The payment of $1,200 ($2,400 for joint filers) is calculated from your most recent tax return. If your adjusted gross income was above $75,000 ($150,000 for couples) the $1,200 payment is reduced by $50 for every $1,000 your income exceeds the limit above. For example is a couple makes $200,000. That’s $50,000 more than the limit. So, $50 x 50 = $2,500. So, no payment. On the other hand if they were at $175,000, then the reduction is $1,250 and they would get their $2,400 reduced by $1,250. So, what year do they look at? The calculation year is the last filed year, but it is trued up after your 2019 tax return is filed. So, if you had lower income in 2018 and higher income in 2019, you might get a bigger check, but will owe some or all of it back at the end of the year. On the other hand if your income in 2019 was lower than 2018, then it would behoove you to file ASAP. The payment will offset anything you might owe this year in taxes. Needless to say, it will be a headache for the next year.
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Lots of Tax Changes – Let’s start with FMLA
You have an employee who either catches COVID-19 or cares for someone with COVID-19, or is quarantined due to COVID-19 exposure, or who has to keep the kids because school and daycare are gone. Under the Families First Coronoavirus Response Act, you get two things: (1) a credit up to 100% of employer share of medicare and FICA taxes capped at $511 per day or $200 per day of wages paid depending on the reason for the absence. There is also a 10 day per quarter limit. This includes health plan payments as well. The credit is refundable and reduces income. Further, employer still gets the employer FICA and Medicare deduction even though its given back to Employer. The same rules apply for self-employed individuals as well and can be used to reduce self-employment taxes as well.
Additionally, the Medicare and FICA tax paid by employers is also permitted for FMLA leave paid during the quarter up to $200 per day plus health plan expenses paid during the quarter. This credit is limited to 10 weeks. However the credit under this provision is taxable as income, but its offset by these expenses. Again the same rules apply for self-employed individuals.
Also any wages paid to the employee under this Act will not be subject to employee Medicare and FICA tax.
This is being amended as we speak in the current bill before Congress.
Manuchin Tweets. -Filing Deadline now 7/15
“At @realDonaldTrump’s direction, we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”
Teeny Tiny breaks from Virginia.
On March 19, 2020, Governor Northam made the following announcement:
“Businesses impacted by COVID-19 can also request to defer the payment of state sales tax due tomorrow, March 20, 2020, for 30 days. When granted, businesses will be able to file no later than April 20, 2020 with a waiver of any penalties.
The Governor has requested that the Department of Taxation to extend the due date of payment of Virginia individual and corporate income taxes. While filing deadlines remain the same, the due date for individual and corporate income tax will now be June 1, 2020. Please note that interest will still accrue, so taxpayers who are able to pay by the original deadlines should do so.”
So, business can request sales tax deferral for 30 days and avoid penalties (not interest). Query whether they will grant it quickly or you won’t find out for 60 days. Individuals still have to file on time, but now have an automatic 30 day extension to pay as well. Still accrues interest. I guess a slice of bread is better than no bread at all.
IRS payment deferral included April 15 Estimated Payments as well
According to IRS Notice 2020-17, income tax payments and estimated tax payments due on April 15, 2020 are extended to July 15, 2020 (under $1 Million for individuals and joint returns). It does not extend June 15 estimated payments however. Further, it does not extend filing deadlines for tax returns. Lastly, it does not say that if you e-file a return and mark the box to pay the tax by debit on the due date whether that debit will occur on April 15 as originally planned or on July 15, the new payment due date.