The coronavirus pandemic is killing thousands and putting thousands more into dire financial trouble.
The economy goes into meltdown. There is hope for low and middle-income earners, and everyone is able to pay their taxes at a later date.
Federal tax deadline delay
For the tax year 19-20, you won’t now be penalized for filing your federal taxes up until July 15. You will still have to pay your taxes by the same day.
If you have been struggling to find the money to pay your taxes, thanks to the situation affecting your income that gives you a chance to breathe – for now, you may have been late in filing, but for the first time in history, the IRS isn’t going to fine or chase you into mid-July.
You should go ahead and file your taxes now, even so. If you have the financial resources and the time on your hands, remember that the US Treasury is always the first creditor you need to pay off in any bad debt ranking.
If you are self-employed and due to make a quarterly payment on June 15, then you should still make that payment.
If you can see you will have problems in paying your tax bill, you may be able to use your Economic Impact Payment of up to $1200 per person (+$500 per child) towards your projected tax debt. Read on for further information.
The IRS will negotiate a repayment plan with you to repay your taxes for the year over a longer-term if you have difficulties.
For more serious tax debt issues, you can always contact us at Defense Tax to discuss your situation.
State tax deadlines
All but five states have followed the IRS and moved their tax return and filing deadline to July 15. Some of these states have extended their deadlines beyond, and others before July 15: Hawaii, Idaho, Iowa, Virginia, and Mississippi have all different tax filing deadlines to the IRS.
The biggest reason you should go ahead and file your tax return and pay your taxes is that the IRS and most states have not stopped their tax refund processes. That means you will get your payment from the tax authorities as you normally would along similar timeframes to those that would normally happen should you have filed your taxes on or about April 15.
Given the uncertain times we all face, every cent you can claw back from the government could be useful.
Economic Impact Payment
Congress has approved a financial stimulus package that gives every taxpayer who earns less than $136,500 per year payment of up to $1,200, tax-free, per person. If you are filing a joint tax return, the maximum income will be $198,000 Adjusted Gross Income (AGI).
As well as adult taxpayers, dependent children are worth up to $500 per child under the scheme. Therefore a family of four could get up to $3,400 from the IRS – not a bad little check!
The Economic Impact Payment is classed as a ‘tax credit’ so you will not pay tax on the money that will be paid directly into your bank account by the IRS.
There is only one catch – if you earn over $99,000 up to $136,500, the amount of money the IRS pays you will be reduced by $5 for every $100 you earn above $99,000. Thanks to the sliding scale, on $130,000 AGI, you will hardly get enough to pay for a good meal!
The IRS has an information page here that you can go through to work out how you qualify.
Uncertain times ahead
At no time in history has the world economy stopped like a car hitting a tree in this way? No one knows what will happen when quarantine restrictions are lifted. A lot of businesses have fired their workers to reduce cashflow thanks to their being unable to trade. No one can be certain that the world will simply turn the ignition key and drive away from where it hit the tree. It was going pretty fast when it hit it, so we don’t know what damage has been done!
The details we have covered above are the only certainties for now. Will, there be more checks given out to taxpayers should the pandemic not pass quickly, and emergency measures still are needed to protect the public? We don’t know.
All of us at Defense Tax wish you a healthy and prosperous future.