Department anytime on or before 1st June 2020. If all the payments are received by 1st June 2020, then the Department would waive all penalties for late payment otherwise penalties would start accumulating from the original payment due date.
However, interest would also keep accruing from the original due date of payment. Some of the taxes which are eligible for this extension and waiver are individual, fiduciary and corporate income taxes and any estimated income tax payments in this period. The State provides an automatic filing deadline extension for all the taxpayers for six months. Also, the Department of Taxation would consider requests for sales tax dealers who would request an extension in the sales tax payment and return filing which was due on 20th March 2020 and would extend it till 20th April 2020.

Montana

The Montana Revenue Department would assess the situation of taxpayers on a case-by-case basis and might permit the deferral of tax payments for up to one month at an instance.
The taxpayers must contact the Tax Collection Bureau by email, phone or mail at least one week before the actual due date of payment for making a deferral request.
The 2020 estimated tax payments for the first quarter have been extended to 15th July 2020 and the second quarter payment is also due on 15th July 2020.

Conclusion

Hence, along with the Federal Government, these are some of the tax relief laws/rules implemented by the different states. Taxpayers can communicate with their respective State tax agencies for complete details on the amendments made in their respective tax laws for COVID-19. These rules and amendments in State tax laws would act as a support for the distressed individual taxpayers or businesses in coping up with the economic disruptions.

References

https://tax.thomsonreuters.com/news/tax-relief-offered-by-states-and-localities-in-response-to-covid-19/?utm_campaign=T_CPE_NSL_9017597_covid19news_20200406_PR_EM1&utm_medium=email&utm_source=Eloqua&site_id=82769734&cid=9017596&chl=em&sfdccampaignid=7014Q000002SW4xQAG&elqTrackId=8432E59EA486AE4E4F693C86C8DF092E&elq=1fca5b09cc9e4a48adaa952eec158059&elqaid=22686&elqat=1&elqCampaignId=16486

https://www2.deloitte.com/us/en/pages/tax/articles/covid-19-state-and-local-tax-due-date-relief-developments.html

Can pandemic COVID-19 affect your house mortgage rate and your deduction?

by Mounica Kota | Apr 7, 2020 | federal government, Standard Deduction

Can pandemic COVID-19 affect your house mortgage rate and your deduction?

Currently, the world is fighting against the huge economic disruptions caused due to the spread of the dreadful coronavirus. The US has been highly impacted by this pandemic causing loss of many lives and the livelihoods of people. COVID 19 The Federal Government has been taking up several measures to reduce the financial stress on the common people. Amongst these, one of the announcements made by the Federal Reserve is related to the cutting of the interest rates and also making unlimited quantitative easing.

According to the Federal Reserve, unlimited quantitative easing would help to calm down the markets. The Federal Reserve has declared that there would be continuity in its asset-purchasing program in amounts which would help in supporting the smooth functioning of the share market and broadening of the financial conditions.

Some of the major reasons why the Federal Reserve uses Quantitative Easing can be mentioned below.

According to the Federal Reserve, the money printed by Quantitative Easing can be used to create more employment opportunities in the country.
Quantitative Easing can encourage both lending and borrowing as the interest rates would be low.
As per Federal Reserve, this would also encourage spending as there would be more money which enters the economy so more money to be spent. It would increase company profits and stimulate the stock market.

If you are a homeowner, then the Unlimited Quantitative Easing and cutting of interest rate would have an impact on you. When there is a drop in the rates of the Federal Reserve, then it would put pressure on the mortgage lending rates.

Mortgage lending rates would be affected directly as the adjustable-rate mortgages are often parallel to the rates of the Federal Reserve.
There would be an indirect impact on the Mortgage lending rate as the borrowers would be allowed to refinance at a low rate of interest.

Moreover, the interest rates on the Home Equity Lines of Credit (HELOCS) have also fallen down due to the drop in the rates of the Federal Reserve.

Higher Equity and Lower payments

Due to the lower rate of interest the borrowers would be able to avail several benefits such as lower payments to be done in a month or the capability of building up of equity quite faster.
But, as you know mortgage interest is tax-deductible and lower mortgage interest rate would result in reducing your deductions. This would ultimately result in an increase in your taxes to be paid.

Major points to be considered

You would have to refinance for locking in the lower rate of interest if you have a fixed mortgage or your Adjustable Rate Mortgage i.e. ARM is in its fixed-rate period.
It has been noticed that usually in the beginning many ARMs have a fixed-rate period which is then followed by an adjustable period.
Refinancing for locking in the lower rate of interest means paying of some loan-originating points.
These loan-originating points are deductible but you would have to spread that deduction over the life period of the loan which would be difficult and impractical.
So, it is quite simple if you stick to your current mortgage even though it would be an expensive option.

Additional thoughts

Usually, the taxpayers in the US would prefer to opt for Standard Deduction. However, there are some taxpayers who prefer itemizing and they must think about refinancing. If you are planning for refinancing at a lower rate, then you must consider the advantages and disadvantages of doing the same.

