COVID-19 tax relief to the small business owners

by | Oct 12, 2020 | COVID - 19, income tax, tax filing, tax form, Tax Payers

COVID-19 tax relief to the small business owners

The pandemic COVID-19 has affected the economic condition across the entire United States. Business owners all over the country are struggling to survive and lower the impact of the pandemic on their business. Meanwhile, the US Government has introduced various forms by which tax relief can be obtained by the small business owners in the year 2020. Most of these changes belong to the FFCRA (Families First Coronavirus Response Act) and the CARES (Coronavirus Aid, Relief and Economic Security Act). These changes in tax regulations would be helpful for the business owners and the employees to survive the crisis caused by the pandemic.

  Employee Retention Credit

 The Employee Retention Credit is a part of the CARES Act which is mainly designed to keep the employees on the payroll during the times of pandemic.

  • The refundable tax credit which is available is 50% of up to $10,000 in the wages that have been paid to the employees by a business owner whose business has been impacted by the COVID-19.
  • This credit is available to all the employers irrespective of the size of the business and it also includes tax-exempt organic
  • There are only two exceptions i.e. State and Local Government and their instrumentalities and those small businesses which take small business loans such as the PPP loans. 

The qualifying employers for obtaining the Employee Retention Credit must fall into either of the two below-mentioned categories: – 

  1. The employer whose business has been suspended completely or partially by the Government because of the coronavirus pandemic during this quarter.
  2. The gross receipts by the employer are below 50% of a similar timeframe in the year 2019. If the employer’s gross receipts are more than 80% of a similar timeframe in 2019, then they are not eligible for the credit after the quarter-end.

 Paid Sick Leave Credit and Family Leave Credit

 Paid Sick Leave Credit is designed in such a way by which the business would be eligible to obtain credit for an employee who has not been able to work because of having symptoms of coronavirus and is being quarantined or self-quarantined.

  • Employees are entitled to the paid sick leave for up to 10 days at the regular rate of pay up to $511 in a day and $5110 in total.
  • Employers are also eligible to receive credit for payment of those employees who are not able to come for work due to caring for a family member who has been affected by COVID-19 or for taking care of a child whose school/daycare is closed due to COVID-19.
  • These employees would receive paid sick leave for up to two weeks at the two-third rate of the employee’s regular payment or up to $200 in a day and $2000 in total.
  • Moreover, employees can also avail paid family and medical leaves which would be equal to two-thirds of their normal pay ranging up to $200 in a day and $10,000 in total.
  • Also, qualifying leave of 10 weeks would be counted towards the family leave credit.
  • Eligible employers or business owners can immediately receive this credit for sick leave and family leave along with the expenses for a health plan and the employer’s portion of Medicare tax on the employee’s leave.
  • The employers eligible for receiving these credits will report their qualified wages and the associated cost of health insurance for each quarter on their employment tax returns for each quarter or by filing Form 941 which begins with the second quarter.
  • In case, the employment tax details of the employers are not enough for covering the credit then the business owner can submit Form 7200 and receive the advance payment from the IRS.

 Deferred Payment of Payroll Taxes

 By the CARES Act, employers are allowed to defer the payment they do for their employee’s portion of the Social Security Taxes. These taxes would have been due in between 27th March 2020 and 31st December 2020. The employers can make these payments in the form of instalmentse. half by the end of 2021 and the other half by the end of 2022.

  • There is no necessity of special election for the businesses for the deferment of their deposits and payments. The IRS is working on the process of revision of Form 941 for reflection of these changes.
  • This option can be availed by most of the employers; however, those employers who have received the PPP loan would be able to defer the payments until receiving notice that their PPP loan has been forgiven.

 Conclusion

 So, these credits and tax rules will help the small business owners to save their business and also lower the impact of COVID-19.

Can a property be seized if you owe back tax to the IRS?

by | Oct 12, 2020 | IRS, owe taxes, property tax, tax filing, Tax Payers, Taxtips

Can a property be seized if you owe back tax to the IRS?

