Extended Timeline For US Tax Filing

by Mounica Kota | Mar 27, 2020 | 401(k), COVID - 19, income tax, IRA, IRS, refund due, Tax Break, tax deductions, Tax Extension, tax filing, Tax Payers, Tax Planning, Tax Refund, Taxation

Extended Timeline For US Tax Filing

While the entire world is struggling to combat the effects of the dreadful COVID-19, the US Government has come up with new initiatives to provide some relief to the public who are paying the taxes. The Treasury Department in the US and the IRS have jointly announced last week that the US Government is extending the tax –filing deadline to 15th July 2020. This decision has been taken by the US Government to give the taxpayers extra time to handle their taxes amidst the outbreak of COVID-19.

The COVID-19 outbreak was declared as a National emergency last week by the President of the US. Also, the President had invoked the Stafford Act which gives him the power to mobilize the federal resources. The taxpayers would get an additional period of 90 days for filing their taxes and the IRS will not charge any interest or penalty for this time extension. However, for those taxpayers of the country who have already filed their taxes this year would not be affected in any means by these changes made.

File Tax Sooner If A Refund Is Due

Even though the US Government has extended the timeline, those taxpayers who don’t owe any money to the IRS can consider filing their tax by the original deadline of 15th April 2020. This would be wiser as the taxpayers would be able to collect their refunds sooner. This would be very helpful for those citizens who have already started seeing their economic condition and earnings being affected by the outbreak of the pandemic COVID-19.

Moreover, it is just that the Federal Government has provided this extension in tax filing but different states in the country have formulated different guidelines concerning the tax filing extension. It is advisable for those taxpayers who are planning to delay their federal taxes to understand in detail about the tax filing extension that their State Governments are offering as well.

The Due Date For Tax Filing In Case Of An Extension

There might be some taxpayers who may be concerned about their ability to pay the taxes even by 15th July 2020 due to the loss of a job or other financial issues related to the outbreak of COVID-19. These taxpayers can contact the IRS and discuss their options. The IRS has short-term and long-term payment plans which would help the taxpayers to pay their taxes conveniently. Short-term plans would give taxpayers around 120 days to pay the taxes whereas long-term plans taxes can be paid in installments over several months.

Earlier, when the tax filing deadline was 15th April and a taxpayer who would get an extension will not have to file his tax returns till October. However, now with the IRS pushing the tax filings date to 15th July 2020, it is quite not sure how long the taxpayers would be able to get if he is filing for an extension. But with the various options made available by the IRS, it is quite sure that taxpayers would have some relief.

Deadline For Quarterly Estimated Tax Payments

Many people are required to make quarterly estimated tax payments to the IRS in case of their income not being subject to the taxes of payroll withholding. This estimated tax payment is made by the division of the year into four payment periods with each period having its payment due date. Now, since IRS has extended the timeline for filing the taxes to 15th July 2020 it is quite uncertain that what would be the impacts upon the deadline of quarterly estimated tax payments.

Some Important Steps To Consider Before The Previous Deadline

Filing of 2017 tax return

If there is a refund due of the year 2017 for a taxpayer and the tax return has not been filed, then it must be filed by 15th April through the Form 1040 or Form 1040-SR to claim the money failing which IRS would keep the money.

Max out 401(k) by 31st December 2020

The contributions made towards the traditional 401(K) help in reducing the total taxable income of an individual. Many employers also contribute to the savings made by an individual; so, if there is enough contribution made then there are opportunities to obtain some money as well.

Contribution towards IRA and HSA

The contributions which are made to an IRA and HSA are eligible for a tax deduction. This contribution must be done by the April deadline every year. Now, even though the tax filing deadline has been extended to 15th July 2020 there have been no announcements made on the deadline for IRA or HSA contributions. So, it is advisable to accomplish this task by the April deadline to avoid any further hassles.

