2021 Tax Schedule.

by | Dec 28, 2020 | 2021 Tax Returns

A list of the important tax deadlines for the year 2020 would be very helpful for you to be prepared for the tax-related responsibilities and take your necessary actions.

  • Open Enrolmentfor the Marketplace Insurance – 1st November 2020 to 15th December 2020.

In case, you are interested in Marketplace Insurance for the year 2021 you must enroll by the Health Insurance Marketplace maximum by 15th December 2020. If you are interested that your coverage must be effective immediately by 1st January 2021 then it is necessary for you to select the plan by 20th December 2020.. 

  • Deadline for the maximization of 401K contributions- 31st December 2020. 

If you are working for another person or firm or you are self-employed you can maximize the contributions made into your 401(k) until the year-end. By this, you would be able to save money for your retirement. 

  • Opening of the IRS E-filing – Late January 2021. 

The opening date for IRS e-filing for the tax year 2020 has not been confirmed yet. By the mid of the late month of January usually, the IRS starts accepting the tax returns by using an electronic medium. 

  • Sent out of W-2 and 1099-NEC. 

It’s time for you to start checking the arrival of your Form W-2 and Form 1099-NEC in your mail. 

  • Last day for making the IRA Contributions – 15th April 2021. 

In case, In case, you have not made the maximum contribution to your IRA for the year 2020 you can make contributions into your IRA by 15th April 2021 and also obtain tax deductions.  You must inform your plan administrator that the contribution which is being made is for the tax year 2020. 

  • Tax Deadline for the tax year 2020- 15th April 2021. 

Filing of your individual tax returns is said to be due for the Tax Year 2020 and you must e-file your tax returns by 15th April 2021 midnight. 

The tax payment quarters of the Self-employed. 

If you are self-employed, then you must ensure that you are paying the estimated quarterly taxes. Let us give you the deadline for the payment of the estimated self-employment taxes. 

  • 4th Quarter 2020 Estimated tax payment due for – 15th January 2021. 

If  you have the fourth quarter estimated tax payment pending for the year 2020, then you can send your estimated tax payment by 15th January 2021.

  • Estimated tax payment for the 1st quarter – 15th April 2021 

If you are self-employed and have the payment to be made for the first quarter income then the payment has to be done by 15th April 2021. 

  • Estimated tax payment for the 2nd quarter – 15th June 2021. 

If you are self-employed and have the payment to be made for the second quarter income then the payment has to be done by 15th June 2021.

  • Estimated tax payment for the 3rd quarter – 15th September 2021. 

If  you are self-employed and have the payment to be made for the third quarter income, then the payment has to be done by 15th September 2021.

  • Estimated tax payment for the 4th quarter – 17th January 2022. 

 If you are self-employed and have the payment to be made for the fourth quarter income, then the payment has to be done by 17th January 2022.

All you need to know about National Economic Impact Payment Registration Day

by | Dec 24, 2020 | Tax Planning, Tax Preparation

All you need to know about the National Economic

Impact Payment Registration Day.

The National Economic Impact Payment Registration Day has been recently announced by the IRS. The IRS has set 10th November 2020 as the “National Economic Impact Payment” Registration Day. This day acts as the final push that would encourage those Americans who do not usually file their tax returns. The National Economic Impact Payment Registration Day is especially dedicated to spreading the word some days before the final extended registration deadline.

Those Americans who have not received their Stimulus Payment can register to receive so by 21st November 2020.

Who must file for the Stimulus Payments?

Most of the taxpayers in the US who are eligible to receive the Stimulus payment will receive it automatically. They would receive the Stimulus Payment based upon their recent tax filing of the year 2018 or 2019. They would also receive the payment based on being the recipients of Social Security Retirement, Railroad retirement, Supplemental Security Income (SSI), etc.  This would also include people who have no income or very less income.

What needs to be done for registration for the Stimulus Payments?

 According to the US Government reports, around 9 million eligible taxpayers have already received their Stimulus payment of $1200. These taxpayers may not be filing their tax returns in general. There are letters along with the 10th November event which would advise the taxpayers to use the Non-filers – Enter Info Here tool. This tool is available on the IRS.gov website and is helpful for the common taxpayers.    