“Can the IRS seize my property if I owe taxes?” This is properly the first question every person who owes tax to the IRS enquires. The mere thought of losing their most valuable asset can create a sense of terror and fear in the minds of taxpayers who might have taxes due to the IRS. However, this might depend on why you owe taxes to the IRS, how much tax you owe, and your financial circumstances.

 The IRS has the authority to seize the property of a taxpayer if the taxpayer has been neglecting or avoiding payment of taxes to the IRS.  This process is otherwise known as Tax Levy. By Tax Levy, the IRS has the legal authority to seize a taxpayer’s property which might include a real estate for the settlement of taxes for which there have been several notices sent to the taxpayer.

 When will the IRS seize your property?

  • Seizure of your property is the last method which the IRS might follow for the settlement of the back taxes.
  • Before the seizure of your assets, the IRS would take the below-mentioned steps for the tax settlement: –
  1. The IRS would assess your outstanding tax and would issue a notice to you which would be demanding for the payment of the taxes.
  2. If you have neglected the notice sent to you by the IRS, then
  3. You will be sent a final notice of intent to levy and also a notice of your right to have a hearing before 30 days of the implementation of the tax levy.

 If the IRS decides to take your property 

  • The IRS would calculate and provide you with the minimum bid price of your property.
  • If necessary, you can challenge the price laid off by the IRS and state the fair market price of your property.
  • The IRS would issue a notice and make the announcement for sale of the property.
  • After the announcement, the IRS waits for 10 days before your property is sold off.
  • The entire amount obtained from the sale of the property would be used to recover the expenses incurred in the property seizure, selling of the property, and payoff of your tax debts.
  • You will obtain a refund if any amount is left out after the sale is over and if any excess money is left out.

 Will the IRS visit your home?

 The IRS representative can visit you for tax-related discussion only in circumstances such as

  • You owe taxes to the IRS and there is a need for a discussion.
  • There is an audit process
  • If there is a criminal investigation needed

 However, there has been an increase in the fake IRS visits and tax scams lately which urges the taxpayers to be aware of their rights. You have the right to verify whether the IRS representative is authorized or not by asking for their credentials. 

What are the other properties which the IRS can seize?

 By a tax levy, the IRS can be able to seize the below-mentioned properties. 

  1. Real estate
  2. Your vehicle
  3. Wages by Wage Garnishment
  4. A levy can be put up on your bank account
  5. Investments and collectibles

 Can you get back your seized property?

 In case, you want to get back your seized property you would have to take some immediate action for resolving the tax debt. You must get in touch with the IRS to request a release of your seized property. Moreover, help from a tax professional would help you in the expedition of the process. In case the IRS would not approve your request for the release of the seizure, you can have an opportunity to appeal against it.

 There are certain circumstances in which the IRS would have to undo the seizure of your property. 

  1. Your seizure can be released if you have fulfilled your tax liabilities.
  2. If the tax collection period got completed before the seizure of your property was done.
  3. If you have enrolled in an installment agreement program and the agreement does not allow the seizure of property.
  4. If by the release of your property, you would be able to cover your tax balance.
  5. If by the seizure of your property, you would be facing some economic hardships and would not be able to avail of the necessities of life.
  6. If the value of the property seized by the IRS would exceed the tax owed and the release of the property would not prevent the IRS from the tax collection.

 Protection of your assets from the IRS

 If you want to avoid any kind of trouble with the IRS, then you must be careful about the rules. Either paying of your taxes or responding to the IRS notice, everything must be done on time and carefully.

 Some of the basic steps by which you can take to prevent a tax levy are:-

  1. Find out methods by which you can utilize your finances to cover up your tax debts.
  2. In case you are not able to pay off your entire tax debt in full, then you can enter into an installment agreement.
  3. You can check with the IRS if it is feasible to classify your taxes as uncollectible.
  4. You can also try to request the IRS for an offer in compromise.

