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

How high deductible health plans would help in providing cover against COVID-19 expenses?

by Mounica Kota | Mar 31, 2020 | COVID - 19, federal government, HDHP, HSA, Relief notice 2020-15, tax deadline, Tax Extension, Tax Payers, taxes, US Government

How high deductible health plans would help

in providing cover against COVID-19 expenses?

Lately, people across the world have been struggling hard to combat the dreadful effects of the pandemic COVID-19. The number of deaths occurring due to coronavirus is on an increase and is also leading to an increase in the fright of the common people. Any symptoms of the COVID-19 and there have to be several tests, quarantining without any idea about what the future holds.Amidst all this chaos, the US Government has taken some very necessary steps to lessen the stress among common people. Extension in the tax return filing and tax payment deadlines, extension in the deadline for making contributions to IRA and HSA, Tax stimulus package, Families First Coronavirus Response Act, etc. are some of the major changes implemented by the US Government to bring some relief to the impacted taxpayers. Another major initiative taken by the US Government for helping the common people is the implementation of testing /treatment of COVID-19 by HDHP with no deductible or sharing of the cost.

What is a High Deductible Health Plan (HDHP)?

What is a High Deductible Health Plan (HDHP)?

A high deductible health plan (HDHP) is a type of health insurance plan which has a lower premium in a month and a higher deductible. HDHPs are more affordable by common people in terms of their monthly premiums. Since the name suggests, high deductible health plan; it implies that the deductible for the health plan is high than that of a traditional healthcare plan. However, by the time the policy holder reaches the annual deductible, he would be covered 100% for the rest part of the calendar year.

A high deductible health plan is suitable for those policyholders who are quite healthy and rarely visit the doctor. In these types of cases, HDHP is an excellent option to cut expenses and it is a better option rather than going without health insurance. However, it should be kept in mind that the policyholder must set aside a considerable amount of liquid savings which would help in covering the deductible and the out-of-pocket expenses.

How does a High Deductible Health Plan work?

How does a High Deductible Health Plan work?

The minimum deductible in an HDHP is $1350 for an individual whereas it is around $2700 for a family. The out-of-pocket expenses for an HDHP are limited to $6650 for an individual and $13300 for a family. To offset the cost of the HDHP it is necessary to open a Health Savings Account (HSA). The HSA offers a tax-advantaged method by which healthcare costs can be saved.

There is a limit on the annual contribution which can be made to the HSA; it helps in rolling over the balance from one year to another. It is ideal for a policyholder to contribute the amount of deductible of HDHP into the HSA so that there are enough funds to cover the medical expenses.

HDHPs and expenses associated with COVID-19

HDHPs and expenses associated with COVID-19

The US Government issued a notice i.e. Notice 2020-15 which states that a health plan which satisfies the requirements to be a high deductible health plan (HDHP) shall not fail to be an HDHP if it provides health benefits related to the testing of COVID-19 and its treatment. This testing and treatment of COVID-19 by the HDHP would be available without a deductible or with a deductible which is below the minimum deductible. So, the evident implication from this notice is that an individual who is covered under the HDHP will still be an eligible individual who might make tax-favored contributions to an HSA.

The Notice 2020-15 also states that all the medical care services received and the materials purchased for the testing of COVID-19 which are provided by a health plan which is either without a deductible or with a deductible that is below the minimum deductible needed for a health plan to be HDHP should be disregarded.

The relief provided by the Notice 2020-15

The relief provided by the Notice 2020-15

This notice does not modify any of the requirements or conditions which are needed for a health plan to be an HDHP other than the relief related to the testing/treatment of COVID-19. However, vaccinations would continue to be considered as preventive care materials for determining if a health plan is an HDHP or not.

So, if a policyholder is availing a health plan with no deductible or less deductible than the minimum annual deductible needed to be an HDHP for testing/treatment of COVID-19 he would still make contributions to the HSA which can help in tax relaxation.

Conclusion

Hence, this effort by the US Government for providing some relief to the affected citizens is commendable and would be helpful for the citizens in these times of distress.

