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On the evening of December 27, President Trump signed into law the $900 billion stimulus bill, a second round of bailout for the American people suffering through this pandemic. This bill provides for stimulus payments of $600 subject to income phaseouts of $75,000 single and married filing separately (MFS), $112,500 head of household, and $150,000 married filing joint. The phaseouts will be based on 2019 income. $500 will also be paid out for dependents under the age of 17.

Stimulus checks and direct deposits began flowing to Americans on Wednesday, December 30.

The IRS is recalibrating its website to allow those who have had address changes or did not file tax returns for 2019 to provide their contact data for receipt of their checks.

The other provisions in this bill are as follows:

  • Allowing the deduction of business expenses paid for with forgiven Paycheck Protection Program loans. This is a biggie for anyone who received the PPP loan for their small business. Initially, the deductions claimed against the PPP income were not to be allowed. This new provision will save small business owners thousands of dollars in taxes.
  • Extension of the special charitable contribution provisions enacted for 2020 through 2021. If you do not itemize deductions, you will be able to write off $300 (single and MFS) or $600 (married filing joint)
  • Restoration of the 100 percent business meals deduction for meals purchased in a restaurant for two years to help the restaurant industry. Normally, only 50% of the expense is deductible. This deduction does not apply to 2020 but to 2021 and 2022 tax years
  • Allowing COVID-19-related expenses to qualify for the above-the-line educator expense deduction.
  • Clarification that certain financial aid received by college students and forgiveness of Economic Injury Disaster Loans to small businesses are excluded from income,
  • Extension of the credit for paid sick and family leave enacted as part of the Families First Coronavirus Response Act through March 31, 2021.
  • Extension of the employee retention credit through June 30, 2021.
  • Extension of the time allotted for repayment of employee Social Security taxes deferred under a presidential memorandum through the end of 2021.
  • Extension of ability to take penalty-free distributions or loans of up to $100,000 from a retirement plan.
  • A new round of PPP lending will soon be available for businesses with fewer than 300 employees, less than $2 million in revenue, and whose gross receipts are 25% lower than in 2019.

Naturally there are caveats, exceptions, special circumstances and other complications involved in all of the above. If you have questions, please consult your tax advisor, or call my office for more information.

 

The IRS predicts a normal tax season this year with the due date of April 15 and extensions allowed for filing to October 15 for individual returns. Corporate and partnership returns are due on March 15.  REMEMBER: the extension is for additional time to file, not additional time to pay. Your taxes must be paid by the initial due date and if they are not yet filed, you must estimate your liability and pay it with the extension form.

Many of you collected unemployment during 2020. Bear in mind that this is taxable income which must be reported on your 2020 income tax return.

The big question is whether or not Congress will pass the bill to increase the stimulus payments to $2000. According to ABC news, Despite continued support, Mitch McConnell is holding up discussion of this bill. It’s likely no action will taken. Reasoning behind this is that Trump slipped into this bill a provision to set up a committee to investigate election fraud and the repeal of Section 230 of the Communications Decency Act, which shields internet platforms such as Twitter and Facebook from liability for user-created content.

We are hopeful for a healthy, happy, and prosperous New Year for us all. And I believe there is every reason for optimism.

This just in from the IRS about the Stimulus Checks:
Many people have already received their Economic Impact Payment, and many more will be getting them soon. Whether it’s already there or on the way, the payment brings questions from many people.
Anyone who has questions can visit IRS.gov for updated FAQs about the Economic Impact Payment. Here are a few of the questions the IRS continues to hear.
What about a child’s parents who are not married to each other, but both got the $500 for the same child? Will one of them have to pay that back?
The law doesn’t require repayment of an Economic Impact Payment in these situations. Each parent should review Notice 1444, Your Economic Impact Payment. The IRS will mail this notice to their last known addresses within 15 days after the payment is made. The parents should keep the notice for their 2020 tax records.
If someone who owed tax scheduled a payment from their bank account, will the IRS send the payment to the account used?
No, the IRS will not send an Economic Impact Payment to an account used to make a payment to the IRS. If the agency doesn’t have direct deposit bank information for someone, their payment will be mailed to the address the IRS has on file.
If someone requested a direct deposit of the payment, why is the IRS mailing it?
There are several reasons why someone’s payment may have been sent by mail. These include:
• The payment was already in process before the bank information was entered.
• The IRS does not have the correct bank account information
• The bank rejects the direct deposit
The IRS will mail the payment to the address they have on file for the taxpayer. Typically, it will take up to 14 days to receive the payment

