Tax relief measures for small businesses during the coronavirus pandemic

Tax relief measures for small businesses during the coronavirus pandemic

by | Mar 21, 2020 | COVID - 19, federal government, global income tax, income tax credit, Investment & Income, Tax credits, tax deadline, Tax exemption, Tax Extension, tax filing, Tax Payers, Tax Refund, taxes, US Government

Tax relief measures for small businesses

during the coronavirus pandemic

The entire nation has been affected by the dreadful coronavirus. The rapid spread of the COVID-19 across the country has affected the economy on a very massive scale. The business operation across the country has come to a standstill especially in the case of small businesses that are tax relief measures. Social distancing and quarantining have led to a decrease in the number of customers coming to purchasing impacting sales. Numbers of employees are also not going on work as everyone is forced to stay inside for preventing further spread of the disease. In such adverse situations where there are huge economic disruptions, the Government is working towards passing legislation that would help in providing financial relief to the businesses and taxpayers.

The Families First Coronavirus Response Act

On March 13th, 2020, President Trump had declared a situation of national emergency along with open access of States and Territories to $50 billion for the shared fight against the disease. Again on 18th March 2020, the Senate had passed the Families First Coronavirus Response Act. This bill was signed by the President on that day which included the below-mentioned highlighted points.

1.Federally mandated paid leave benefits and paid sick leave are to be provided to the eligible employees. The paid sick leave must be provided to the impacted employees for 14 days at the regular rate of pay i.e. max $511 per day. Moreover, employers should also provide the benefits of paid leave to the eligible employees for three months.

2.The availability of tax credits for both employers and self-employed taxpayers have been mandated to reduce the burden of employers arising due to the paid leave

 

Extension in tax payment and tax return filing deadline

The US Treasury Department and the IRS had announced that the deadlines for filing tax returns and tax payments that are due on 15th April 2020 are extended up to 15th July 2020. This extension is applicable for making filing tax returns for 2019, Income Tax payments for 2019 and the estimated income tax payments for 2020.

If there is a tax refund due, then the Income tax returns must be filed as soon as possible so that the refund can be obtained immediately and put to use in this time of crisis.

 

Low-interest loans guaranteed by the SBA

 

When there is a tremendous drop in sales, it becomes quite difficult to manage business expenses, employee wages, bills, etc. In such a situation, a business loan can be taken but then it will have a very high rate of interest. So, to ease down these worries the President has announced that the Government would provide more funds in the federal disaster loans which are backed by the Small Business Administration (SBA).  The loans provided by the SBA are known as the Economic Injury Disaster Loan.These loans would help in providing relief for the qualifying businesses in the below-mentioned forms.

 

  1. Loans at low-interest rates i.e. 3.75% for businesses and 2.75% for non-profit organizations.
  2. Repayment plans are long term in nature i.e. up to a maximum period of 30 years.

If a small business is facing financial issues and is not able to afford bills related to the payroll expenses, fixed debts and accounts payable then it can apply for an “Economic Injury Disaster Loan”.

 

Moreover, the federal and state financial regulators have been encouraging the financial institutions to work in a co-operative manner with those borrowers who belong to the affected communities.

Cash Payment by the Government

Another measure taken by the Government to provide relief to the small businesses is by providing the Stimulus package. Under this package, stimulus checks would be provided to US adults. On 27th March 2020, President Trump signed the CARES Act into law.

By this Act, cash payments would be provided to adult taxpayers up to $1200 for a single person and up to $2400 for couples. If there is a child, then the amount of the stimulus cheque will include an additional $500.

Those individuals who have earned $75,000 in the adjusted gross income (AGI) on the Income-tax returns of 2018 will be receiving a lower amount. Also, those individuals who do not have a federal tax liability will receive $600 under this proposal.       

 

Deferment of

any amount

The IRS has also announced any amount can be deferred related to the Federal tax.  In the Notice 2020-18, the IRS had stated that “there is no limitation on the amount of payment that may be postponed”. Previously, there was a dollar limit on the tax that can be deferred but later on 21st March 2020 this limit has been withdrawn.

