IRS Offers Disaster Relief to California Tax Payers

IRS Offers Disaster Relief to California Tax Payers

Victims of California wildfires getting IRS disaster relief.

California has been hit by a series of wildfires going back to Aug. 14. Taxpayers now have until Dec. 15, 2020 to file their various individual and business tax returns and make any tax payments.

The IRS says the relief is for taxpayers and businesses in any area designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual assistance.

This currently includes Lake, Monterey, Napa, San Mateo, Santa Cruz, Solano, Sonoma and Yolo counties in California. Taxpayers in other localities that are added to the disaster declaration later will automatically get the same relief.

The most current list of eligible counties and locations is available on the disaster relief page on IRS.gov.

The IRS says these relief measures postpone various deadlines that occurred starting Aug. 14.

“As a result, affected individuals and businesses will have until December 15, 2020, to file returns and pay any taxes that were originally due during this period,” an IRS release states. “This means individuals who had a valid extension to file their 2019 return due to run out on Oct. 15, 2020, will now have until Dec. 15, 2020, to file.”

It should be noted, however, that because payments related to these 2019 returns were due by July 15, 2020, those payments are not included in the relief package.

The Dec. 15 deadline also applies to quarterly estimated income tax payments due Sept. 15 and the quarterly payroll and excise tax returns normally due Oct. 31. It also applies to tax-exempt organizations operating on a calendar-year basis that had a valid extension date to run out on Nov. 15.

Businesses with extensions also have the additional time, including, among others, calendar-year corporations whose 2019 extensions run out on Oct. 15.

IRS advice for those who missed the July 15 2020 deadline, file now to avoid bigger bill

IRS advice for those who missed the July 15 2020 deadline, file now to avoid bigger bill

For those who missed the July 15 tax deadline and didn’t request an extension, the Internal Revenue Service reminds taxpayers about some important tips, including filing electronically as soon as possible to reduce potential penalties.

Some taxpayers may have extra time to file and pay any taxes due without penalties and interest. These include:

The IRS offers these after-tax-day tips:

File to get a tax refund

The only way to get a refund is to file a tax return. There is no penalty for filing after the deadline if a refund is due. Use electronic filing options including IRS Free File available on IRS.gov through October 15 to prepare and file returns electronically.

The IRS reminds taxpayers that, while we continue to process electronic and paper tax returns, issue refunds, and accept payments, we’re experiencing delays in processing paper tax returns due to limited staffing. If a taxpayer filed a paper tax return, we will process it in the order we received it. Do not file a second tax return or call the IRS.

Taxpayers can track a refund using the Where’s My Refund? tool on IRS.gov, IRS2Go and by phone at 800-829-1954. Taxpayers need the primary Social Security number on the tax return, the filing status and the expected refund amount. The tool updates once daily, usually overnight, so checking more frequently will not yield different results. The “Where’s My Refund?” tool cannot be used to track Economic Impact Payments.

File to reduce penalties and interest

Normally, taxpayers should file their tax return, or request an extension, and pay any taxes they owe by the deadline to avoid penalties and interest. Taxpayers need to remember that an extension to file is not an extension to pay. Penalties and interest will apply to taxes owed after July 15.

Even if a taxpayer can’t afford to immediately pay the taxes they owe, they should still file a tax return as soon as possible to reduce possible penalties. The IRS has more information for taxpayers who owe the IRS, but cannot afford to pay.

Ordinarily, the failure-to-file penalty is 5% of the tax owed for each month or part of a month that a tax return is late. But if a return is filed more than 60 days after the due date, the minimum penalty is either $435 or 100% of the unpaid tax, whichever is less. Filing and paying as much as possible is important because the late-filing penalty and late-payment penalty add up quickly. The basic failure-to-pay penalty rate is generally 0.5% of unpaid tax owed for each month or part of a month. For more see IRS.gov/penalties.

Taxpayers who have a history of filing and paying on time often qualify for penalty relief. A taxpayer will usually qualify if they have filed and paid timely for the past three years and meet other requirements. For more information, see the first-time penalty abatement page on IRS.gov.

Pay taxes due electronically

Those who owe taxes can view their balance, pay with IRS Direct Pay, by debit or credit card or apply online for a payment plan, including an installment agreement. Several other electronic payment options are available on IRS.gov/payments. They are secure and easy to use. Taxpayers paying electronically receive immediate confirmation when they submit their payment. With Direct Pay and the Electronic Federal Tax Payment System (EFTPS), taxpayers can opt in to receive email notifications about their payments.

Taxpayer Bill of Rights

Taxpayers have fundamental rights under the law that protect taxpayers when they interact with the IRS. The Taxpayer Bill of Rights presents these rights in 10 categories. IRS Publication 1, Your Rights as a Taxpayer, highlights these rights and the agency’s obligation to protect them.

IRS Warns Against Corona Virus Fraud, and Other Scams

IRS Warns Against Corona Virus Fraud, and Other Scams

The IRS is reminding taxpayers to be on the lookout for corona virus fraud and other scams.