Mainly, this tool has been designed for both couples and individuals. Single individuals who have an annual income below $12,200 and married couples who have an annual income of less than $24,400 and are not claimed as dependents by anyone else can use this tool. Moreover, the IRS Non-filers tool is also useful for those single individuals and couples who are homeless.

Can college students file for Stimulus Payment?

Any eligible college student who is self-supporting who does not file his tax returns and also did not obtain his Stimulus Payment from the IRS can get himself registered by 21st November for obtaining their Stimulus payment before the year 2020 ends. In case you are a self-supporting student registering for obtaining the Stimulus Payment and you are filing your tax returns as a single individual then he would be eligible to receive a Stimulus payment of $1200. Moreover, if the student is married and is filing a joint tax return then you would obtain $2400. Furthermore, in case you are having a dependent child then you would be receiving an additional $500 for each child who is eligible.

 Suppose, you are a student who must file a tax return then you must not use the Non-Filers tool. You would be able to claim the Economic Impact payment by Recovery Tax Rebate while you are filing your taxes for the year 2020. Those students who are self-supporting and do not need to file a tax return can use the Non-filers tool. In case, you have been working throughout the year and have taxes being deducted from your paycheck then you must file for a tax return even if you are below the income thresholds as defined by the IRS.

Conclusion

So, with the time running out the IRS encourages everyone who meets the eligibility requirements to register faster before the deadline of 21st November arrives.  In case, you are missing this deadline you would have to wait and then file a tax return next year in order to claim the payment in the form of Recovery Rebate Credit.

All you need to know about Paycheck Protection Program as an NRI in the US.

by | Dec 21, 2020 | NRI, NRI business, NRI Norms

All you need to know about Paycheck Protection

Program as an NRI in the US.

What is the Paycheck Protection Program?

The Paycheck Protection Program is a type of loan which has been created for helping businesses in the maintenance of their workforces during these adverse pandemic times. All types of loans taken by the business would be forgiven by the US Small Business Association (SBA) if the major criteria of retention of employees are met and the funds are being utilized for those business expenses which are eligible.

The Paycheck Protection Program (PPP) was a program of $350 billion whose major intent is to provide the small businesses in America with cash flow assistance of 8 weeks through 100% federal loans. In late April 2020, the Paycheck Protection Program was expanded by an addition of $310 billion into the funding of this program. The deadline for applying for the Paycheck Protection Program has expired since 8th August 2020 but there can be an extension if there is another relief bill that is signed into law.

Major highlights of the Paycheck Protection Program.

  • The Paycheck Protection Program loans would have an interest rate of 1%.
  • The benefits of the Paycheck Protection Program can be availed by all the small businesses of America.
  • No personal guarantees or collateral are needed for those businesses which are availing of this program.
  • The Paycheck Protection Program loan has a maturity rate of 2 years and an interest rate of around 1%.
  • No fees would be charged from the small businesses either by the Government or by the lenders who are availing of this loan.

What is the working procedure of the Paycheck Protection Program?

Small businesses that have around 500 employees or even fewer employees, other independent contractors, sole proprietors, or those NRIs who are self-employed are eligible for availing the benefits of the Paycheck Protection Program.

  1. Sole proprietors would need to submit Schedule C from their tax returns filed which would provide details of the net profit that has been obtained from the proprietorship.
  2. Those NRIs who are independent contractors must submit Form 1099-MISC along with the Schedule C.
  3. The NRIs who are self-employed need to submit their payroll tax filings which have been reported to the IRS.

 The Paycheck Protection Program loan would be completely forgiven if the fund from the loan would be utilized for interest on mortgages, payroll costs, utilities, and rent as well.  There is no necessity for making the loan payment until the forgiveness application of the NRI has been processed or 10 months after the covered period of the loan ends.

 How much money can be borrowed by the Paycheck Protection Program loan? 

  1. In case of being a small business, you would be eligible to receive a loan which would be up to 2.5 times the average monthly payroll costs for the previous year.
  2. In the case of the NRI being self-employed or a sole proprietor, the loan amount that can be obtained is mainly calculated based on the payroll cost of the proprietor incurred in the last year. The full amount is up to $100,000 which can be the maximum limit that can be claimed by the small businesses.

 What is the loan period for the PPP loan?