References

What are the tax relief initiatives taken by the IRS for self-employed taxpayers during COVID-19?

by Mounica Kota | Mar 28, 2020 | COVID - 19, federal government, FFCRA, global income tax, IRS, self employed, Tax Extension, Tax Payers, taxes, US Government

What are the tax relief initiatives taken by the IRS

for self-employed taxpayers during COVID-19?

The US Government has recently made changes into the tax filing timelines as an effort to provide some relief to the taxpayers who are already suffering due to the outbreak of pandemic COVID-19. These changes were jointly announced by the US treasury and the IRS and are applicable for individual taxpayers, businesses and even self-employed taxpayers.

The US Government has extended the income tax filing deadline to 15th July 2020. The IRS would be processing the refund process for all the taxpayers within the normal time frame which is around 21 days for those filing the tax returns by electronic medium or by direct deposit.

Tax-filing extensions for self-employed taxpayers

Tax-filing extensions for self-employed taxpayers

The tax filing timeline has been extended for 90 days without the payment of any penalty and this change is also applicable on the estimated tax payment for the year 2020 which was also due on 15th April 2020.

For self-employed taxpayers, if there is a filing of the quarterly estimated tax then first-quarter filing must be due by 15th April 2020 previously. The timeline for the filing of the first quarter estimated tax has now been extended to 15th July 2020. However, for the other quarters, the filing dates remain unchanged such as the tax filing deadlines remain 15th June 2020, 15th September 2020 and 15th January 2021 for the second, third and fourth quarters.

The Families First Coronavirus Act

On 18th March 2020, the US President signed into law the Families First Coronavirus Act which is the initial coronavirus relief bill. This Act provides several benefits to self-employed taxpayers and small-business owners.

1.Comparable tax credits for self-employed individuals

a.If a self-employed individual is affected by the coronavirus, then by this Act he is eligible to claim a refundable credit against the bill of his federal income tax including the self-employment tax hit. In case the credit is more than the bill amount then the Government will issue a payment for the excess to the taxpayer.

b.This refundable credit will equal to the sum of 100% of the self-employed individual’s sick leave equivalent and 67% of the sick leave equivalent amount needed for taking care of a family member who is sick or for taking care of the individual’s child due to the closing of the child’s school or child care center.

c.The sick leave equivalent amount would equal to lesser among the below-mentioned

average daily self-employment income of the individual or
$511 each day for up to 10 days for self –care due to the COVID-19 or $200 each day up to 10 days for the care of a sick family member or child after the latter’s school has been closed due to COVID-19.

d.Moreover, self-employed individuals can claim a family-leave credit due to COVID-19 up to 50 days. The amount of this credit would be equal to the number of the qualified family day leaves multiplied with the lesser amongst $200 or the individual’s average daily self-employment income. The maximum total family-leave credit permissible is $10,000 which is equal to 50 days multiplied with $200 per day.

e.These credits which can be availed by the self-employed individuals are allowed only for the days during a particular period which is specified by the Treasury up to 31st December 2020. The beginning date is most likely to be within 15 days of the date this Act became a law i.e. 18th March 2020.

f.The self-employed individuals must maintain proper documentation needed to claim these credits.

2.Small Business Owners Tax Credits

A small business owner is eligible to collect a tax credit which is equal to 100% of the qualified emergency sick-leave and family-leave payments made by him under the Families first coronavirus Act.
This credit would only cover those leave payments which are made during the period specified by the Secretary of the Treasury up to 31st December 2020.
This credit can also be increased for providing cover to a portion of the small business owner’s qualified health-plan expenses which can be allocated for emergency sick-leaves and family-leave wages.
However, this credit would not be available for those employers who are already receiving the pre-existing credit for paid family leave and medical leave under IRS Code Section 45S.

Conclusion

Hence, with the outbreak of the COVID-19 the self-employed individuals and small business owners have also suffered from certain economic and financial disruptions. The attempt of the US Government to bring certain relief to these taxpayers by changing tax laws and by passing the Family First Coronavirus Act is sure to be successful.

References

https://blog.turbotax.intuit.com/self-employed/what-the-coronavirus-relief-means-for-self-employed-taxpayers-46585/

https://www.marketwatch.com/story/what-the-family-first-coronavirus-relief-bill-means-for-small-business-owners-and-self-employed-people-2020-03-21

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

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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