I’ve had dozens of questions relating a variety of tax and economic topics. These are the most common ones:

Q. I’m self-employed, a sole proprietor (or in some cases a freelancer or gig worker). Can I apply for unemployment?
A. Yes you may. In normal circumstances, you would not be able to because you haven’t paid into the system. But these are different times and allowances are being made to help us all. In CA go to https://www.edd.ca.gov/unemployment/filing_a_claim.htm to file a claim

Q. I did not file a tax return for 2018 or 2019 because I was on Social Security and had no other income. Will I get a stimulus check automatically or do I have to file a return to get the check?
A. Yes, you will get the check automatically. There is no need to file an abbreviated tax return. At first, this was a requirement but the IRS realized that it can pick up your bank account info from the roles at SSA. So that’s what they are doing. They will provide you with a direct deposit of the stimulus check into your bank account.

Q. What if I didn’t have a filing requirement for the last two years and I wasn’t collecting social security? How will they know to send me a check?
A. Right now nothing is in place to help you. As soon as the IRS releases information about how people can go online to make sure they receive their EIP, they will let you know. Info on this should be coming out this week. Go to: https://www.irs.gov/coronavirus to check on recent developments. I understand they will be setting up a portal to deal with individuals in these situations.
You may also file an EIP tax return. Most tax pros are equipped to handle this. Or go to www.irs.gov and file it yourself. Click on the Free File button on the home page.

Q. Do I have to do anything, file any forms, to get the new extension to July 15? When must I pay my taxes?
A. No additional paperwork required; no extension need be filed. It’s automatic for both federal and CA. the extension includes time to pay not only your 2019 tax liability free of penalty and interest. July 15 is also the new due date for your first two installments of your estimated tax payments for 2020, normally due April 15 and June 15.

Q. I got a call from the IRS saying they don’t have my direct deposit information. Is it okay to provide them with that information over the phone or was that a scam? I hung up on them.
A. Yes, hanging up was the right thing to do because indeed it was a SCAM! Beware, the scammers are out there taking advantage of you during this trying time. Remember: The IRS will NEVER call you or email you. They always deal through snail mail correspondence.

Q. I tried to call the IRS this week to set up an installment agreement for the taxes I owe but no one answered the phones. Are they overwhelmed right now?
A. As a matter of fact, there are no phone operators on duty, so forget about calling them. They have also suspended collection activity for the duration. And the Practioner Hotline is closed as well. Many tax matters, such as setting up installment agreements can be dealt with online. Go to: www.irs.gov to set up your payment plan. You can also do many other things: apply for an EIN, get transcripts of your account, and check the status of your refund, among others. Their website has become a handy tool.

Q. My business needs help! I don’t know which loan to apply for: the Disaster Assistance or the Payroll Protection Loan.
A. The disaster assistance loan caps at $10,000 and may be forgiven if you use the funds for operating expenses. You may apply for it directly with the Small Business Administration (SBA) The payroll protection loan can be for much higher amounts and in addition to operating expenses, it covers 8 weeks of payroll for your employees. You must apply for this loan through your bank. Go to: https://www.sba.gov and click on the golden ruler bar at the top “Corona virus (COVID-19): Relief options and Additional Resources.”

Please note that on April 9 the IRS announced that Individuals, trusts, estates, corporations and other non-corporate tax filers qualify for the extra time to file and pay their 2019 taxes to July 15, 2020. Initially, only individuals were allowed this automatic extension.

If additional time is needed to file and pay, you may file an extension to October 15,2020. This extension must be filed by July 15, 2020. Also, any tax due (you may need to estimate) must be paid by July 15. There is no further extension granted of time to pay.

If you have a tax question, please write to me at bonnie@taxpertise.com.

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