 The loan period is for 8 weeks from the date of loan origination. This is the actual date on which the NRI borrower would receive the loan amount in actual. The interest payments on the Paycheck Protection Program loan will be deferred by around six months. This loan is due in two years and no penalty is charged for pre-paying the charges. However, the loan period has been extended to around 24 weeks.

 How can your Paycheck Protection Program loan be forgiven?

 By loan forgiveness, the loan can be turned into a non-taxable grant. The entire loan or a part of the loan which would be received by small businesses under the Paycheck Protection Program can be forgiven if the owner would keep all the full-time employees on their payroll or if you are re-hiring your employees again within 24 weeks of receipt of the loan.

 For the loan amount to be forgiven a minimum of 60% of your loan should be utilized in funding the business payroll and the employee benefit costs as well. Only 40% of the amount that has been forgiven could be used for the non-payroll expenses like the payments of mortgage interest, payments of rents, utilities, etc. Forgiveness will not occur until the end of the 24-week employment period occurs after the loan amount has been received.  Businesses must ensure that they must keep proper records and have proper bookkeeping as proof of the business expenses that have been incurred during the loan tenure.

 Conclusion

 So, the Paycheck Protection Program would be of great help for those who have incurred losses in business due to the pandemic and these coronavirus relief plans are evolving at a constant pace.

All you need to know about Tax Deductions for Contributions for the NRI in the US.

by | Dec 18, 2020 | Tax Deduction, Tax Deduction Ideas

All you need to know about Tax Deductions for Contributions

for the NRI in the US.

Giving Tuesday is said to be a day when individuals and businesses are helping the needy by making various charitable contributions. This would also increase the possibilities by which the tax bills of NRIs can be trimmed before the year 2020 comes to an end. The Giving Tuesday this year would be even more special as a lot of people are having genuine needs due to the adverse impact of the pandemic COVID-19. However, it is also necessary to understand which organization would qualify as a charitable organization.

NRIs in the US are aware of the concept of donating for charity and then writing off the donations made. However, there seems to be some confusion related to the exact concept behind this. Some Americans consider that contributions made to any organization can be deducted. Some others feel that the value of time that has been spent on volunteering can be deductible. But, the concept behind both these ideas is not true. Let us check out the real concept underlying the tax deductions related to charitable contributions and their functioning.

Charitable Contribution

According to the IRS, charitable contributions occur for an NRI when he donates money which can include securities, goods/services, or business ownership to a particular organization. The market value of the contributions made would be deducted from your income tax returns.

The IRS has specified that for any particular donation or contribution to be qualified as charitable it must be made to a qualified organization. If contributions are made to any political parties, individuals, and any other candidates then those contributions are not tax-deductible. In general, the only deductible charitable donations are those contributions that are being made to a scientific, literary, educational or religious organization that has a 501(c) (3) status obtained from the IRS. NRIs can use the IRS Search Tool to have a clear understanding of which organization qualifies as a charitable organization.

Different categories of contributions

In addition to money, other things which can be donated or contributed are:-

  1. Artwork
  2. Clothes
  3. Vehicles
  4. Jewellery
  5. Valuable items 
  • Any of these above-mentioned items contributed would qualify for a tax deduction.
  • In case, if the value of the contributions made is $250 or more than that then a written acknowledgement has to be obtained from the charitable organization about the donation.
  • In case, if the value of the charitable contributions which are non-cash is more than $500 then the NRI would have to mention some information about the charitable organization and the donation that was made while the income tax return would be filed.

Volunteering

Many NRIs consider the time which they have spent in volunteering can make them eligible for tax deductions. However, this is not legal according to the guidelines of the IRS. The value of a particular person’s time is completely different from the value of another person’s time and it is difficult for the IRS to verify the worth of a particular person’s time. It is also not feasible to deduct any of your expenses related to volunteering for taxes. However, costs like the cost of gas, oil, uniform, air/bus transport, etc. which is related to your volunteering work can be deducted for tax.

Paperwork required

  1. When making charitable contributions and using them for availing tax deduction is the intent then the paperwork is the most necessary thing.
  2. Any kind of cash/non-cash contribution which is of the value of $250 or more will need a written acknowledgement from the organization to which the charity has been made.
  3. Also, IRS Form 8283 must be included along with your income tax returns for the non-cash donations which are more than $500 in value, and for the non-cash property which is more than $5000 in value.
  4. Moreover, the qualified appraisal would also be needed for any non-cash property or non-cash donations that have been made by an NRI.