 Conclusion

 As a US taxpayer, you must fulfill your civil responsibilities on time. Ignoring or neglecting the notices or communication obtained from the IRS can lead to serious consequences. So, you must abide by the laws, regulations and must take matters related to the IRS quite seriously.

SBA Debt Relief for small business owners

by | Oct 9, 2020 | Blog, income tax, IRS, Tax Deduction, tax filing, Tax Payers, Tax Refund, tax return, Taxtips

SBA Debt Relief for small business owners

The pandemic COVID-19 has created a lot of financial problems for people across the country. People from every profession are facing several economic issues due to the coronavirus and are continuously struggling to lower the impact of the pandemic on the profession/work-related front. However, if you are a small business owner then your business must have been impacted badly by the spread of the COVID-19. So, one of the ways by which you can be able to obtain some financial aid during these challenging times is through the US Small Business Administration (SBA) Debt Relief Program.

SBA Debt Relief Program

The SBA is a part of the $2 trillion packages offered by the US Government under the provisions of the CARES (Coronavirus Aid, Relief, and Economic Security) Act. It can be described as a debt-payment assistance program that would help in providing immediate relief to the various small businesses in the United States with the help of Small Business Administration Loans.

By the SBA Debt Relief Program, financial assistance can be provided to small business owners by making a payment of principal, interest, and any other fees which the borrowers owe for the current 7(a) loans, 504 loans, and other Microloans as well.

How to participate in the SBA Debt Relief Program?

If a business is eligible to participate in the SBA Debt Relief Program there is no need for any application. Participation is automatic. The SBA has given instructions to the different lenders for not collecting any loan amount during the debt relief period. The SBA has said that it would make the loan payments for these borrowers.  According to the provisions of the CARES Act, the SBA should start making the payments within a month of the date on which the first payment of the loan taken needs to be done.

  1. In case the loan payment of a borrower was to be collected after 27th March 2020, then the lenders were provided with the instruction to inform the borrower about having the option of loan payment returned or applying the payment for even more reduction in the loan balance after the payment has been made by the SBA.
  2. If the loans are not deferred then the SBA can start making the payments on the due date of the next payment and will be making the payments for 6 months.
  3. For those loans which are on deferment, the SBA will be making the payments with the immediate next payments that are due after the end of the deferment period. The SBA will be making the payments for the upcoming 6 months.
  4. In the case of those loans which have been made after 27th March 2020 and have been fully disbursed before 27th September 2020, the SBA will make the payments. The SBA will start with the first payment which is due and would do the payments for the upcoming 6 months.

Can the SBA Debt relief program be applied to PPP and EIDL loans?

  • The Debt Relief Program by the SBA does not apply to the Paycheck Protection Program (PPP) loans to or to the Economic Injury Disaster Loan (EIDL).
  • EDILs which have the status of regular servicing which means when the loan is in a closed state with accordance to the Terms and Conditions of the loan authorization, the payment for the final disbursement has been made and the SBA guarantee fee has also been paid as of 1st March 2020, automatic deferments would be provided by the SBA through 31st December 2020.
  • However, interests would keep on accruing during this period.

 Can you get a PPP loan even if you have received the SBA debt relief?

 Yes, even if you have received the SBA Debt Relief you can fill an application for obtaining the PPP loan. You must keep in mind that the procedure for obtaining a PPP loan is different from that of the process for obtaining the SBA Debt Relief.

 

Conclusion

 So, the SBA Debt Relief is an excellent initiative by the Government to alleviate the distress caused to the economic condition of the small businesses within the country due to the pandemic COVID-19. The borrowers might have several queries related to the SBA debt relief program and must contact their lenders for this purpose.

 

Tax Implications for buying/selling stocks

by | Oct 8, 2020 | Tax implications, Tax Payers, tax return, taxes

Tax Implications for buying/selling stocks

The pandemic COVID-19 has created an adverse impact on the economy of the entire world. Millions and millions of Americans have taken the advantage of the low stock prices and purchased many stocks. Many have sold their stocks and withholdings due to market fluctuations and economic causes too.

