COVID-19/Coronavirus Tax Relief News

Taxpayers could Receive a Tax Break on Unemployment Benefits

Although jobless benefits are considered taxable income, the recently enacted $1.9 trillion American Rescue Plan allows individuals receiving unemployment to have the first $10,200 of those benefits exempt from federal income taxes.

 Taxpayers with a modified adjust gross income of $150,000 or more are not eligible for the tax break. The income threshold is the same for both single and married tax filers.

According to some tax experts, taxpayers who suffered job loss during the pandemic could see $1,000 to $2,000 reduced off their total tax bill.

The law to have the first $10,200 unemployment exempt from their federal taxes took effect after the Internal Revenue Service (IRS) had already received at least 55 million individual tax returns. The good news is that the IRS may be able to adjust the already submitted and amended tax returns with no additional paperwork required.

The IRS will issue out refunds in two phases. The first phase will start for taxpayers who qualify to exclude up to $10,200 of unemployment benefits from their federal tax income.

The second phase will include married couples who file a joint tax return. Couples who file jointly, can waive tax on up to $20,400 of benefits.

It is still unknown as to whether the first phase of payments will also include married couples in which just one spouse received unemployment benefits, or if they will fall in the second round. It is also still unknown as to whether or not taxpayers with much more complex tax returns will be issued out a refund in phase one or if they will have to wait for phase two.

We will continue to update you with new information as this story develops.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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Is Your Stimulus Check Taxable?

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The tax code states that individuals must pay taxes on any income that they have earned throughout the tax year. So, does that mean you have to pay taxes on any of the stimulus checks that you have received?

There are loopholes in the current tax law that prevent qualifying individuals from having to pay taxes on their stimulus checks. These payments are not considered income and are instead considered an advance payment on a tax credit. For those who receive tax credits, it is important to know that they are not considered a taxable credit.

Taxpayers filing their 2020 federal income tax return (Form 1040), will see an additional line on the second page for the “Recovery rebate credit.” Individuals should review this line on their return carefully, especially if they:

  • did not receive the full amount from the first and second stimulus check
  •  did not file a 2018 or 2019 tax return
  •  are married and one spouse did not have a Social Security number
  •  saw a decrease in income in 2020
  •  had a baby in 2020
  •  are a recent college graduate
  • had a significant change in circumstances in 2020.

For those who qualify for the stimulus check and have not received the full amount from either of the stimulus payments, this new credit will help you save a lot of money.

The first and second stimulus checks are calculated the same way and are based off the information that was provided on your 2018 or 2019 tax return. The tax credit will also be based on the number that an individual puts down on their 2020 tax return.  Taxpayers should be aware that failing to file their 2018 or 2019 tax return could result in a difference between the amount of their stimulus checks and credit amount.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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IRS Delays Tax Deadline from April 15th to May 17th

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The IRS is now planning to delay the April 15th tax filing deadline by a month to allow taxpayers additional time to file their taxes and to resolve any outstanding collection issues.

The details of the final deadline are still being worked out, but the move comes after there were increased calls to extend the tax deadline following the approval of the $1.9 trillion American Rescue Plan. The new tax extension will allow the IRS time to send out the third round of stimulus check and process both individual and business tax returns.

At the start of the year, the IRS announced that they would push back the start of the tax season to February 12th. This allowed the agency additional time to distribute the second round of stimulus checks that was passed last December through the Covid relief bill.

In February, the IRS had already extended the tax filing deadline to June 15th for individuals and businesses in Texas when President Biden declared a disaster after major snowstorms hit the area. At this time, it does not appear that any additional time beyond that deadline has been added for those residents and business owners to file.

Due to disruptions from the pandemic and the changes in tax laws, many taxpayers will have to wait for updated forms or resubmit their return if certain corrections need to be made. With the new tax deadline, taxpayers will now have breathing room to collect their important tax documents and consult with a tax professional so that they can accurately file their tax return.

Taxpayers should be aware that the federal tax filing postponement only applies to federal income tax returns and tax payments. State tax payments and deposits, as well as any other type of federal tax besides income tax, are not affected by this postponement. Individuals are still required to file their income tax returns but should be aware that their state filing deadline could vary. Taxpayers can check with their state tax agencies for additional details regarding their state’s tax filing deadline.

We will continue to update you with new information as this story develops.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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Your Latest Stimulus Check could be Garnished for Unpaid Debts

The recently passed $1,400 stimulus check is expected to provide relief to Americans who have been financially struggling throughout the ongoing pandemic. However, certain individuals may be at risk of having their stimulus check garnished if they have unpaid debts.

The $1.9 trillion Covid relief bill includes a third round of direct payments. The payments will come with eligibility rules which will be based off taxpayer’s income as well as other requirements.

It is important to note that these new checks will be authorized through a budget reconciliation process that will not be exempt from garnishments. Both consumers and banking trade groups are calling for stimulus payments to be exempt from garnishments so that families have a chance to pay their household bills. Individuals who have unpaid debts or have their entire bank accounts frozen by garnishment order, will not be able to access their funds which also includes their stimulus check.