This deferment or the postponement of tax payment has only been announced for the federal taxes and is not applicable for any other tax like excise taxes and payroll taxes.

Conclusion

Hence, the various legislations and implementations of new tax laws would be helpful for small business owners to avoid sleepless nights due to tax payments in times of low sales and disrupted business.

References

https://ssfllp.com/coronavirus-covid-19-tax-relief-for-small-businesses/

https://www.patriotsoftware.com/blog/payroll/small-business-relief-coronavirus-pandemic/

 

Families First Coronavirus Response Act: The new coronavirus relief bill

Families First Coronavirus Response Act: The new coronavirus relief bill

by | Mar 19, 2020 | CARES, coronavirus relief bill, COVID - 19, Emergency FMLA, Emergency paid sick leave act, federal income tax, FFCRA, FMLA, global income tax, Tax credits, Tax exemption, Tax Extension, taxes, US Government

Families First Coronavirus Response Act:

The new coronavirus relief bill

The Families First Coronavirus Response Act has been signed by the US President on 18th March 2020 to provide additional relief for those taxpayers who have been affected by the COVID-19. This Act is applicable for all categories of taxpayers such as individuals, self-employed and business entities as well. This new law would be effective starting from 1st April 2020 till 31st December 2020.

There are several provisions included under this legislative package such as free coronavirus testing, food assistance, increase in medical service budget, etc. However, there are four major aspects of the Family First Coronavirus Response Act that apply to businesses.  These major aspects include provision for employers to offer paid sick leave, paid family leave and medical leaves, tax credits for the paid leave and the expansion of the insurance related to unemployment.

Emergency Family and Medical

  Leave Expansion Act (FMLA)

By this guideline, until the end of December 2020 employers who have a workforce consisting of less than 500 employees must provide their employees with a paid FMLA of up to 10 weeks. The first two weeks of the general 12-week FMLA leave might be unpaid but the employee might be able to be paid by the provision of paid sick leave.

Eligibility for FMLA

Paid FMLA can be availed by an employee who has been employed for at least 30 days and must be taking care of the minor children whose school or child care center has been closed due to the outbreak of COVID-19. An employee who is eligible to obtain FMLA must not be working or even working remotely while taking care of the children.

Payment of employees

during this time

The employers would provide employees unpaid leave for 10 days. Then, the concept of paid leave arises and the employees can receive compensation at two-thirds of their normal rate. The paid leave cannot be more than $200 per day and $10,000 total for a period of full 10 weeks.

Exemptions 

Businesses that have less than 50 employees can be exempted from all these provisions if they can prove that by providing the Emergency Family and Medical leave they would be risking to go out of their business. 

Employees working in health care organizations or emergency services can be excluded from the emergency FMLA due to the outbreak of COVID-19.

 

 

Businesses having fewer than 50 employees are exempted from any civil actions that are brought by employees for creating violations regarding emergency FMLA.

 

Emergency Paid Sick Leave Act 

This is another leave provision of the Families First Coronavirus Response Act which would be effective till the end of December 2020. Employers having fewer employees than 500 should offer paid sick leave to those who meet the criterion associated with a public health emergency.

Eligibility for Emergency Paid Sick Leave

 

This would be available for all those employees who are unable to work due to the below-mentioned circumstances.

  1. Federal, State or even local quarantine due to COVID-19.
  2. Being advised by the doctor to be self-quarantined due to COVID-19.
  3. Experiencing some symptoms of COVID-19 and under medical supervision

4.Taking care of a family member who has been advised for quarantine

5. Caring for minor children if their schools, child care centers are closed or their caretaker is not available due to COVID-19.

Payment of employees

during this time

1.Full-time employees would receive up to 80 hours of paid sick leave whereas part-time employees can receive paid sick leave based on the number of hours they are working in two weeks.

2. For the reasons like need to have self-isolation as advised by doctors sick leave is received at a normal rate capped at $511 in a day.

3.If it is due to taking care of sick persons or minor children then sick leave obtained is two-thirds of regular pay capped at $200 per day. 

