COVID-19: What the IRS Is Doing To Help
- May 5, 2020
- Posted by: firstname.lastname@example.org
- Category: Blog, IRS, Taxes
COVID19 is now affecting the economic structure where businesses thrive. For the sake of containment, the pandemic has forced companies to shut down operational activities for the foreseeable future. As millions of folks file for unemployment, Americans can take a sigh of relief from the new Coronavirus Stimulus Package.
The official name for the $2 trillion package is CARES or COVID19 Aid, Relief, and Economic Security Act. One of the new provisions of the package includes new rules of payments to individuals in their accounts. In essence, the purpose of CARES is to offer financial support to families, individuals, and businesses.
Now, the relief measures involve a structured tax rebate for American taxpayers. This article will highlight the details of the package and what new guidelines the IRS put in place to curb the impact of COVID19.
What’s in the Stimulus Package?
Here are some of the details you should be aware of in the new Coronavirus Stimulus Package:
Who will receive a check?
In simple terms, any individual who files an annual tax return is entitled to receive a check. Additionally, non-filers who get disability benefits and social security retirement will also receive the checks. However, the truth is not every person file tax return or gets these benefits due to their low income. It means people are ineligible for the program won’t receive the checks
Contrary to misguided perception, you do not have to be unemployed to get the check. In fact, every American taxpayer will get the check with low-income limits. The legislation involves a new provision that also takes into account unemployed individuals.
What do you have to do to receive the check?
In short, practically nothing. The IRS will transfer the payments to qualified individuals as per their information on the official file. Direct deposit of the tax refund also means taxpayers will get the payment. Therefore, if you did file your tax return in 2019, the IRS will take into account that information for the guarantee of the check.
Conversely, if you failed to file the tax returns for 2019, the IRS will utilize your 2018 tax return. In any case, the IRS urges taxpayers to file their tax returns for 2019 immediately. The goal is to not miss the eligibility of these payments.
How much amount you can expect to get?
You will get $1,200 if your adjusted net income is below $75,000, whereas married couples with a joint return will receive $2,400 with below the adjusted net income of $150,000. Single parents, on the other hand, will receive the maximum amount of $1,200 on adjusted net income of below $112,500.
Remember, you will notice the decrease in the amount of the check if your net adjusted income is higher than $99,000 and married couples whose adjusted income is over $198,000. In addition, individuals will get an added $500 for every child claimed as a dependent. However, the child has to be under 17 years.
What Should Taxpayers Do Right Now?
Here is the thing, as per CARES Act, the government can now leverage the direct deposit data of your annual taxes of 2018 or 2019. It means you can wire deposit of these funds electronically into your bank account.
Ideally, the first course of action for American taxpayers should be to file their 2019 tax returns. And if you have not so far and intend to opt for a tax refund, select to get that refund via direct deposit. The idea is to make sure that the IRS has your current direct deposit and tax filing data. After all, this is the information that the IRS will use to establish the eligibility criteria for stimulus amounts.
What is the Current Stand of the IRS?
As of now, the IRS has suspended specific tax payments and as well as compliance programs. However, the agency claims it will not roll out new debt collections or audits before July 15. Apart from the extension of tax deadlines and helping the federal government devise the new legislation, the IRS further intends to ease the tax burden of individuals for the rest of the year.
The suspension of all tax activities began on April 1, 2020. According to the new changes, the postponement includes certain payments associated with Compromise Offers and Installment Agreements. Similarly, there will be a postponement of the enforcement of certain tax actions.
Details: What Else?
Tax Credit for Employers
According to the new provisions laid out in the legislation, the IRS will offer a tax credit to business owners. As a result, companies will be able to decrease their tax liability because of the tax credit. The IRS did not ignore self-employed individuals who can claim the same tax credit as a paid sick leave.
That said, employers who are offering paid sick and other leave benefits do not need to pay the Social Security tax charges on employees’ earnings. Simultaneously, Employers who do not have adequate available resources to cover payroll taxes and paid sick can request the IRS for separate accelerated payment.
Lower Interest Rate Loans
A lot of businesses are experiencing a significant sales drop. On top of that, you might not have sufficient funds to take care of business expenses such as rent, utility bills, and employees’ wages.
The natural response for businesses is almost always to get a business loan, but a high-interest business loan is often deterrent. And that is one of the reasons the new initiative offers millions of funds to cover disaster loans under SBA backing.
As of now, businesses can get low-interest rates of 3.75% and non-profit companies 2.75%. Similarly, companies can get more than 30 years of long-term repayment options. However, businesses cannot avail these benefits on lower interest rate loans.
One of the best financial reliefs for small and corporate businesses comes through tax deferments. It comprises a tax deferment income for employers and a payroll-based tax deferment. Whether you operate as a sole proprietor, LLC, or corporation, the deadline to file a tax return is now July 15 as opposed to April 15. Also, penalties are inactive for 90 days.
As per CARES, corporations can postpone collective tax payment until October 15. That said, each state has different implementation guidelines when it comes to tax payment and filing. However, most of the States aim to implement the same tax extensions guidelines of the IRS.
As per CARES act, the employer can defer part of the social security tax. Eligible businesses will be able to postpone remittance into Social Security. However, the employer’s Medicare tax aspect will remain the same, which means employers must still withhold their employees’ payroll taxes in its entirety. Moreover, employers can postpone the remittance a part of their social security tax until next January first, 2021.
It is imperative to understand that the new initiatives set forth by the IRS are not permanent. Furthermore, taxpayers can expect new tax policies to evolve. The fact is, it all depends on how federal authorities manage to contain the spread of the virus.
So long as the medical professionals are successful in flattening the curve of the COVID19 spread, there is a good chance of reversal to the standard IRS tax laws. That said, the IRS explicitly laid out that it will continue to modify, review, or even expand the current initiatives if deemed necessary.