Many are requesting that a standalone bill be passed to prevent banking institutions from having to pay creditors who are attempting to garnish and freeze people’s bank accounts.

Currently, there are three types of unpaid debt that could lead to an individual getting garnished: unpaid IRS tax debt, other government debt, or private debt.

Stimulus check recipients will be protected from outstanding debt or debt collected by the government which would include child-support offsets. However, stimulus payments are not protected from collection for private debts.

There are limited ways individuals can change their bank account information with the IRS. Because of this, there is not really a way to prevent funds from getting taken unless you close your account. However, this would likely mean that individuals would have to wait longer to receive this stimulus checks.

We will continue to update you with new information as this story develops.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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First-Time Homebuyers may receive up to $15,000

President Biden has proposed a $15,000 tax credit for first-time homebuyers to help offset the costs of buying a home. The details of the proposal from either party have yet to been made official and would most likely be worked out in a bill passed by congress.

The proposal would help millions of families buy their first home by creating a new refundable and advanceable tax credit of up to $15,000. The new First Down Payment Tax Credit would assist families offset the costs of home buying and help millions of families buy property for the first time.

This credit is very similar to the $7,500 tax credit that was created by the Housing and Economic Recovery Act signed by President George W. Bush back in July of 2008. The credit was previously increased to $8,000 the following year in a bill that was signed by President Barak Obama. The program expired back in 2010.

The current proposed plan differs from the prior tax credits in the way that it could be redeemed. Previous credits were claimed when buyers filed their income taxes the following year. Biden’s proposal would create a tax credit that could be used during the time of a home purchase.

We will continue to update you with new information as this story develops.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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Here’s what Taxpayers need to know about President Biden’s $1.9 Trillion Economic Rescue Package

Taxpayers can expect a bigger stimulus check in addition to more aid for the unemployed, the financially struggling and those who are currently facing eviction. Additionally, the Economic Rescue Package will also provide assistance to small businesses, states and local governments and will increase funding for vaccinations and testing.

Here’s what American’s need to know about the new rescue plan and how it can affect them.

Larger stimulus payments

Eligible recipients can expect to receive $1,400 per person. This would be in addition to the $600 individuals previously received that was approved by Congress in December and was distributed to qualifying individuals earlier at the beginning of the year.

These new stimulus payments will also go out to adult dependents who were not included in the previous rounds. The impact payment will also include households with mixed immigration status, since the first round of $1,200 checks did not include spouses of undocumented immigrants who did not have Social Security Numbers.

Unemployment assistance

President Joe Biden wants to increase jobless benefits from the $300 weekly increase in unemployment from the Congress’ relief package back in December to $400 a week. Biden would also like to extend additional pandemic unemployment programs through September. This will apply to Pandemic Emergency Unemployment Compensation program and the Pandemic Unemployment Assistance program.

Rental assistance and eviction moratorium

The rescue package would provide more than $25 billion in rental assistance for low to moderate income households who have lost their jobs or are financially struggling to stay afloat during the ongoing pandemic. This would be in addition to the $25 billion lawmakers provided in December.

An additional $5 billion would be set aside to assist renters struggling to pay their utility bills. Biden is also calling for $5 billion to assist states and localities help individuals who are currently experiencing homelessness.

Additional assistance for child care and child tax credits

Congress would be called on to create a $25 billion emergency fund and also add an additional $15 billion to an existing grant program that will assist child care providers pay for rent, utilities and payroll, and increased costs associated with the personal protective equipment.

Small business assistance

The plan would call for providing $15 billion to create a new grant program for small business owners that would be separate from the existing paycheck protection program.

$15 hourly minimum wage

Biden is asking Congress to increase the current minimum wage to $15 an hour and to end the tipped minimum wage and the sub-minimum wage for people with disabilities.

We will continue to update you with new information as this story develops.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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Small Businesses that Took out PPP Loans may face Tax Implications

The federal COVID Relief bill provided small businesses with forgivable loans to assist them throughout the ongoing pandemic. Although this bill has provided considerable assistance, small businesses may still have to deal with a tax hit when it comes to filing their state tax returns.

Some borrowers may be eligible for PPP loan forgiveness if at least 60% of their proceeds go towards payroll expenses. Partial loan forgiveness may also be available to those who fall sort of the threshold. PPP borrowers are also able to claim tax deductions for expenses that were covered with forgiven loan proceeds. PPP loans that aren’t forgiven, must be repaid and are subject to an interest rate of 1%.

Taxpayers need to be aware that some states may block PPP borrowers from claiming deductions on state tax returns or from having their balances zeroed out without paying any taxes on it.

Every state will vary in their approach to the Internal Revenue Code and can decide whether or not they will adopt changes to the federal law. Some states may follow their own rules when determining each individual’s income while others will choose to follow the federal code.

States have the ability to take different approaches when interpreting the COVID relief measures which includes the possibility of disallowing tax-free PPP forgiveness or blocking deductions associated to PPP.