According to a release from the IRS, criminals continue to use the corona virus relief payments as a cover to steal personal information and money.

Below are some corona virus schemes the IRS is urging taxpayers to look out for:

  • Using relief payments as a cover to get personal information and money
  • Selling fake at-home test kits
  • Selling fake cures, vaccines, pills and advice
  • Selling large quantities of medical supplies through fake shops, websites, social media accounts and email addresses
  • Setting up fake charities
  • Offering opportunities to invest early in companies working on a vaccine for the disease
  • Phishing scams using emails, letters, texts and links

Scams should be reported to the National Center for Disaster Fraud hotline at 1-866-720-5721 or submitted through the
web complaint form here –> https://www.justice.gov/disaster-fraud/ncdf-disaster-complaint-form

 

Delaying Payment of Old Tax Bills Is a Big Mistake

Delaying Payment of Old Tax Bills Is a Big Mistake

You know that long list of ways that the COVID-19 virus has affected our lives? Well, here’s another one. The IRS has completely flipped a switch on its priorities, and it is not even looking at paper tax returns that are being sent to it. The idea of all those envelopes piling up somewhere is a bit mind-boggling, but it’s apparently what’s happening as the Treasury Department focuses on generating the stimulus checks that American taxpayers need to get through the crisis.

If you don’t owe the IRS money and you’re not looking to amend a previously filed tax return, this shift won’t mean much to you. You can rest easy knowing that the tax return and payments that would have been due in April are now not due until July 15th. But if you were hoping to get a refund from a previous year’s return via a return you amended (or need to amend), or if you owe the IRS money, you need to pay attention.

For the first of these two categories – the folks with amended returns – what you need to know is that you’re not likely to see any kind of response for quite a while. There’s no way to find out what the status is and the agency is pointedly advising people not to interpret the lack of response as a need to send in a new one. Doing so would just confuse things more. You need to sit tight.

If, however, you owe the IRS money from before the crisis occurred, there are no breaks on the penalties and interest that are stacking up. It may take the agency a while to get around to figuring it out, but if you decide to sit and wait ‘til you hear from them, you’re going to be in for a big shock. Your liability is not only still there, it’s adding on interest from the time that it was due. This is true on amended returns that reflect a liability as well.

How much could the interest and penalty add up to?

In a word – it could add up to a lot. Not only do you owe the original amount, you are also subject to accruing interest and a failure-to-pay penalty of 0.5% of your original liability for each month (or partial month) that it hasn’t been paid. That can rack up to 25% of the liability. There’s also a penalty if you failed to file on time, and that can add up to another 5% of the amount that you owe each month. Even if you can’t afford to pay your entire liability all at once, you’re much better off paying small parts over time than waiting and having all of that interest added to your debt. You can contact the IRS online to arrange for one of their installment agreements.

Remember that mountain of returns piling up somewhere? Keep that in mind when you’re ready to send the IRS your money. If you write a check it’s going to just sit there, and your interest is going to keep adding up. Opt for paying electronically via direct payment. Don’t worry about the fact that the paperwork is sitting in that big pile. The agency will eventually get around to going through it, and they’ll figure out which payment goes with which amended return.

Don’t Fall For These 5 COVID-19 Relief Payment Myths

Don’t Fall For These 5 COVID-19 Relief Payment Myths

1. Everyone is going to get $1,200.
While many are, the maximum $1,200 person payout isn’t going to show up in every person’s bank account or snail mail box. People who have higher incomes will see their payments reduced phased out incrementally for individuals with no children where their adjusted gross income (AGI) is more than $75,000 for single people; $112,500 for taxpayers filing as head of household; or $150,000 for taxpayers filing a joint return.

The Coronavirus Aid, Relief and Economic Security (CARES) Act that created the payments also decreed that folks won’t get any COVID-19 relief money if their AGIs are more than $99,000 for single filers; $136,500 for head-of-household taxpayers; or $198,000 for married couples filing jointly.

The phase-out income levels are a bit higher for folks with kids. The Internal Revenue Service table below shows how the COVID-19 economic relief payment is reduced based on your AGI and number of eligible children (those age 16 or younger) you can claim.

COVID19 payment phase out for high earners with children_IRS table

Even those who do qualify for the maximum payout could see less when it arrives. The COVID relief payments are not subject to most types of federal offsets that usually are attached to things like your tax refund, such as overdue student loan payments or unpaid taxes. However, if a recipient is behind on child support, that due amount likely will be taken out before the relief payment is made. There’s also the possibility the payments could take a hit from some types of state or local government garnishments, as well as court-ordered paycheck collections.

2. Unemployment benefits disqualify you from getting the payment.
Not true, and that’s a huge sigh of relief you’re hearing across the country from the more than 30 million folks thrown out of jobs since the coronavirus began spreading across the United States. So collect that unemployment check (if your state government is able to get it to you) and expect your COVID-19 economic relief payment, too.