 

Exemptions

Businesses that have less than 50 employees can be exempted from all these provisions if they can prove that by providing the emergency paid sick leave they would be threatening the viability of their business

Tax credits for employers 

Since employers are paying the Emergency FMLA or emergency paid sick leave, they can avail of certain reimbursements by tax credits. 

  1. In every quarter, private organizations can avail refundable tax credits for FMLA and paid sick leaves. These tax credits would be applied to the Social Security taxes which the employer owes.

2. Even after this, if the businesses are not able to cover the payouts the Treasury Department can help with cash payouts. 

3. Moreover, the Treasury can also waive any penalties arising due to the failure of businesses in submitting their payroll taxes due to the anticipation of a refund as per the new laws.

4. Furthermore, the tax credit of employers is increased by the amount it is paying to maintain health care related to sick leave and FMLA.

Emergency Unemployment Insurance

By the FFCRA, the State Governments are allocated with $1 billion in funds for those workers who need unemployment insurance. This Act also removes the issue of unemployed workers to wait for one week to be eligible for Unemployment Insurance. This implies that the workers would be able to apply for the unemployment insurance quite faster.

Conclusion

Hence, with the coronavirus creating havoc in the lives of common people it is also evident that many self-employed individuals and small businesses would suffer losses as well. Layoff and workforce downsizing have already been started in several businesses. In such a stressful situation, the FFCRA is a sincere effort by the Federal Government to bring some alleviation in the economic stress of both employers and employees.

References

  1. https://blog.turbotax.intuit.com/tax-news/families-first-coronavirus-response-act-everything-taxpayers-need-to-know-about-the-new-relief-bill-46430/
  2. https://www.uschamber.com/co/start/strategy/families-first-coronavirus-response-act-guide
  3. https://www.natlawreview.com/article/emergency-legislation-families-first-coronavirus-response-act-updated-march-26-2020

 

 

New to the US? Here are the taxes paying options that you should be aware of.

New to the US? Here are the taxes paying options that you should be aware of.

by | Feb 10, 2020 | Tax Installments, Tax Payment Methods, taxes

New to the US? Here are the taxes paying options that you should be aware of.

In the US, taxes must be paid on time failing which you might have to pay heavy penalties. You must always try to make the tax payment in full and on time. There are various methods by which the tax payment can be done.

a.Electronic mode of payment

You can pay your tax directly from your bank account through the electronic mode of payment. This electronic mode of payment can include making your payment through your phone, any other mobile device or by the use of cards. 

When you are making your tax payment with the help of either your debit card or credit card, you can use any of the three processors which co-ordinate with the IRS i.e. World Pay US, Link2GocCorporation or Official payments. The service fee which is charged by these processors is tax-deductible. You can make an electronic payment using the IRS2Go app as well. By visiting the Payment page, the payment can be done instantly and even payment can be scheduled in advance. By using a phone or other mobile device you can make the payment for the Electronic Federal Tax Payment System. After your payment, you can receive instant confirmation about the payment.

b.IRS Direct Pay

This is a secure service that you can use for making your tax payment for Form 1040 and estimated taxes. This payment is done directly from your bank account without any charges being levied on you. It is easier for you to check the status of your payment and even receive notifications about your payment. It is also possible to cancel your payment or make changes in the payment for 2 business days before your scheduled payment date arrives. 

c.By cash

You can also make your tax payment by cash at participating retail outlets like 7-Eleven. There is a service tax charged for this and it takes 5-7 business days for processing of the payment.

d.By cheque, money order or cashier’s cheque

You can enclose your cheque, money order or your cashier’s cheque along with a copy of your tax return. You have made this payable to the United States Treasury and also provide name, address, TIN, Tax year, Notice number, etc.

In case you are not able to make the full tax payment immediately, you can avail the provision of additional time i.e. up to 120 days and make the payment in full. There are no additional charges levied for this but there is an interest that gets accumulated till the entire amount is paid off. This facility can be availed by the help of the Online Payment Agreement (OPA) or by using toll-free numbers.

e.Pay tax in installments

In case, you are not able to make your full tax payment by the due date or within 120 days then you can opt for a Monthly Installment Plan for making your tax payment.  You can request making tax payment in installments by using the OPA application, Installment Agreement Request or Form 9465. You can make your monthly installment payments by using several payment options like 

  1. Payment by debit card or credit card
  2. Payment by cheque or money order
  3. Payment by the Electronic Federal Tax Payment System (EFTPS)
  4. Payment through cash with the help of a retail partner
  5. Payment is done by direct debit from the bank account
  6. Payment is done by deduction from payroll

 When you are selecting the tax payment to be done by direct debit from a bank account or deduction from payroll, the process is automated and there would be no chances of missing the default payment date.

