COVID-19/Coronavirus Tax Relief News

Taking a CARES Act Retirement Withdrawal could Lead to a Tax Liability

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 taxpayers still dealing with the financial fallout from the COVID-19 outbreak, many are falling on hard times and needing to get cash quick. The Coronavirus Aid, Relief and Economic Security Act, also known as the CARES Act, has a provision that can aid Americans that are financially strapped.

The CARES Act makes it easier for taxpayers to withdraw funds from their retirement accounts like 401(k)s and traditional Individual Retirement Accounts (IRAs). The temporary changes made to retirement accounts allows taxpayers to make early withdrawals without worrying about tax penalties as well as relaxed rules on loans you take out from your retirement.

Here is everything you need to know about the CARES Act.

Eligibility on early withdrawals from retirement accounts with the CARES Act

Some tax-advantaged retirement account holders may not qualify for some of the CARES Act’s relaxed early distribution and loan provisions. Legislation restricts relief to certain participants with a valid COVID-19 related reason in order to receive early access to funds. This includes:

  • If you have been diagnosed with COVID-19.
  • If your spouse or dependent is diagnosed with COVID-19.
  • Experiencing a layoff, furlough, reduction in hours, or inability to work due to COVID-19.
  • Lack of childcare because of COVID-19.
  • Closing or reducing hours of a business due owned or operated by an individual or spouse due to COVID-19.

Additional rules for early distribution

Eligible participants in tax-advantaged retirement plans typically have 401(k)s, 403(b)s,457s, and Traditional IRAs. This includes taking an early distribution of up to $100,000 during the calendar year 2020 without having to pay the 10% penalty tax that is typically imposed on most retirement account withdrawals before an account owner is 59 ½.

The act also suspends the mandatory 20% tax withholding requirement that is typically applied to early distributions from a 401(k) or other workplace retirement plan. The CARES Act allows taxpayers up to three years to redeposit the withdrawn money back into their retirement account or pay it all back in 2020 if your income is much lower this year. 

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

By |COVID-19/Coronavirus Tax Relief News|Comments Off on Taking a CARES Act Retirement Withdrawal could Lead to a Tax Liability

If a Second Stimulus Check is Approved, When will it Arrive?

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 negotiations underway to pass a new economic rescue package with a second stimulus payment also being mentioned, we can forecast that qualifying Americans could be getting paid by the government a second time this year. Should a second stimulus check become a reality, it will depend on how quickly the IRS can start sending out money to taxpayers. Here are some important stimulus payment facts American should know about.

Recently, House Speaker Nancy Pelosi as well as House Democrats provided a new relief proposal. Pelosi has also agreed to resume negotiations with Treasury Secretary Steve Mnuchin to discuss laying out a new bill that includes another stimulus check, as well as other items like aid for airlines and restaurants. 

If another stimulus check is passed, it could take about a week to orchestrate the first payment. Potential dates have also been speculated, based on the House of Representatives and Senate, to happen anytime in October to the middle of November. This is of course contingent on a bill being passed that includes Americans receiving a stimulus check.

So far, the IRS has sent out money to at least 160 million people in three different ways. There are those who filed for direct deposit, taxpayers who chose to receive a paper check, and others with more complicated scenarios who are still waiting for their payments. It is expected that if a second round of stimulus checks are distributed, the IRS will use the same system they previously used when the first checks went out.

Taxpayers who have their direct deposit information on file with the IRS or add their direct deposit information if the registration opens up again, should be the first in line to receive their second stimulus check. An electronic transfer of funds is a faster and much more efficient way to receive your money.

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

By |COVID-19/Coronavirus Tax Relief News|Comments Off on If a Second Stimulus Check is Approved, When will it Arrive?

President Trump Pushes for Stimulus Checks and Massive Economic Relief

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.

President Trump recently called on congressional Republicans to back a massive economic relief bill that contained “much higher numbers” and larger stimulus payments for Americans suffering financially from the ongoing pandemic. The bill was just recently proposed and is completely different from the plan from what the Senate GOP was backing in the most recent days.

Although President Trump has expressed support for this new bill, he has yet to endorse it. The $1.5 trillion plan was unveiled on Tuesday by a bipartisan Problem Solvers Caucus in the House. If passed, the proposed bill would provide another round of $1,200 stimulus checks to qualifying Americans, a provision that has currently been omitted from the $300 billion plan the Republican senate has been attempting to pass. 

Congressional leaders in both parties recently made it clear that they don’t support the Problem Solvers proposal. Many Republicans agree that the new bill would cost too much and Democrats don’t think the bill provides enough relief for many businesses and Americans.

With President Trump’s renewed interest in providing such generous aid to the American people, it could possibly open up additional talks between Democrats and Republicans to come together and find a reasonable solution to assist U.S. citizens.

Signs are pointing to possible movement with coronavirus relief legislation being worked on. A growing number of House Democrats and House Republicans continue to work towards finding a resolution.  

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

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

By |COVID-19/Coronavirus Tax Relief News|Comments Off on President Trump Pushes for Stimulus Checks and Massive Economic Relief

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.

By |COVID-19/Coronavirus Tax Relief News|Comments Off on Wealthy Americans are Prepping Their Finances Based on the Presidential Election. Here’s Why.

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.

By |COVID-19/Coronavirus Tax Relief News|Comments Off on Is My Social Security Number Required in Order to File My Taxes?

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.

By |COVID-19/Coronavirus Tax Relief News|Comments Off on I was Furloughed Temporarily and now I’m Back at Work. How does this Affect my Taxes?

The COVID Pandemic could Cause 1 in 4 Hotels to be Financially Impacted

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 record low demand for travel as well as the hotel industry, more than 25% of hotels in the U.S. are at risk of foreclosure. 