Conclusion

Hence, with the global economy coming to a standstill and numerous lives being affected due to the pandemic COVID-19, this action by the US Government is applauding. This would reduce a lot of pressure on those expecting to owe money to the US Government. However, if there is a refund expected then it must be claimed immediately so that the cash can be utilized during this period of emergency.

References

https://www.fool.com/taxes/2020/03/24/the-tax-deadline-has-been-extended-should-you-wait.aspx

https://www.cpapracticeadvisor.com/tax-compliance/news/21130318/irs-extends-2020-income-tax-filing-deadline-to-july-15

https://www.usatoday.com/story/money/2020/03/20/taxes-2020-irs-delay-april-15-tax-filing-deadline-july-15/2883840001/

https://www.cpapracticeadvisor.com/tax-compliance/news/21129714/when-is-the-new-irs-tax-filing-deadline-for-2020-coronavirus-delay

https://turbotax.intuit.com/tax-tips/tax-planning-and-checklists/important-tax-deadlines-dates/L7Rn92V1d

https://www.nerdwallet.com/blog/taxes/april-deadline-taxes/

How business entities would obtain benefits from the suspension of tax compliance programs by the IRS?

by Mounica Kota | Mar 25, 2020 | COVID - 19, Deduction & Credits, global income tax, Investment & Income, IRS, Tax Break, Tax compliance, Tax credits, tax deadline, Tax Extension, tax filing, Tax implications, Tax Payers, tax return, Taxation, US Government

How business entities would obtain benefits from

the suspension of tax compliance programs by the IRS?

Tax Compliance programs by the IRS has been taking a series of steps related to tax legislation as an effort to alleviate the stress common people are facing due to the outbreak of COVID-19. The rapidly spreading COVID-19 has led to the reduction in sales, slowdown of businesses, people being laid off from their jobs and huge economic adversities. In such a chaotic situation, the IRS’s initiatives on the suspension of tax compliance would act as a boon for the taxpayers, especially for the business entities.

How business entities would obtain benefits from the suspension of tax compliance programs by the IRS.One such major initiative taken by the IRS is the implementation of the “People First Initiative” which would help in providing relaxation to those business entities who are facing uncertainties related to their taxes.

People First Initiative

The People First Initiative includes the postponement of certain payments that are associated with the installment agreements and offers in compromise.According to IRS, these measures included under the People First Initiative would start from 1st April 2020 onwards and would continue up to July 2020.The major changes which have been included in the People First Initiative are the postponement of the payments which are related to the Installment Agreements, the Offers in compromise, Audits, and other enforcement activities.

Installment Agreements

The IRS has announced that it has suspended the existing installment agreements that were due in between 1st April and 15th July 2020. Those taxpayers who are not able to comply with the terms of the installment agreement can suspend their payments due during this period. The IRS would also not consider any installment agreement of this period as a defaulter. However, the interest would be accruing on the unpaid balances.

Also, the IRS has made provisions by which taxpayers either individuals or business entities who would not be able to make payment for their federal taxes can take the help of the monthly payment agreement by the IRS.

Offers in Compromise (OIC)

The taxpayers who have pending OIC can provide additional information for support till 15th July 2020. Without the consent from taxpayers, IRS would not be closing any OIC which is pending before 15th July 2020.
Taxpayers who have accepted OICs can suspend their payments until 15th July 2020. However, interest would be levied on the accrued balances which are unpaid.

3.Those taxpayers who are delinquent in the filing of their tax return for the year 2018, the IRS would not issue an OIC as a defaulter for them.

4.Any delinquent returns of the tax year 2018 must be filed by the taxpayers either before or on 15th July 2020.

Automated Liens

and

Levies

According to the regulations of the IRS, no new automatic liens and levies would be carried out till 15th July 2020.

Activities related

to field collection

All activities related to liens, levies and any seizures associated with a personal residence that are initiated by the field revenue officers will be suspended till 15th July 2020.
The field revenue officers will, however, continue to perform seizures and similar activities for high-income non-filers whenever needed.