Usually, if you are selecting a payment plan then IRS would charge additional fees from you for this purpose but if you belong to the low-income taxpayer group then this fee would be reduced or waived based on specific conditions.

Conclusion

Hence, with the various forms of convenient tax-paying options available in the US; filing of tax returns would not be difficult even if you are new to the US.

Reference

https://www.irs.gov/taxtopics/tc202

https://www.usatoday.com/story/money/2019/04/11/how-pay-taxes-installments-and-other-tax-payment-options/3434002002/

 

What is the process to obtain the US Individual Taxpayer Identification Numbers (ITINs)?

What is the process to obtain the US Individual Taxpayer Identification Numbers (ITINs)?

by | Jan 31, 2020 | federal income tax, IRS, ITIN, SSN, tax filing, Tax Payers, tax return, taxes, W-7 Form

What is the process to obtain the US Individual Taxpayer Identification Numbers (ITINs)?

US Individual Taxpayer Identification Number is an Identification Number which is used by the IRS (Internal Revenue Service) for the administration required in the field of tax laws. ITIN is a nine-digit number that is issued either by the SSA (Social Security Administration) or by the IRS. ITIN is issued by IRS to those individuals who must have a US taxpayer identification number but do not qualify to obtain SSN (Social Security Number)from the SSA.

Why do you need ITIN?

When you are working in the US and earning in the US, but you do not qualify to obtain an SSN, then the ITIN will be helpful during your filing for tax returns.

Let us find out what does an ITIN does.

  1. If you qualify to obtain a tax refund from the IRS, then ITIN will help you in obtaining a refund.
  2. ITIN will help you to file your taxes and help the qualifying dependents to claim the tax benefits.
  3. Moreover, ITIN can help you to apply for a mortgage loan or open a bank account.

Eligibility for obtaining ITIN

 You should be falling into these below-mentioned categories to obtain the ITIN.

  1. You should be a non-resident alien who needs to file a US tax return.
  2. You must be a US resident alien who has to file a US tax return.
  3. You should be a dependent or the spouse of a US citizen or resident alien.
  4. You must be a dependent or spouse of a non-resident alien VISA holder such as H4 VISA.
  5. You should be a non-resident alien who is claiming a tax benefit.
  6. You should be a non-resident alien student, researcher or professor filing a US tax return or for claiming an exception.

Procedure to obtain ITIN

  • For the process of applying for ITIN, you will need the below-mentioned documents.
  1. Form W-7
  2. IRS Application for Individual Tax Identification Number.
  3. Your federal tax return. But, if you are eligible for an exception then you must provide the supporting documents as well for the exception.
  4. Original documentation from the issuing agency for proof of your identity and foreign status.
  • Since, you will be filing your tax returns in the form of an attachment to your ITIN application you should avoid mailing your filled form to the address which is mentioned in Form 1040, Form 1040A or even Form 1040EZ.
  • You can send your Form W-7, tax return, and other documents either to the mailing address mentioned in Form W-7 or submit it at the walk-in offices of the IRS. You can also get your form and documents processed by an agent who has been appointed by the IRS.
  • These Acceptance Agents are those entities such as colleges, financial institutions, accounting organizations, etc. who help the ITIN applicants in obtaining ITIN. These Acceptance Agents would review the application forms and would forward them to IRS for further processing.

Timeline within which ITIN must be applied

When you are ready to file your Federal Income Tax Return, you should also complete your Form W-7. This needs to be done as the return would be needed to be attached to FormW-7.

If you are qualifying for any of the exceptions, then you do not need to file a tax return. You would only submit Form W-7 along with those supporting documents which provide proof for the exception. An applicant is allowed to apply for ITIN during any time of the year but if you need to attach the tax return to Form W-7 and that tax return is filed after the due date then you might have to pay penalties.

