- By now you are probably aware that both the federal and NC return deadline for filing 2019 returns was extended to July 15, 2020. Penalties and interest will be waived for federal returns; however, the state is only able to waive penalties. Returns can still be extended to October 15.
The first and second quarter estimated tax payments for 2021 have been extended to July 15, 2020.
- As part of the People First Initiative, IRS has agreed to postpone certain installment payments and those in collection and limit some enforcement actions. For those who are currently in an installment agreement, payments due between April 1 and July 15, 2020 are suspended. You have the option of paying or suspending. No installment agreements will go into default; however, interest will continue to accrue on unpaid balances. All liens and levies will be suspended until July 15, 2020.
- The CARES Act was enacted to allow individuals to receive payments of $1,200 ($2,400 if married filing jointly) plus $500 for each child under 18. Income must be under $99,000 ($198,000 MFJ). The payment amount decreases on income between $75,000 and $99,000 ($150,000 to $198,000 MFJ). If over these amounts, you do not qualify for payment.
By now most people should have received their payment. If you haven’t received one yet, here are some of the reasons why:
- Your income was too high and you are not eligible
- The IRS doesn’t have your direct deposit information and the check is in the mail
- You did not file taxes for 2018 or 2019 and you did not fill out the non-filers payment information on the IRS website
- The IRS has the wrong bank information or address (this would have been taken from the most recent tax return filed)
- Your tax return is still being processed
- If you have been laid off due to COVID-19, unemployment benefits are available for 39 weeks. In addition, the unemployment amount has been increased by $600 per week. Short-term compensation is also available to those who had to reduce their working hours.
- If you are forced to withdraw from your retirement account, the 10% penalty for withdrawing before age 59 ½ is waived for distributions up to $100,000. The amount is included in taxable income ratably over three years; and if the total amount is repaid within the three year period, it will be treated like a rollover and no tax will be assessed on the initial distribution.
If you would prefer to borrow against your retirement earnings, plan loans are increased to $100,000 or 100% of the value in the plan. Repayment dates are deferred for one year.
- The Tax Cuts and Jobs (TCJA) made it much more difficult to itemize your deductions, including charitable contributions. The CARES Act has modified this restriction allowing $300 of donations to be deducted without having to itemize.
Another Stimulus Check?
Some lawmakers are proposing monthly stimulus payments of $2,000 for at least six months to people earning under $130,000 with special rules for married couples and children. However, there are a series of political drama that affects the details of another stimulus check.
Some question whether the prior relief measures accomplished anything and want to be cautious about any further government spending and the increase of the federal deficit.
Some believe that a more effective way to assist those struggling and to stimulate the economy is through payroll tax cuts so that workers can hang on to more of their money each paycheck. While this approach might help those with jobs it won’t benefit anyone who is already out of work.
As of publication, neither the House nor the Senate has passed a bill for a second round of relief payments for individuals. There are very different ideas which divide between party lines. It will probably take some time before any additional payments are distributed, if at all.