Passport Certifications to the State Government and Private Debt Collection

For the seriously delinquent taxpayers, the IRS would provide Passport certifications to the State Government. This procedure has been suspended currently till 15th July 2020.
Moreover, new delinquent accounts will also not be forwarded by the IRS to the other private collection agencies for working on them until 15th July 2020.

Field, Office and other correspondence audits

Any in-person field, office or correspondence audits will not be carried on till 15th July 2020. There can be audits or examinations remotely by the examiners of the IRS. Taxpayers should also co-operate with the IRS and provide all information that is requested for faster tax processing.
There might be some situations in which the taxpayers might be interested in the examination or audit. If the audit or examination is beneficial for the parties and the required IRS personnel are available then the audits/examination can start.

Refund claims

The IRS would continue to work on the processing of the refund claims without making any in-person contact.

Earned Income Tax Credit and

Wage Verification Reviews

The taxpayers have time till 15th July 2020 for responding to the IRS that whether they qualify for the EITC or their income has to be verified.
Through 15th July 2020, taxpayers will not be denied these credits if they have a failure in providing the requested information.

Independent Office of appeals

The Office of appeals would be continuing to work on their cases. There might be a conference which would be held by telephone or through videoconferencing. For all the cases of the Independent Office of appeals, the taxpayers should promptly respond to any request made for information.

Statute of limitations

There would no disruption in the protection of the statute limitations by the IRS. The taxpayers are encouraged to co-operate with the IRS in extending those statutes whose expirations may be jeopardized. Otherwise, notes of deficiency would be issued by the IRS to protect the interests of the Government in the preservation of these statutes.

Conclusion

Hence, with these several changes being implemented by the IRS in the tax regulation the plight of the individual taxpayers and business entities would reduce by a considerable amount. With these tax relaxations and suspensions, business entities are sure to cope up with the losses that have been incurred due to the outbreak of COVID-19.

References

https://tax.thomsonreuters.com/news/irs-suspends-certain-compliance-programs-due-to-covid-19/

https://www.forbes.com/sites/kellyphillipserb/2020/03/25/irs-will-ease-tax-payment-guidelines–limit-collections-activities-during-covid-19-crisis/#5a8cdb9c4dca

https://www.forbes.com/sites/robertwood/2020/03/25/irs-eases-installments-due-slows-audits-sweeping-relief-puts-people-first/#2eb525c93855

https://www.accountingtoday.com/news/irs-suspends-key-tax-compliance-and-enforcement-programs-to-adjust-covid-19-effort

Answers to the top queries on tax regulations during COVID-19

by Mounica Kota | Mar 24, 2020 | COVID - 19, federal government, Form 1040, HSA, IRA, IRS, refund due, state tax, Tax Break, tax deadline, Tax Payers, Tax regulations, tax return, Top queries, US Government

Answers to the top queries

on tax regulations during COVID-19

The outbreak of the pandemic COVID-19 has created huge economic disruption globally. Amidst all the chaos and economic troubles, the US Government has announced certain changes related to the tax filing activities. Amongst these changes, the most important one is the extension in the deadline for federal tax filing to 15th July 2020. This step has been taken by the US Government to provide some relief to concerning handling taxes amidst the trauma spread by the COVID-19.Answers to the top queries on tax regulations during COVID- 19.

Now, with these changes been introduced by the US Government, it is quite obvious for you to have several questions related to the changes made, new tax deadlines and other associated impacts. Let us check out the answers to all the evident questions related to these changes introduced by the IRS.

Is there a possibility of state taxes to have a different deadline?

Mostly, a majority of the states have confirmed to the same extended deadline as that of the Federal tax i.e. 15th July 2020. However, there can be some states which will have different tax deadline than that of the Federal tax. You can know in detail about your State tax filing deadline by checking with your respective state tax agencies.

Can I file my tax return according to the original tax filing deadline i.e. by 15th April 2020?