When will you receive your ITIN?

 The IRS usually takes a time of around two months to complete the processing of the ITIN form. If your documents and details are correct, then your form would be processed and ITIN would be sent to your mailing address approximately within two months.

However, if even after 2 months you do not receive your ITIN or any other document/correspondence from IRS then you can call IRS at the Toll-free number and enquire about your ITIN application.

Hence, ITIN is very much necessary for tax return and if you are filing your tax return with an expired ITIN then your request would be processed but you will not receive any tax exemptions or credit claims.

Reference

  1. https://www.irs.gov/individuals/international-taxpayers/taxpayer-identification-numbers-tin
  2. https://www.hrblock.com/tax-offices/tax-prep/itin-application.html
  3. https://internationalcenter.umich.edu/resources/tax/getting-itin
  4. https://studyinthestates.dhs.gov/what-is-an-itin
  5. https://www.immihelp.com/itin-individual-taxpayer-identification-number/

 

 

 

 

 

 

 

 

Should capital gains taxation affect me?

Should capital gains taxation affect me?

by | Jan 24, 2020 | capital gains, income tax, Investment & Income, tax deductions, Tax Refund, Taxation, taxes

Should capital gains taxation affect me?

Capital gains taxation a lot of things that we own for either personal use or for investment purpose usually qualifies as a capital asset. Some common examples of capital assets include house, property, bonds, and stocks held as an investment, home furnishings, etc.

When you sell any of these capital assets and make some profit on them, the capital gains taxation come into the picture. The basis of capital gains taxes is that when you sell or exchange your capital assets, you do so at a higher price than you had bought them. Similarly, if you sell a capital asset at a lower price than you paid to buy the same, it would be tagged as a capital loss.

Classification

Capital gains are either classified as long term capital gains or short term capital gains. Here are some details about each category.

  • Long Term Capital Gains

If you hold on to a capital asset for a minimum of 1 year and then decide to sell or exchange it, any gains that you make would be long term capital gains. And the applicable taxes also vary depending on the type of capital gain. For long term capital gains, most individuals would end up paying no more than 15% as taxes.

There is a possibility that some or all your capital gains might be even taxed at 0% if your income is less than $78,750. The standard rate of 15% is applicable if your income ranges between $78,750 and $434,500 for single taxpayers and between $78,750 and $488,850for taxpayers who are married and filing jointly.

Citizens with annual income exceeding the above, the capital gains tax works out to be 20%. Certain capital assets such as collectibles, selling stocks of small businessses, etc. are taxed at a maximum of 28%.

  • Short Term Capital Gains

Any assets that you sell or exchange within a year of buying or acquiring it qualifies as sort term capital gain. In the case of any short term gains, the gain is added to your annual income and taxed accordingly.

One of the major benefits of categorizing these gains is that you are entitled to lower taxes. If the same amount were to be taxed like your income, you would end up paying higher taxes. However, with short term and long term capital gains, you can reduce the tax liability by a considerable margin.

As a rule of thumb, short term capital gain taxes tend to be on the higher side. Since it is dependent on the annual income, the maximum taxes can go up to 37%. On the other hand, long term capital gains can be up to a maximum of 20%.

On the other hand, if you sold a capital asset at a lower price than what you acquired it for, you would incur a capital loss. And it is important to know that you can use those losses to offset any of your capital gains. They can offset gains up to $3,000 with the help of capital losses.

If you stay in the house that you are putting up for sale for a minimum of two years, capital gains up to $250,000 for individuals and $500,000 for married couples is tax free. Thus being aware of the taxes can save the day for you.

If you own any of the capital assets mentioned above, you are entitled to pay capital gains taxes on the selling of these assets. The presence of capital gains taxes impacts you in more ways than you realize. For starters, unless it is short term capital gains, you will end up paying fewer taxes.

Reference:

https://www.taxpolicycenter.org/briefing-book/how-are-capital-gains-taxed

https://taxfoundation.org/capital-gains-taxes/

https://www.irs.gov/taxtopics/tc409