 However, if you have sold or even purchased stocks during this pandemic stricken period you must be willing to understand various tax implications on this. Moreover, you might also be inquisitive to understand the differences between long term and short term capital gains.

 So, let us talk about some of the major areas and topics associated with the tax implications on the stock market.

 

Taxes levied on the Capital Gains

 On selling of the shares of winning stock, you would have created Capital Gains. If you are selling your shares during a downturn, you must keep in mind that you might obtain again depending on the duration for which you have held the stock.

 

Suppose, you have sold a stock at a rate of $80 per share, which is d downturn from the $100 price of each share. You might think that this stock has lost its value and is apt for sale; however, if you would have purchased the stock before 10 years at the cost of $20 for each share you will have a $60 gain and not a $20 loss on each share.

 

So, in case you had 100 shares of that stock your cost price at the $2000. By selling the shares at $8000, you would be able to recognise a long-term capital gain which would be at around $6000.

 

In case, you are in the tax rate bracket of 15% long term capital gains then you would have to pay federal taxes of around $900 when the stocks are being sold.

 

Long Term Capital Gain and Short Term Capital Gain

In case you have been holding a security for a period of more than 1 year, then on the sale of that security, you will be eligible to obtain long term capital gains at the tax rates of 0%, 15%, or 20% based on the income.

  • However, if you obtain the same gain from the sale of stocks which have been held for one year or even less then the short-term capital gains would be taxed at the same rate as that of ordinary income i.e. 10%, 12%, 22%,24%, 32%, 35% or even 37%.
  • If you are married and you have a combined taxable income of $150, 0000 along with your spouse. When this is your income level, you can have a long term capital gains tax rate at 15% and your Federal Income Tax rate would be 22%.
  • Then the capital gain of $6000 which you have obtained by selling security which you have held for one year or less would be $1320 and not $900.

Capital losses can be offset with Capital Gains

You should not feel disheartened if you have sold the losing stock and have faced capital losses. You can offset your capital losses with your capital gains. This procedure is known as Tax harvesting where investors realize their capital losses and offset their capital gains.

 Suppose, you had a capital gain of $10000 from the sale of a particular stock whereas, you experienced a capital loss of around $8000 on the sale of another stock. So, in this case, you can deduct the capital losses from capital gains. You would obtain $2000 long-term capital gain thus, reducing your capital gains and taxes.

 For instance, if your capital losses are greater than your capital gains, then you can deduct up to $3000 in a year in the form of allowable capital losses against the non-investment income. This would help lower your overall taxable income.

 However, in the case of 2020 if there has been a loss of $8000 by the sale of stock then there are no gains offset it against. You can deduct $3000out of that loss against the non-investment income. The remaining $5000 can be easily carried forward into the subsequent years. This can be either deducted against the future capital gains or can also be written off against the non-investment income. This can be done at the rate of $3000 in a year until the complete loss has been deducted. 

 

Net Investment Income Tax

This is an additional tax that you might face depending on your income. The IRS had started implementing the Net Investment Income Tax for partial funding of the Affordable Care Act.

By this, an additional tax of 3.8% would be imposed on your investment income if the thresholds are exceeded by your Modified Adjusted Gross Income.

 These thresholds can be listed as

  1. Married jointly- $250,000
  2. Married but filing tax returns separately – $125,000
  3. Single or the Head of a household – $200,000
  4. You re a qualifying widow/widower along with a child – $250,000 

 The Net Investment Income Tax applies not only to the income from capital gains but also the investment income which has been derived from dividends, interest, rental income, royalty income, and also non-qualified annuity income.

Conclusion

 So, this information would be helpful for you in understanding the various tax implications imposed on the purchase or sale of stocks.

The top 10 myths busted for taxpayers in the US-2020.

by | Oct 7, 2020 | IRS, Tax Payers, tax return

The top 10 myths busted for taxpayers

in the US-2020.