Yes, you can file your tax returns according to the original deadline i.e. 15th April 2020. If you expect a refund from the IRS it is advisable to file your tax returns now to get your refund money soon.

Is there a probability of obtaining the tax refund being delayed?

There are no such probabilities of tax refund being delayed and would be processed as normal. If the tax return has been filed by electronic medium or via direct deposit then it would be refunded within a maximum of 21 days.

Is there any specific eligibility for availing this extended deadline for filing a federal tax return?

Any person who has a federal income tax payment or returns due on 15th April 2020 is eligible for availing the relief of the extended timeline. Here “person” can denote an individual, an estate, a trust, a corporation or even a business entity. The payment here refers to the Federal income tax payments for 2019 and the estimated federal income tax payment 2020. It must be noted that the return or tax payment must be due on 15th April 2020 and this relief does not apply to any return/payment due on any other date.

Does this extension in the tax filing deadline means that I can some more time for making contributions to my HSA?

You can make contributions to your HSA anytime until the extended tax filing deadline. Since the tax filing deadline has currently been extended to 15th July 2020you can make your contributions into HSA until then.

I have already filed my tax return 2019 which was due on 15th April 2020 and even I have to pay taxes that are not paid yet? What can be done to avoid penalties and interest?

You can avoid penalties and interest by paying your income tax by 15th July 2020. Interest/penalties will be charged only after 15th July 2020 if the due tax has not been paid. In case of filing the tax return by Form 1040 or Form 1040-SR the amount to be paid will be found on Line 23. If the return has been filed by using Form 1040-NR, the amount can be found on Line 75. For a corporation that is filing a return using Form 1120, the tax amount can be found online 35.

Does this extension in the tax filing deadline mean I have more time to make contributions to my IRA for the year 2019?

Contributions into IRA for a particular year can be made till the tax filing due date of that year. Now since the income tax filing for the year 2019 has been shifted to 15th July 2020 you can make contributions to your IRA till 15th July 2020.

What to do if I am not able to pay my taxes due on 15th April 2020 by 15th July 2020 even?

If you are individual and are not able to pay your taxes that are due on 15th April 2020 even by 15th July 2020 then you must request an automatic extension. You will have to request for this automatic extension by 15th July 2020 and can be done by electronically filing Form 4868. Business entities and trusts can file for this extension by filing Form 7004.

Hence, these are some of the common queries answered related to the extension of the federal tax filing deadline. This effort by the US Government during these times of emergency is sure to reduce stress related to finances up to some extent.

References

https://blog.turbotax.intuit.com/tax-news/your-top-tax-questions-about-coronavirus-covid-19-answered-46591/

https://www.irs.gov/newsroom/filing-and-payment-deadlines-questions-and-answers

Does the new tax deadline by IRS mean a new deadline for your IRA contribution?

by Mounica Kota | Mar 23, 2020 | federal income tax, global income tax, IRA, IRA Contribution, IRS, Tax Extension, tax filing, Tax Payers, Tax Refund, tax return, tax savings, taxes, US Government

Does the new tax deadline by IRS mean a new deadline

for your IRA contribution?

The IRS Tax Deadline, The federal tax filing deadline in the US has been extended up to 15th July 2020 to combat the effects of economic hazards caused due to the outbreak of COVID-19. This extension would also mean that you can make contributions to the IRA up to 15th July 2020.

IRA and how it works?

In the US, IRA or Individual Retirement Account helps you in saving money for retirement in a tax-advantaged way. The money which you would invest in this account can grow in a tax-deferred manner until you are ready to retire. Usually, traditional IRAs and Roth IRAs are opened by individuals whereas SEP IRAs and SIMPLE IRAs are meant for small business owners and self-employed individuals.

All the IRAs offer tax benefits which can be considered as a reward for saving. With the help of an IRA, you can even invest in stocks, bonds, and other assets. By making contributions to a traditional IRA, your tax bill would be reduced for the year in which you are contributing and you would not have owed income tax on the money until you withdraw it on your retirement. However, in a Roth IRA investments can grow in a tax-free manner but the contributions are not eligible for tax deductions. The withdrawal of the money can be done on retirement in a tax-free manner by investing in a Roth IRA as well.

