COVID-19/Coronavirus Tax Relief News

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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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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Pause on Student Loans could End Soon. Here’s what You Need to Know.

Updated on December 7, 2020

  • Betsy Devos has extended the pause on student loan payments through January 31.
  • Devos has also extended the pause of interest accrual and the suspension of collections on defaulted loans.
  • Despite month-long negotiations, Congress has yet to approve additional pandemic aid to both individuals and Americans.  

If you’re one of the 37 million student loan borrowers that has been taking advantage of the pause on student loan payments that was part of the CARES Act, you may need to start preparing for your payments to begin again starting January 1st.

The Department of Education suspended student loan debt payments, paused accruing interest, and stopped collections on defaulted federal loans in March in the midst of the pandemic when unemployment was surging. The idea was to provide financial relief to Americans that were suffering due to the coronavirus outbreak.

It’s not clear yet as to whether or not another extension will be made during President Trump’s presidency since the government has been unable to reach a deal on providing assistance to  individuals by distributing stimulus checks and giving out loans to business  that are struggling to keep their doors open.

The idea of student loan forgiveness has become increasingly popular and a variety of proposals have been presented in order to help student loan borrowers that struggle to make their monthly payments.

  • House Democrats passed the HEROS Act back in May. The Act would have provided $10,000 in both federal and private student loans forgiveness that are economically distressed.
  • President-elect Joe Biden proposed forgiving all undergraduate federal student loan debt for borrowers who attended public colleges and universities, as well as historically black colleges and universities and private minority-serving institutions. Borrowers earning less than $125,000 per year would be eligible for student loan forgiveness.
  • Senator Elizabeth Warren previously pushed for across-the-board student loan forgiveness of up to $50,000 per borrower for those who earn under $100,000 per year. The benefit would gradually phase out for those earning between $100,000 and $250,000 per year.

Additional proposals have been suggested that would be geared towards certain professions in response to the ongoing COVID-19 pandemic. First responders, medical personnel and teachers were included in the group of people that should be given student loan relief. Although many ideas have been passed around about erasing college debt to assist those who are having difficulty making ends, there has yet to be any student loan reform bills that have passed.

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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People Experiencing Financial Hardships May Qualify for an Economic Impact Payment

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.

For those experiencing homelessness or extreme financial hardship, you may be eligible for a $1,200 Economic Impact payment and an additional $500 for each qualifying child under the age of 17. In order to receive an economic payment, you will need to register with the IRS using the IRS Non-Filers: Enter Payment Info here tool by November 21st, 2020.

If someone’s income is below the income threshold of $12,200 or $24,000 if they’re married, they will most likely need to file a tax return. This most likely means, the IRS may not have enough information to issue their payment.

Taxpayers who don’t typically file their tax return may be eligible for an Economic Income Payment if they:

  • Are a U.S. citizen, permanent resident or qualifying resident alien.
  • Have a work-eligible Social Security number.
  • Cannot be claimed as a dependent of another taxpayer.

In order to use the tool, you will need the following:

  • Your name must appear as it is on your social security card.
  • You must have a work-eligible SSN for self and spouse.
  • For every qualifying child, you must have their name, relationship, and SSN or Adoption Tax Identification Number.
  • A mailing address where you can receive both your payment and confirmation letter. The IRS will typically mail out this letter within 15 days after issuing their payment.
  • An Identity Protection Personal Identification Number.

The non-filers tool will also ask qualifying taxpayers for their license or state ID number to digitally sign the document.

For those who prefer their payment to be direct deposit but don’t have a bank account, can visit the FDIC website for assistance.

If you need tax help, contact us for a free consultation.

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IRS Extends Economic Impact Payment for Non-Filers to November 21st

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.

The IRS has extended the deadline to register for an Economic Impact Payment utilizing the Non-Filers tool that can be found of the IRS website. The IRS has extended the deadline until November 21, 2020.