Another factor that may determine whether or not states will consider the PPP loan as income is the state sales and income tax revenues. Due to COVID-19, many states have seen a decline in state income amid layoffs and businesses having to close down.

Taxpayers should review their state’s tax filing guidelines to determine how they should file and if they should prepare to owe a state balance.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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Small Businesses have been hit with Another PPP tax Change. Here’s Everything You need to Know.

The IRS has added to the Small Business Administration’s Paycheck Protection Program. The new guidance was issued on November 18th and offers additional details the entail tax-deductible items will no longer be deductible if they were paid with PPP funds.

Small businesses have been prohibited from deducting expenses in 2020 taxes that are associated with PPP loan forgiveness even if it takes until 2021 or 2022 to reach actual forgiveness, or if the business has yet to fill out a forgiveness application.

Businesses that plan to defer 2020 tax liabilities for the year while waiting for their loans to be forgiven may no longer be allowed due to the new guidance that the IRS has provided around the PPP.

Without the PPP, small business would be forced to lay off their staff in order to save on any expenses they may incur throughout the year. The only reason why staffing levels have been able to maintain at their current rate is due to the PPP.

Many businesses will still financially benefit from PPP loans even though there are limits on tax deductible items.

The Biden administration may review the current guidelines for the PPP loan in order to see if there are any alterations that need to be made to it. However, it is unlikely that they would be able to entirely reverse guidelines created for the loan.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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When Can Taxpayers Expect to Receive their Stimulus Payment? Your Questions Answered.

A second round of stimulus checks are starting to be issued out by the IRS and the Treasury Department to individuals as of last week.

Taxpayers should be aware that the distribution of their payment could potentially take several days to post to individual accounts. Those who opted for direct deposit on their tax return will likely be able to view the payment as pending or as a provisional payment in their account before the scheduled payment date of January 4, 2021, which is the official date the funds will be made available.

Paper checks have already began being distributed to taxpayers and will continue to be mailed out through all of January. A handful of individuals can also expect to be mailed debit cards in January. The IRS strongly recommends people check their mail carefully and to be aware that sending out the checks will take the IRS more time to process compared to those who chose direct deposit as their method for their impact payment.

No action is required on the taxpayer’s end and those who are eligible for the second stimulus check will receive the payment automatically and should not contact their financial institutions or the IRS with payment timing questions.

Eligibility

U.S. citizens and resident aliens who are not eligible to be claimed as a dependent on another person’s income tax return, are eligible for this second payment. Qualifying individuals can receive up to $600 or $1,200 for married couples and up to $600 for each qualifying child.

Individuals who have an adjusted gross income for 2019 up to $75,000 ($150,000 for married couples filing joint returns) will qualify for the full amount of the second stimulus payment. Filers who earn income above these amounts will receive a reduced amount.

Check the status of a payment

Taxpayers now have the ability to check the status of both their first and second payments by using the Get My Payment tool on the IRS website.

Payment not received or is the incorrect amount? Taxpayers can now claim this on their 2020 tax return

Payments will be made to those who have provided valid routing and account information on file. If a payment was sent to an account that is no longer valid, the financial institution that received the payment must return it to the IRS. If you have yet to receive your full payment by the time you file your 2020 tax return, you may claim the Recovery Rebate Credit on your tax return.

Updating bank account or mailing information

Eligible taxpayers should be aware that the IRS does not have the ability to change an individual’s payment information such as a bank account or new mailing address. Eligible taxpayers who do not get a payment or it is less than expected may be able to claim it on their 2020 tax return as a Recovery Rebate Credit.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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The IRS has more than 1 Million Unprocessed Returns and 3 Million Pieces of Unopened Mail Due to COVID-19

The IRS is currently dealing with over one million 2019 tax returns that have yet to be processed due to the coronavirus pandemic and distribution of millions of stimulus checks that buy a delay on IRS operations.

Approximately one million unprocessed returns still remain which is down from the 2.5 million unopened returns back in October. In addition, more than 3 million pieces of unopened mail remain which is down from the 5.3 million.

After the agency extended their tax deadline to allow Americans more time to file their 2019 federal tax returns because of COVID-19, the influx of paper returns as well as IRS employees having to transition to a work-from-home environment has caused a major delay in processing due to limited staff.

Although the delay has been stressful to tax filers who are still waiting for their return to process and are anticipating a refund, the IRS has promised that they will pay interest on overdue refunds once they have processed their return.

Currently, 6.8 million returns are being processed by the IRS. Saturday, November 21st, was the deadline for those who have yet to file their income taxes to register on the IRS nonfilter portal to obtain their $1,200 ahead of next tax season.

The IRS has attempted to reach out to over 4,000 shelters in order to notify people who are homeless that they could possibly qualify for a stimulus check and to go to the IRS website in order to obtain it.

Optima Tax Relief provides assistance to individuals struggling with unmanageable IRS tax burdens. To assess your tax situation and determine if you qualify for tax relief, contact us for a free consultation.

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