The major benefits of an IRA can be listed below.

Saving tool for retirement
Cutting of tax bill
The wider option of investments available
Savior in any unexpected situation

By the IRA withdrawal rules, you can withdraw your money anytime from the IRA but by paying a penalty of 10% and a tax bill if your money has been withdrawn before the age of 59-1/2 years unless there is an exception.

Extension in IRA

contribution deadline

In case you have not been able to save much for your retirement in the last year, you can do that now as the IRA contribution deadline has also been extended. The IRS has extended this for 90 days without charging any penalties or interest for this.

You can contribute a maximum of $6000 towards the IRA. If you are above the age of 50 years then you can contribute an additional $1000 as a catch-up contribution. For making further contributions to your IRA you must contact the brokerage where your IRA has been held so that any additional funds that are added by you into the IRA are correctly filed.

Extension in the deadline for tax

owed on the income from IRA

If you have taken an early distribution from your IRA or any other work-based retirement plan then you will owe an additional tax. This will be a 10% additional tax on the amount that can be included in

gross income obtained from the early distribution. The deadline for reporting and payment of this additional tax has also got an extension up to 15th July 2020.

The major cause behind this is that this additional 10% tax is calculated and even paid at the same time as the income tax owed on the gross income. In case you are filing before 15th July 2020, then this extra 10% tax would be calculated at the time of filing itself.

Remove excessive

deferrals

In case, excessive deferrals have been made by you to your work-based retirement plans then those deferrals must be removed from the plan. This removal must be done by 15th April 2020 as those distributions need to be removed from the income and there has been no extension in this deadline.

Conclusion

Hence, the current situation is quite stressful for the people as the COVID-19 has led to several lay-offs and business closures in sectors that are customer-facing in nature. If you have extra cash now, you must contribute it towards your IRA and take one step ahead for your secure retired life.

References

CARES Act: Relief for small businesses and individuals during COVID-19

by Mounica Kota | Mar 22, 2020 | CARES, charitable donations, COVID - 19, EIDL, federal government, global income tax, Investment & Income, IRS, paid leave credits, payroll tax credits, Tax Extension, US Government

CARES Act: Relief for small businesses and individuals during COVID-19

The outbreak of the pandemic COVID-19 has created a threatening impact on the lives and livelihoods of people across the world. In the US, more than 2 lakhs people have been affected by this dreadful disease and there have been around 6K deaths due to this pandemic. COVID-19 has not only affected the lives of common people but also the economy of the nation. There has been a remarkable slowdown in businesses with the common masses being laid off from their jobs.CARES Act: Relief for small businesses and individuals during COVID-19

In such adverse situations, the Federal Government has brought certain changes in the tax rules. There has been the implementation of some new laws for reducing the stress that the common people are facing.

Coronavirus Aid, Relief, and Economic Security (CARES) Act

On 27th March 2020, the CARES Act was passed in the House of Representatives by a voice vote. Then the bill was signed into law by the US President. It is the third round of support from the Federal Government for the general public concerning the outbreak of the COVID-19. In the previous weeks, the Federal Government had already passed the Families First Coronavirus Act (FFCRA) and sanctioned an amount of $8.3 billion for the public health initiatives.

Business Relief

SBA Economic Injury Disaster Loans (EIDL) and Emergency Grants – The SBA stands for Small Business Administration which is a federal program that helps small businesses with financial assistance. Loans and EIDL are offered by SBA when there is a critical situation. A business must have been operational on 31st January 2020 for being eligible for the loans by SBA. According to the provisions of the CARES Act, the SBA would provide an advance of up to $10,000 to small businesses that have been harmed in COVID-19. This loan would be provided within 3 days of applying. There is no provision for the return of the advance by the businesses and can be used for paying debts, keeping employees on the payroll, paying sick leave, rent or other obligations.

