In light of the new global pandemic, the CORONA virus, also known as the COVID-19, significant changes have been introduced by the Treasury, the IRS and the Federal Government. Here is fully updated detail on covid-19 cares act in US.

What is the Covid-19 CARES Act?

Also known as the Coronavirus Aid, Relief and Economic Security (CARES) Act, President Donald Trump signed a $2 trillion stimulus package on March 27 th , 2020 to provide relief to individuals, families and small businesses.

Stimulus Checks for Individuals and Joint Tax Payers:

A stimulus check is a check sent to a taxpayer by the United States Government. Stimulus checks are sent out with the intention to stimulate the economy by providing consumers with spending money. Stimulus checks of up to $1,200 for individuals and $2,400 for joint taxpayers and an additional $500 for each qualifying child will be given out based on the taxpayers’ most recent tax filings such as 2019 or 2018( in case 2019 has not been filed yet). However, the amount paid out now will be reconciled on next year’s tax return based on the taxpayer’s 2020 situation. Eligibility thresholds for receiving stimulus checks is up to $75,000 of Adjusted Gross Income for Individuals ($150,000 for married filing jointly) . However, the rebate phases out at $99,000 for single and $146,500 for head of households and $198,000 for joint filers. Stimulus paycheck funds are eligible for direct deposits into the taxpayers’ bank accounts.

Student Loan Payment Relief:

Employers can continue to make student loan payments on behalf of their employees on a tax free basis, up to $5,250 annually. These loan payments would be excluded from the employee’s income. The provision is with effect from March 27, 2020 through Jan 21, 2021.

Unemployment Payment amounts to be raised:

Unemployment payments will be increased by $600 weekly for four months through July 31. The CARES bill now includes those who were previously considered ineligible for unemployment, including part-time employees, freelancers, independent contractors, gig workers and the self-employed.

Financial assistance available for Self-Employed Individuals:

The CARES act provides $349 billion for Small Business Administration(SBA) to distribute a new loan program called the Paycheck Protection Program( PPP), allowing relief to self-employed individuals and contractors and some eligible non profits as well.

The Federal Reserve Lending program will also receive $454 billion in support. Loans will be given for more than five years and will be aimed at businesses and non-profits having around 500-10,000 employees with the goal of retaining at least 90% of their workforce with full compensation and benefits.

Early Retirement Withdrawal penalty waived:

People wanting to withdraw up to $100K from their retirement funds are waived off from a 10% early withdrawal penalty. They would still owe tax though, just that the 10% penalty would no longer be applicable on that early withdrawal amount. The tax on such funds can either be paid the same year or can be paid over a period of three years. They would also be allowed to recontribute the funds to an eligible retirement plan within three years and can disregard that year’s cap on contributions.

Social Security Payroll Tax payment can be delayed by Employers:

Employers including all self-employed, can delay the payment of the employer portion of the Social Security Payroll Tax for the remainder of 2020 and pay back the liability over the next two years.

Covid-19 Cares Act – Deadlines and Extensions

The 2019 tax filing deadline is now July 15, 2020. This deferment applies to all taxpayers including individuals,trusts, estates, corporations and other non-corporate tax filers as will as those who pay self-employment tax. Tax payers who owe money( regardless of any amounts) can defer tax payments both interest free and penalty free until July 15 . The deadline for Partnerships and S-Corporations remained at March 15,2020 and the deadline for Foreign Bank Account Reports ( the IRS Fin Cen 114) was April 15, 2020 and was not extended.

The July 15 deadline is applicable to all taxpayers automatically. No extension needs to be filed. No refunds will be delayed either but it would be best to file now so as to be able to get your refunds on a timely basis. Generally, the IRS takes about 21 days for refunds provided that the returns are filed electronically and a direct deposit for accepting refunds is set up.

If a taxpayer needs additional time beyond July 15 to file, then an extension would have to be filed. An extension of up to October 15,2020 would be given but the taxpayer will need to pay any taxes owed by July 15 or be subject to penalties and interest.

Quarterly estimated tax payment deadlines extended:

The due dates for Q1 and Q2 quarterly estimated taxes, normally April 15 and June 15 respectively, are extended to July 15. So now the new deadlines for the estimated tax payments is July 15, July 15, Sep 15 and Jan 15( of 2021) for Q1, Q2, Q3 and Q4 respectively.

Please note: Even though the Federal and most States’ tax filing deadlines have now been extended to July 15, it’s advisable to check the deadline date for your State for further reference.

For more details on the CARES Act for all Americans and how it works, please refer to
https://home.treasury.gov/policy-issues/cares

GavTax Advisory Services accepts clients from all 50 States including the State of New York, California, Texas,Illinois, Florida, Pennsylvania, Ohio, New Jersey, Virginia, North Carolina and all U.S territories as well.

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