You must consider in detail how much the reduced monthly payment would help you in saving for each month, for a year and the entire life of the loan.
You should compare the savings you make with the new additions that would come up at the time of tax payment.
You must analyze and calculate any other changes that might come. These changes can be associated with your income or the deductions that you make while filing taxes.
You must ensure that you take into consideration other aspects such as the birth of a baby, change in your household income, increase or decrease in charity for the year or if your adult child has moved out, etc.

Hence, you must be educated about the changes that are being made in tax laws and be aware of the implementation of these changes.

References

COVID-19 Stimulus Payment and Tax Relief for the Self-Employed

by Mounica Kota | Apr 5, 2020 | COVID - 19, self employed, Stimulus payment, US Government

COVID-19 Stimulus Payment and Tax Relief for the Self-Employed

Self-employed individuals are those who earn a livelihood by working for themselves. They do not work as an employee for someone else and not as an owner/shareholder of any corporation. Self-employed persons can work for themselves in different trades and occupations such as photography, music, hairstyling, tutors, childcare workers, etc. Professionals like Gig workers, independent contractors, freelancers, and owners of small businesses can be said to be self-employed.

A very important part of the American workforce comprises of self-employed individuals. With the outbreak of the COVID-19, there are a large number of self-employed individuals who are facing economic disruptions. Many of them have either lost their income or are struggling hard to make income.

Let us talk about the various changes made in the tax laws by the Federal Government for reducing the stress of these self-employed individuals during the COVID-19.

a.Families First Coronavirus Response Act (FFCRA)

The Families First Coronavirus Response Act was signed into law on 18th March 2020. This Act included certain refundable tax credits which would be beneficial for the self-employed individuals.

1.Qualified Sick Leave

In case a self-employed individual is taking a sick leave from his job due to his health or for taking care of a family member showing up symptoms of being affected by COVID-19. In case of a self-employed individual is willing to claim sick leave credit, the below-mentioned guidelines would be helpful.

If the individual is himself being quarantined due to exhibiting symptoms of COVID-19, he can claim up to ten days of sick pay at his average rate of income whose maximum value is $511 per day.
If the self-employed individual has to take a leave for taking care of a family member exhibiting coronavirus symptoms, he can claim up to 10 days of sick pay at two-thirds of his average rate of income whose maximum value can be $200 per day.

2.Qualified Family Leave

A self-employed individual can claim a refundable tax credit associated with family leave. This family leave can be because of not being able to send your kid to school or daycare as they are closed due to the outbreak of COVID-19. In this case, the self-employed individual would be able to claim up to 50 days of income at the rate of two-thirds of his earning. The maximum value of the average rate of earning in a day can be $200.

These refundable credits offered by FFCRA will be applicable when a self-employed individual is filing his tax returns for 2020 in 2021. The IRS has suggested considering these credits while planning for federal estimated tax payments. The self-employed tax would get reduced by the qualifying credit and hence the funds can be used up now at the times of emergency. Self-employed individuals can maintain records related to virus testing, medical care or school closure for making the claims.

b.Extension in tax deadlines

To alleviate the financial disruption caused by COVID-19, the Federal Government has extended the deadlines for filing tax returns and even tax payments to 15th July 2020.

For the self-employed taxpayers, the deadline for payment of the first quarter estimated tax has been extended to 15th July 2020. However, the deadline for the payment of second, third and fourth remains unchanged i.e. 15th June 2020, 15th October 2020 and 15th January 2021 respectively.

Even though there has been an extension in the deadline for filing tax returns and tax payment, the IRS advises people to file the tax refund soon as the refund can be obtained on time and be utilized in these times of emergency.

c.Stimulus payment under the CARES Act

The Federal Government would be sending the taxpayers stimulus payments based on their AGI and tax filing status of the year 2019. The Government would consider the tax returns filed for the year 2019 to determine how much a self-employed individual should obtain as Stimulus payment. In case, a self-employed individual has not filed for the year 2019 his tax returns for 2018 would be taken into consideration.

If a self-employed individual is filing his tax returns as a single individual and his AGI is below $75,000 then he would receive a Stimulus payment of $1200.
In case of filing tax returns jointly as a married couple with AGI less than $150,000, the Stimulus payment received would be $2400.
If there is a dependent below the age of 17 years and has been claimed on tax returns, then an additional Stimulus payment of $500 would be obtained.

Hence, with the impacts of COVID-19 affecting the financial lives of the Americans especially the self-employed individuals, it is quite sure that the relief measures initiated by the US Government would bring the stress level of the Americans under control.

References

https://www.taxslayer.com/blog/covid-19-stimulus-payment-tax-credits-self-employed-gig-workers/

https://www.uschamber.com/co/start/strategy/families-first-coronavirus-response-act-guide

https://www.investopedia.com/terms/s/self-employed-person.asp