Deduction of charitable donations

  1. If an NRI is donating to a qualified charitable organization, the contributions made can be eligible for tax deduction only when the deductions are itemized and are not claimed as Standard Deduction.
  2. According to the guidelines of the CARES Act, a new charitable deduction of up to $300 would be permissible on the taxes of 2020 if cash donations are made for a 501(c) (3) organization and the deductions are not itemized.

 Conclusion

 Hence, charitable donations made to proper charitable organizations would be helpful from the tax deduction point of view. The NRIs must have a clear view of the rules associated with charitable contributions and tax deductions to avail the benefits easily.

Tax Deductions for Charity and Donations this Christmas available to NRI’s in the US.

by | Dec 16, 2020 | Charitable Contributions, Charitable Deduction, charitable donations, Foreign Trust Schemes

Tax Deductions for Charity and Donations this Christmas available

to NRI’s in the US.

If you are an NRI and are planning to make donations for this Christmas, then your charity and donations would definitely have an impact on your tax deductions.

You should not be influenced by the scammers in light of the charitable opportunities that have occurred due to the various events being triggered throughout the year. You must ensure that the charity or donations done by you during Christmas are done to a 501(c) (3) non-profit organization. 

Qualified organizations would include non-profit organizations that are educational, charitable, religious, scientific, or literary. The IRS website would help you in determining if the organization to which you are donating is a qualified one or not.

Due to tax reforms, there have been various changes introduced in the itemized deductions, but the deductions related to charitable donations remain mostly the same with a few changes. If you are making any donations of money or goods this Christmas, then you can claim your donations by itemizing your tax deductions. In general, if you are opting for a Standard Deduction then you would not be able to claim any deduction for your donations but there have been certain changes under the CARES Act.

As per the guidelines of the CARES Act, there would be an addition of a new charitable deduction up to $300 on your taxes for this year if your donations have been made to a 501(c)(3) organization and even if your tax deductions are being itemized. You must keep this in mind as most of the NRI taxpayers claim the standard deduction and do not itemize thus, making it infeasible to deduct the donations under the tax reforms.

There have been certain changes made to the provisions related to tax reforms. These changes would include the below-mentioned points: –

  1. The percentage limit of the cash contributions which have been made for public charities has increased from 50% to 60% of your AGI (Adjusted Gross Income). But, the CARE Act would eliminate the limit placed on the deductions availed for cash contribution if you are itemizing your deduction.
  2. While you would be able to claim around 80% of the donation made for seat rights like tax reforms, you would not be able to claim any of these donations as a tax deduction.

 Standard Deductions and Itemized Deductions. 

Due to the tax reforms, around 90% of the NRIs would now opt for Standard Tax Deduction which was around 70% during the previous years. For the tax year 2020, the standard deduction has been increased to $12,400 for those who are filing returns as single individuals or has increased to $24800 for those who are married and filing their tax returns jointly. In case, if you are filing the tax returns as the Head of the Household then the permissible Standard Deduction is $18,650. You can either claim your Standard Deduction or itemize the tax deductions based on your expenses which are tax-deductible.

It might happen that you might be in the category in which the standard deduction is more than the itemized deduction and you would choose Standard Deduction.  

If you are closer in proximity to the Standard Deduction threshold it is feasible to increase your tax deductions and then itemize your deductions if the charity is done towards the end of the year. By doing so, you would be helping someone who might be in need and also would increase your tax returns. 

For example, state and local taxes to be paid are around $10,000, $8,000 for mortgage interest, and $2,000 for the charitable contributions, which totals to $20,000 of itemized deductions. If you are filing your tax returns as a single individual, you would prefer to itemize your deductions since $20,000 is greater than $12,400 which is the standard deduction. However, if you are filing as a married couple you will be claiming the standard deduction of $24,800 instead of itemizing your deductions unless you end up with about $5,000 more in itemized deductions.

 Conclusion 

Hence, you should not worry about the standard deduction threshold or itemizing deductions. You can follow the IRS guidelines and know in detail about these changes related to the deductions and itemizing.