PPP Forgivable Loan – For a small business to avail of the PPP forgivable loan, it must have been in business on 15th February 2020. Small businesses, sole proprietorships with a workforce of 500 employees or less, self-employed individuals and even independent contractors can apply for this loan. The amount of this loan can be up to 2.5 times the business’s average monthly payroll costs plus an extra 25%. It is necessary that at least 75% of the loan amount must be utilized for payroll costs and the remaining 25% can be used for business rent, debts, and other expenses.

Local Government Grants – Small business grants are being offered by some Local Governments for relief to businesses.

Paid Leave credits – Small and midsize businesses would provide paid leaves to their employees who are sick due to COVID-19 or need to stay back at home for taking of a family member who has been affected by COVID-19. The employers would be provided with tax credits for the paid leaves that are being provided to their employees.

Payroll tax credits – If a business has been impacted by the economic shutdown which took place from mid-March 2020 to December 2020, then the exact payroll tax need not be paid and if the organization/business has already made the payment then they will get back the money. This is known as retention credit.

Also, employers can delay payment of that part of the employee payroll tax which is related to social security. This can be paid over the upcoming two years i.e. by the end of 2021 and 2022.

Other provisions – Some other provisions are also associated with the business relief such as relaxation of the limit to the carrying back of net operating losses up to 5 years, avail of additional business expenses under the CARES Act, etc.

Activities to be done

To avail the business reliefs under the CARES Act, small businesses must ensure that their accounting records are well-maintained. The Profit and Loss Statement must be updated as it would highlight the income, payroll and other expenses. Proper estimation must be done which would assess the financial ability of the business to survive the economic shutdown, money that must be needed by the business and the loan re-payment.

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Personal Relief

Stimulus check – The Federal Government would provide the taxpayers with a direct deposit of up to $1200 in case of a single person, $2400 for married couples and an additional $500 for each child. This stimulus checks would be available only for those individuals who have an income of up to $75000 and $150,000 for married couples.

Unemployment benefits – Those taxpayers who are already receiving unemployment benefits would receive an additional $600 every week until 31st July 2020. There has been an extension of 13 weeks for receipt of unemployment benefits than the period allowed by State unemployment programs. Employees would be beneficial by Short-time compensation and work-share programs where their working hours would be reduced rather than being laid off.

Delayed tax filing and payment – The IRS have postponed the tax filing and payment date to 15th July 2020 rather than 15th April 2020. Also, for self-employed taxpayers, the date for the estimated tax payment has been moved to 15th July 2020.

Federal Student loans – The interest on the Student loan which is due on the US Department of Education has been waived temporarily.

Retirement plans – Early retirement distribution done in 2020 up to an amount of $100,000 are not subject to any penalty if the taxpayer or his family are diagnosed with COVID-19 or have been impacted financially due to COVID-19.

Mortgage relief – The Federal Government has also announced suspensions in mortgage payments during the economic shutdown of COVID-19.

Charitable donations – Taxpayers can deduct up to $300 in the cash contributions that have been made for qualified charitable donations. For 2020, individuals can deduct more than 50% of their AGI (Adjusted Gross Income) for charitable organizations.

Activities to be done

The individual taxpayers should ensure that if their banking information or current address is not present with the IRS and if not then the post office must have the address. Also, if an individual has not filed his tax returns for 2019 then he must consult with his tax professional about the feasibility and impacts of filing the tax returns now.

Conclusion

Hence, these new provisions implemented according to the CARES Act prove that it is quite a positive step to help individuals and businesses to overcome the hardships or the economic ruins which have been caused by the COVID-19.

References

https://www.simpleprofit.com/coronavirus

https://www.forbes.com/sites/leonlabrecque/2020/03/29/the-cares-act-has-passed-here-are-the-highlights/#3e3a5cc168cd

https://taxfoundation.org/cares-act-senate-coronavirus-bill-economic-relief-plan/

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