It is quite obvious that there are some common misconceptions among the taxpayers related to various facts related to taxes. Some taxpayers feel paying taxes is not necessary and can be avoided whereas certain tax deductions have been labeled as loopholes. Some taxpayers even follow the bad tax advice from others blindly and land up in troubles. 

So, let us understand some of the major myths associated with the taxes in the US and debunk those myths to be better taxpayers.

 

Myth 1:- Filing of taxes is a voluntary activity.

Even if this can be considered as falsehood, there are a large number of people who believe in this. These people think that due to the Form 1040 instruction book, the tax system is voluntary and people are not legally liable to pay taxes.

Here the term voluntary means that every individual would find out how much tax they owe, but has no relations if the filling of taxes is done on time or not. Unless there is a legal dispute, it is a bad idea to think about such theories to contest with the IRS.

 

Myth 2:- Illegal activity is not taxable.

Even if performing illegal activities is wrong, it cannot be considered non-taxable. The income obtained from illegal activities is taxable. If the entire scenario is being considered from a tax perspective, then the IRS does not care whether income obtained is by robbing banks or by defrauding investors. When an individual is making money, the Government is entitled to receive its share. The person can be very good at covering the tracks but, if illegal income is made and on top of that tax cheating is done it is sure to be exposed.

 

Myth 3:- Pets can be claimed as dependents.

A person might love his pets up to any extent, but he cannot claim them as dependents. Pets indeed obtain half of their financial support from the masters; but, they are not humans. If a dependent is being claimed falsely, then it would be counted as a fraud and must be avoided.

 

Myth 4:- Students do not need to pay taxes.

It can be said that this myth is partially true. If a student is being claimed as a dependent of someone else who has an income less than $12,200, then he would not have to pay taxes. But, the students should file their taxes. If the student would have an employer who would be withholding money due to some purposes then the student can receive a refund.

 

Myth 5:- Online income is free of taxes.

This type of rumor might have started as those who are doing business online do not fill the Form W-9 and report their income to the IRS. But, the IRS does not consider income earned from online different from that of the income earned offline. Irrespective of the medium, if you are earning more than $400 you will have to declare the income on your tax returns.

 

Myth 6:- The IRS would file a tax return for you.

IRS can verify your tax returns but waiting for your returns to be filed by the IRS would be quite disappointing. Your tax returns have to be filed by you only and you cannot depend on the IRS for that.

 

Myth 7:- Home office deductions are equal to instant audit.

There was a time when this myth was almost considered to be the truth. But, with home offices becoming quite prevalent this fact has become a myth now. Claiming a home office would increase the scrutiny but they are quite common and reduce the fear of claiming a legitimate deduction.

 

Myth 8:- Lack of time to do taxes.

Since we have already covered the fact that taxes are not voluntary lack of time for not filing your taxes does not form a considerable factor anymore. There are several options available for making tax filing easier and lack of time cannot be considered anymore.

 

Myth 9:- Your tax mistakes are your accountant’s liabilities.

Even if you are hiring an accountant, the mistakes made in tax filing are your responsibilities ultimately. You should not assume that your accountant must have taken care of all details; rather you must double-check the details before the returns are filed.

 

Myth 10:- I don’t have enough money for being audited.

You might think that if your income is less you will not be audited by the IRS. However, your income has less connection with you being audited. Many other factors play an important role in your audits rather than your income. Even though the probability of being audited is more for those individuals who fall under the income bracket of $100k, still those falling below this bracket can also get audited. You must maintain a detailed record of any income which can be considered as questionable.

 

Conclusion.

So, these myths are the mysteries which many taxpayers in the US believe. However, these myths are far away from reality and taxpayers should avoid getting confused with these myths.

The top 10 FAQs answered for taxpayers in the US-2020.

by | Oct 4, 2020 | Tax Payers, Tax Planning, Tax Preparation, Tax Refund, Taxtips

The top 10 FAQs answered for taxpayers

in the US-2020.

There have been various changes in the tax laws due to the outbreak of the pandemic COVID-19. Due to the adverse impacts of the pandemic, millions of Americans have become unemployed and are facing a huge financial crisis. To alleviate the situation of economic distress which is being faced by the Americans the IRS has introduced various changes into the tax laws for the year 2020.