Taxpayers who typically don’t file their tax returns and haven’t received their stimulus checks, are urged to register as quickly as possible before their Economic Impact Payment expires. To register, you can use the Non-Filers: Enter Info Here tool on IRS.gov. Taxpayers should provide their information as soon as possible because the tool will not be available after November 21st.

The extension is only for those who have yet to register or receive the payment and don’t normally file a tax return. Taxpayers who requested an extension because they needed additional time to file their 2019 tax return should do so as soon as possible.

Most eligible U.S. taxpayers already received their Economic Impact Payment. If you don’t have a tax filing obligation, it’s recommended to use the Non-Filers tool to register with the IRS in order to get up to $1,200. This usually includes those who receive little to no income.

This tool is designed for those who have an income below $24,400 for married couples, and $12,200 for singles who could not be claimed as a dependent by someone else. This also includes couples and individuals that have experienced homelessness.

The Non-Filers tool is accessible to anyone that requires it and can speed up the arrival of their payment by opting in for direct deposit. Those who opt out of direct deposit will receive a check.

If you need tax help, contact us for a free consultation.

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The IRS to Contact Taxpayers Who are Eligible for a Stimulus Check

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.

The IRS has started to reach out to over 9 million Americans who may be eligible for a federal stimulus check but have yet to claim their coronavirus relief payment. 

Those who qualified for the past stimulus check but didn’t receive it will be sent a letter from the agency regarding the money they are owed on September 24th. The letter will inform recipients that they are eligible for the payment if they meet the certain criteria. Taxpayers must be a citizen or a resident alien and also have a valid social security number.

Currently, Washington, D.C., has the largest share of Americans who are entitled to a check, based off the state data issued by the IRS. Alaska is currently in second, with about 4.2% of the state’s residents who are expected to receive a letter from the IRS notifying them about claiming their money.

California has the most residents, at 1.2 million, which could be eligible for claiming their check but still have yet to. Texas currently has 796,000 pending, Florida has 567,000, followed by New York with 538,000 and Georgia with 349,000 unclaimed stimulus checks.

The relief payments are meant to target middle to low income households by providing $1,200 for single taxpayers, $2,400 for married couples and $500 per child under 17 years old. In order to deliver the first round of stimulus checks as quickly as possible, the IRS relied on taxpayer’s most recent tax returns which included either their banking information or home addresses for paper checks.

If you need tax help, contact us for a free consultation.

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Wealthy Americans are Prepping Their Finances Based on the Presidential Election. Here’s Why.

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.

With the 2020 presidential election just around the corner, taxpayers are starting to review their current financial circumstances and determining when it would be beneficial to make moves with their money or refrain from investing in the future. 

If Democratic candidate Joe Biden wins the presidential election, it is assumed that a tax plan would be put into place where the marginal rate for top earners back at the Obama-era 39.6%, which would be an increase from the current rate of 37%. The new rate would apply to capital gains for taxpayers who earned more than $1 million. In addition, a potential tax proposal where the top 1% earners would pay for about 80% of an increase in taxes. 

The Republicans’ tax overhaul in 2017 boosted the threshold at which the 40% federal gift and estate exemption phases out. In 2018, the exemption level increased from $5.45 million to $11.4 million for individuals.

The provision will end in 2025, and it is suggested that Biden wants to end it much sooner and bring estate tax back to its historic norm.

Presidential hopeful, Biden, wants to also end the so-called step-up in basis. This tax rule dictates that if an heir sells inherited assets, capital-gains taxation on any future sale is added to an asset’s value at the time of inheritance, not the date of the original purchase. If the asset appreciates greatly over time, the step-up basis saves an heir a large amount in capital gains.

The 2020 presidential campaign comes with a short-staffed Internal Revenue Service auditing fewer returns. Data shows that the IRS audited 1.73 million returns in the fiscal year 2010 compared to 2019 where just over 770,000 returns were reviewed.

 According to Biden’s campaign, the IRS could gain $535 billion if it brought audit rates back to their level from 10 years ago and begin to focus more on the wealthy.