The federal relief payments being distributed now are based on the amount of money you made either in 2018 or 2019. The Treasury and IRS don’t care what you’re making (or not) in 2020. However, this year’s income could come into play as far as COVID-19 relief when you file your tax return next year. If you didn’t get the maximum amount based on your prior taxes, for example, you had an eligible dependent this year who was not shown on your earlier returns, you can claim that relief amount when you file your 2020 taxes in 2021. Yeah, I know. The wait is not what you need. But at least you’ll get your money eventually.

3. The COVID-19 economic relief payment is taxable income.
Again, no. The relief money is not income. It is a tax credit. Just like the child tax credit or Earned Income Tax Credit (EITC), it’s a tax break that’s calculated based on your eligibility and is used to offset any tax you owe. Tax credits aren’t taxed. In some cases, they’re even refundable, meaning you get money back even if you don’t owe taxes. You don’t owe taxes the next year on any credits you get on your prior tax filings.

This tax credit math is usually done when you file your return. But in order to get the COVID relief money out more quickly, it’s being issued as an advance tax credit on your 2020 taxes based on your 2018 or 2019 returns. But its tax treatment remains the same. It’s not taxable.

4. You’ll have to pay back a too-big COVID-19 economic relief payment.
This is the companion to the tax credit myth. Again, not true. While the multiple tax years involved in the COVID relief payments definitely lend to the confusion about the money, the good news here is that if you got an overly large amount based on your 2018 or 2019 returns, don’t worry about it.

Uncle Sam says that even if your 2020 taxes, for which the payment is an advance tax credit, shows you should have received less, you get to keep the over payment that the government made this year. That’s because at the time the IRS calculated the COVID-19 relief amount you were due, the agency was using the latest info it had, your prior filings. So even though it technically is a 2020 tax year advance credit, the timing of its early delivery means that the IRS doesn’t care about your 2020 money, at least as far as the COVID-19 economic relief payment is concerned.

And there’s even better news. As noted in myth #2 and worth repeating here, if you didn’t get as much this year in your COVID relief payment as you eventually find you are due based on your 2020 tax situation, you can collect that unpaid amount when you file your 2020 return next year.

5. There are special ways to speed up delivery of my relief payment.
Treasury and the IRS already have established the payment schedule for the COVID-19 economic relief money. It’s going to direct deposit accounts first, then paper checks will be dropped in the mail. The payments also are being sent to the lowest-income taxpayers first in either the electronic or snail mail delivery route.

The only sure-fire way to get your COVID-19 economic relief payment more quickly is to get your direct deposit data to the IRS using the enhanced Get My Payment tool. If the IRS doesn’t have that information, it will mail you a paper check via the U.S. Postal Service. But you need to hurry. If when you do try to let the IRS know your bank info you find that it’s already decided you’ll get a paper check, you can’t change that. You’ll get a paper check.

So don’t fall for “offers” that promise to get you your COVID-19 money more quickly. Any phone calls or texts or emails from folks, some pretending to be with Treasury, the IRS or the Social Security Administration, are coronavirus scams. Don’t fall for them. It could cost you even more than the relief payment amount you’re expecting.

Stimulus Payments Are Finally Flowing – Did You Get Yours; Was It Correct?

Stimulus Payments Are Finally Flowing – Did You Get Yours; Was It Correct?

The IRS has finally started making those much anticipated Economic Impact Payments, aka “Stimulus Payment.” However, not everyone who was expecting one has received theirs, and some may not be the amount expected.

The Treasury first looked for a filed 2019 return when they began making the payments. If a 2019 return was not filed in time to catch the payment dates, they used the family makeup and income from the 2018 return if one was filed. If neither was filed, then they paid rebates to recipients of Social Security, SSI disability, survivors, Railroad Retirement and veterans’ benefits.

Someone who does not fit into one of those categories is generally deemed to be a non-filer and will not receive a rebate until they either file a return or use the Non-Filer Tool on the IRS website.

You can check on the status of your rebate using the “Get My Payment” feature at the same IRS webpage as the non-filer tool. That same page also provides the ability for some taxpayers to enter their direct deposit information If the IRS doesn’t have your direct deposit information in their records, you can use Get My Payment to submit that information after properly verifying your identity and if the payment hasn’t already been scheduled for processing. To protect against potential fraud, Get My Payment won’t allow direct deposit bank information already on file with the IRS to be changed. However, direct deposit information can be updated for people whose direct deposit information on the last return filed was incorrect and resulted in a paper check being issued for their refund. Unfortunately, address changes cannot be made through Get My Payment.

Also realize there may have been births, deaths, under age 17 dependent children, marriages, separations, divorces, emancipations, and income changes that can cause the rebate amounts to be different from what may have been expected, or in some cases, be incorrect. On top of all that, the rebates are reduced (phased out) for higher income taxpayers, so based on your reported adjusted gross income on your 2019 return (or 2018 if 2019 hasn’t been filed yet), you may only qualify for a reduced rebate or no rebate at all.

The IRS provides an extensive Q&A related to rebate issues and situations that may answer any questions you may have related to your rebate.