 The major change which was announced by the IRS was the postponement of the due date for filing federal income tax returns and for making the payment of the Federal Income tax. This due date was on 15th April 2020 which was postponed to 15th July 2020. Moreover, there would be no accrual of any interest or no penalties for failure in payment of taxes or failure of tax return filing by 15th April 2020. The interest accrual and penalties will begin after 15th July 2020. This relief has been made available for all types of taxpayers such as individuals, an estate, a trust, a corporation, or any business entity.

 Now, since there have been such important tax reforms introduced by the IRS there must be several queries in the minds of the taxpayers.  So, let us have a look at some of the major queries of the taxpayers related to the reforms in the tax laws. 

  • What do I need to do to avail of the extension of tax return filing due date from 15th April 2020 to 15th July 2020?

 No, you do not have to do anything to avail of the extension of the tax return filing due date to 15th July 2020. You will not have to file any additional forms or contact the IRS to avail of this relief in the tax filing deadlines. If you have to pay any taxes that are due, you can do that by 15th July 2020. After 15th July 2020, if you need a further extension then you would have to file a request for an automatic extension.

  • Is there a need to be sick, quarantined, or have any impact from COVID-19 to qualify for this relief?

No, you do not have to be sick, quarantined, or impacted by the COVID-19 in any form to avail of this tax relief introduced by the IRS.

  • How and by when do I need to make the payment for my first and second quarter Estimated Income Taxes 2020?

 The due date for the first quarter and second quarter Estimated Income Taxes was on 15th April 2020 and 15th June 2020. However, you can make both the payments by 15th July 2020. You can do this in the form of a single payment with an amount that is adequate for covering both the first and second quarter Estimated Income Taxes 2020.

  • What would be the due date for the rolling over of the entire or a portion of a qualified plan loan offset into a retirement plan?

If you are filing your Federal tax returns by 15th July 2020, then the due date to roll over a part of a complete qualified plan loan offset into an eligible retirement plan is by 15th October 2020.

  • I had made an excess contribution to my IRA during the year 2019. Is it feasible to avoid the excise tax if I withdraw the excess amount by 15th July 2020?

Yes, you can avoid excise tax if you withdrew the excess amount contributed by 15th July 2020. But, you must not have taken any deduction for the excess contribution which you have done. Moreover, you can even avoid the excise tax if you withdrew the excess amount not only by 15th July 2020 but also by 15th October 2020.

  • Are the tax return filing and payment deadline for exempt organizations, businesses, or any other entities which have the due dates for filing on 15th May 2020 or 15th June 2020 have been extended?

All the tax return filings and payments related to the Federal taxes which are from 1st April 2020 till 1st July 2020 have been postponed to 15th July 2020.

  • I wanted to file a claim for my Tax Refunds for the year 2016. This has to be done by 15th April 2020. Do the tax relief laws allow this claim to be done later?

   Yes, with the changes in tax laws you can file your claim for obtaining tax refunds for the year 2016 by 15th July 2020.

  • What do I need to do in case I have filed for an automatic extension for filing the 2019 tax returns? I owe Federal taxes to the IRS.

 You can file your tax returns by 15th October 2020; but, you will have to pay your taxes by 15th July 2020.

  • Has the IRS postponed the tax return filing deadlines for partnership firms and S-corporations which were due on 16th March 2020?

No, there has been no postponement by the IRS for the tax return filing deadlines for the partnership firms and S-corporations that were due on 16th March 2020. This tax relief is only for filings and payments which are after 15th April 2020 and before 15th July 2020.

  • Does this relief give me more time to contribute to my IRA, HSA, and Archer MSA?

Yes, you can make contributions to your IRA, HSA, and Archer MSA at any time in a year or by the tax return filing due date.

Hence, these common FAQs on the tax payments related to 2020 will resolve your queries related to the tax return filing and tax payments.