As with nearly everything else, the COVID-19 pandemic has affected taxpayers and their upcoming obligations with state agencies and the IRS. A few federal bills have been passed that aim to help U.S. citizens stay financially afloat the next few months, and some parts of those laws affect what is already a busy season for filing taxes. To help clear up some of the confusion surrounding coronavirus and its effect on tax programs, we have compiled this guide to answer some frequently asked questions.
Has the tax deadline been pushed back?
Yes, you now have until July 15 to file your federal taxes. You can also wait until July 15 to send the IRS money if you owe. Many states have adopted this July 15 deadline for state-level tax, as well, with some notable exceptions. Mississippi only pushed the deadline back one month, to May 15, while Virginia and Idaho taxpayers must file by June 1 and June 15, respectively.
Will you have to pay taxes on payments the government is sending?
Much is still unknown about the logistics of sending every American adult $1,200. Couples are receiving $2,400 and get a $500 credit for each child. The payments are slated to be sent sometime in April to every eligible American (those making up to $75,000 individually). Most taxpayers will not need to take extra steps to receive this check, but some older persons and those who do not usually file a tax return will have to complete a simple form to receive the money.
For employers: What is the Employee Retention Credit, and am I eligible?
To encourage employers to keep workers on their payroll, the IRS has helped introduce a tax credit to businesses that they can apply to qualified wages paid to employees between March 12, 2020 and Jan. 1, 2021. The credit is applicable to 50 percent of the first $10,000 paid to any employee during that time period, for a maximum of $5,000.
Eligible businesses are those that have either had to suspend part of their operations due to containment measures or experienced a significant decline in gross receipts. A significant decline in gross receipts is defined as a drop of 50 percent or more in a calendar quarter as compared to the same calendar quarter the previous year. The credit ends when a calendar quarter is 80 percent or more of the amount of gross receipts the same quarter saw the previous year.
Various actions have been taken by the IRS and state agencies to provide some measure of relief to taxpayers due to coronavirus, and there is likely more to come. If you are seeking legal help to make sure you utilize the new tax credits correctly or you are currently in trouble with the IRS, reach out to us soon.