The IRS has announced that it will be launching hundreds of new audits of high-net-worth individuals. Biden has also released a plan for universal preschool and higher caregiver pay. This would be a $775 billion plan that would increase tax compliance for high-income earners. 

Depending on who wins the upcoming presidential election, taxpayers will need to investigate what future financial events will happen and how they should handle their money, assets and investments. As Election Day creeps closer, it is important for taxpayers to have access to their permanent records related to the cost of any capital assets to ensure that they properly file and don’t face any future audits from the IRS.

If you need tax help, contact us for a free consultation.

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Is My Social Security Number Required in Order to File My Taxes?

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.

With this year coming to an end, it’s time to start preparing for tax season next year. If you’re a first time tax filer or you’re filing on your own for the first time, it can be intimidating and you may even be unsure of what information you may need to provide to the IRS. 

Do you need to file a tax return?

The first thing a taxpayer needs to know is whether or not they need to file their taxes. The answer to this question depends on whether or not your income hits a certain threshold. If you earn less than the standard deduction amount when filing your taxes; $12,200 for those filing single, $18,350 head of household, and $24,400 if you filed married filing joint, then you may not need to file your taxes.

For those who are self-employed, you will need to file a tax return if your net self-employment income is $400 or more. You will also need to report any income that was reported on a 1099-Misc.

Others who may not need to file their taxes include:

  • U.S. resident aliens who need to file tax returns
  • Spouse or dependents of a U.S. citizen or resident alien
  • Nonresident aliens with a tax filing requirement

The U.S. government issues social security numbers to citizens, which employers can use when reporting taxes they withheld.

If you are applying for a visa and immigrating into the U.S., you may also apply for a social security number.

What’s an Individual Taxpayer Identification Number?

If you don’t have a social security number and you have to file your taxes, you can file by using your Individual Taxpayer Identification Number (ITIN).  Your ITIN is a nine digits and is similar to a social security number, but not the same. 

You can apply for an ITIN by:

  • Filling out a W-7 form
  • Proof of identity
  • Foreign status documents
  • Prove that you need an ITIN

If you need tax help, contact us for a free consultation.

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I was Furloughed Temporarily and now I’m Back at Work. How does this Affect my Taxes?

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.

When the pandemic struck earlier this year, millions of Americans were either laid off or furloughed by their employers. If you are wondering what the difference is, employees that have been laid off are let go by their employer permanently and will most likely not be re-hired by the same company. If you have been furloughed by your employer, it means that you have been temporarily laid off with the intention that you will be returning back to work in the future when conditions change. For those who have been furloughed, they don’t have to go through the re-hiring process again and some employees may be eligible to continue their benefits such as health insurance throughout their furlough period.

If you were furloughed, you most likely applied for unemployment to financially assist you during the period of time that you were out of work. If you received unemployment benefits, it is important to understand whether or not this will need to be placed on your tax return. Taxpayers will also need to know if their unemployment income is considered taxable and how it will affect them once they return back to work and start receiving a paycheck again.

If you previously received refunds for past tax years that you have filed for, expect to possibly receive a smaller refund when you file for future taxes if you have also received additional income from working throughout the year. Your refund will be determined on how much taxes were taken out of your regular paycheck for income tax withholding. If you had more taxes taken out each period than the taxes owed, then you can expect to receive a refund once your tax return has been filed.

For those that received fewer paychecks this tax year because they were furloughed for part of the year, it can be expected that they will receive a smaller refund in comparison to previous tax years. If a taxpayer has been furloughed, they can also expect to have fewer paycheck withholdings which will result in a much lower refund amount.

Taxpayers who didn’t withhold any federal taxes from their unemployment may have not had enough withheld to convert their tax rate which could cause them to either: 1) owe a tax balance or 2) receive a much smaller refund in order to make up for the taxes that weren’t deducted from their income. While receiving unemployment compensation, taxpayers can request to have 10% withheld from their unemployment by filling out a W-4V form, also known as the Voluntary Withholding Request form.

If you need tax help, contact us for a free consultation.

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