A report sent to Congress shows that the total percentage of hotels that are 30 days or more delinquent on their loans is at 23.4% as of last month. In comparison, the percentage of home loans that were 30 days or more delinquent is 2019 was at 1.3%.

Due to the current pandemic, travel has increasingly slowed down due to consumer’s fears of catching Covid-19. Because of the slow in travel, delinquency rates in the commercial mortgage-back securities market are now at the highest it has ever been. 

As of July, $20.6 billion in hotel commercial-mortgage-backed security loans were more than 30 days delinquent. To compare, a financial crisis that hit decades ago, the highest volume of delinquent hotel loans was at $13.5 billion.

A letter signed by more than 4,000 hotel owners as well as several trade groups sent over to Congress has asked for support for the Helping Open Properties Endeavor Act. The HOPE Act is meant to provide financial assistance for small businesses that operate under the commercial real estate market and would shift funds from the CARES Act Economic Stabilization Fund. 

The HOPE Act would allow businesses to keep their doors open and continue running as well as to retain and rehire any employees that have been impacted by the pandemic. If hotels don’t receive assistance soon, America could see a large wave of hotel closings or permanent job losses for thousands of employees still hoping to return to work. 

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

By |COVID-19/Coronavirus Tax Relief News|Comments Off on The COVID Pandemic could Cause 1 in 4 Hotels to be Financially Impacted

$600 Unemployment Benefits Expected to Fall to $200 or $300 a Week

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 unemployment due to end this week, unemployed workers may see their additional benefits cut in half to $200 or $300 a week. This proposal outlined by Treasury Secretary Steven Mnuchin was announced last Thursday and negotiations are still proceeding to work out the finer details.

Currently, a new coronavirus relief package is being put together to assist millions of Americans who are financially struggling during the pandemic. The prior bill passed in March provided out-of-work Americans with an additional $600 per week, funded by the federal government. 

Discussions regarding the extension of unemployment benefits have been ongoing. It is expected that Congress will announce a new plan to provide the unemployed a reduced amount of $200 or $300 a week depending on data that is collected to determine what is feasible to distribute. 

Although taxpayers should expect a lower amount of unemployment funds coming their way, it is still expected to help them get by month to month. In addition to extending the length of time to receive unemployment checks, those out of work will also most likely receive a stimulus check to ease their current financial burdens. 

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

By |COVID-19/Coronavirus Tax Relief News|Comments Off on $600 Unemployment Benefits Expected to Fall to $200 or $300 a Week

Will Taxpayers Receive More Money in their Next 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.

Time is drawing near for a decision to be made as to whether or not a second stimulus check will be distributed to millions of Americans. Multiple bills have been proposed to provide relief to those that are financially struggling due to the coronavirus pandemic.

For weeks, Senate Majority Leader Mitch McConnell has worked with Treasury Secretary Steven Mnuchin on a relief package that would distribute stimulus checks only for those who have been financially impacted the most during the ongoing pandemic.

Negotiations have been ongoing throughout this week to make a decision as to who will qualify for the second round of stimulus checks as well as working out the details on how they will build upon the CARES act in order to assist businesses and Americans that are currently struggling to make ends meet.

Treasury Secretary Mnuchin confirmed that the proposed second stimulus check will be the same as the first, meaning taxpayers who qualify will receive up to $1,200. The guidelines for who qualifies for the stimulus check have not changed and will remain the same as the first: 

  • Single filers who earn less than $75,000 a year will receive the full $1,200. For those earn more than $75,000 should expect to see their check reduced by 5% of the amount they earn.
  • Joint filers who earn less than $150,000 a year will receive the full check however those who earn more will see their check reduced by 5% of the amount they earn over $150,000.

As negotiations continue, there is a general expectation that a decision regarding the expansion of the CARES act, as well as when the second stimulus check will be distributed, should be made before the end of July.

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

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

By |COVID-19/Coronavirus Tax Relief News|Comments Off on Will Taxpayers Receive More Money in their Next Stimulus Check?

Trump Backs Tax Breaks for Baseball in Order to Increase Fan Attendance

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.

White House officials have been discussing a possible approval of new tax breaks for baseball games to encourage Americans to return to the ballpark. 

Many are questioning whether the baseball season itself will even occur this year.  Minor League Baseball has already announced that no additional games will be played this year, and there is the expectation that many Major league baseball stars may opt out of the season due to fears of the coronavirus pandemic. The Washington Nationals and Houston Astros, the two teams that faced off in the World Series last year, were forced to cancel their Monday workouts due to complications they have been having with player testing. Not only have the amount of baseball games scheduled to be played this season already been greatly reduced, fans will not be permitted to attend any games for the foreseeable future. 

The White House, as well as President Trump, have been pushing for a spectrum of tax breaks that are meant to assist Americans with the transition back to normal economic life as well as assist businesses that are currently suffering due to the pandemic. 

President Trump has also endorsed the Explore America tax credit which would reimburse taxpayers up to $4,000 should they choose to travel within the U.S. This credit is meant to boost the economy by encouraging Americans to travel throughout America and shop local in order to revitalize struggling businesses – which could allow Americans the opportunity to fly to the city where their favorite team plays and catch a game.

Although the White House strongly supports tax breaks to taxpayers who want to travel within the U.S. and attend tourist attractions, their plans may fall flat as many of the businesses that were meant to be a part of the proposed plan, such as Major League Baseball teams, are now operating in a much different manner – or have even closed their doors – during the ongoing outbreak. 

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

By |COVID-19/Coronavirus Tax Relief News|Comments Off on Trump Backs Tax Breaks for Baseball in Order to Increase Fan Attendance