IRS extends Economic Impact Payment deadline to Nov. 21 to help non-filers

IRS extends Economic Impact Payment deadline to Nov. 21 to help non-filers

The Internal Revenue Service announced today that the deadline to register for an Economic Impact Payment (EIP) is now November 21, 2020. This new date will provide an additional five weeks beyond the original deadline.

The IRS urges people who don’t typically file a tax return – and haven’t received an Economic Impact Payment – to register as quickly as possible using the Non-Filers: Enter Info Here tool on IRS.gov. The tool will not be available after November 21.

“We took this step to provide more time for those who have not yet received a payment to register to get their money, including those in low-income and underserved communities,” said IRS Commissioner Chuck Rettig. “The IRS is deeply involved in processing and programming that overlaps filing seasons. Any further extension beyond November would adversely impact our work on the 2020 and 2021 filing seasons. The Non-Filers portal has been available since the spring and has been used successfully by many millions of Americans.”

Special note: This additional time into November is solely for those who have not received their EIP and don’t normally file a tax return. For taxpayers who requested an extension of time to file their 2019 tax return, that deadline date remains October 15.

To support the ongoing EIP effort, many partner groups have been working with the IRS, helping translate and making available in 35 languages IRS information and resources on Economic Impact Payments.

To help spread the word, the IRS sent nearly 9 million letters in September to people who may be eligible for the $1,200 Economic Impact Payments but don’t normally file a tax return. This push encourages people to use the Non-Filers tool on IRS.gov.

“Time is running out for those who don’t normally file a tax return to get their payments,” Rettig added. “Registration is quick and easy, and we urge everyone to share this information to reach as many people before the deadline.”

While most eligible U.S. taxpayers have automatically received their Economic Impact Payment, others who don’t have a filing obligation need to use the Non-Filers tool to register with the IRS to get their money. Typically, this includes people who receive little or no income.

The Non-Filers tool is secure and is based on Free File Fillable Forms, part of the Free File Alliance’s offering of free products on IRS.gov.

The Non-Filers tool is designed for people with incomes typically below $24,400 for married couples, and $12,200 for singles who could not be claimed as a dependent by someone else. This includes couples and individuals who are experiencing homelessness.

Anyone using the Non-Filers tool can speed the arrival of their payment by choosing to receive it by direct deposit. Those not choosing this option will get a check.

Beginning two weeks after they register, people can track the status of their payment using the Get My Payment tool, available only on IRS.gov.

Oct. 15 deadline nears for taxpayers who requested tax filing extensions

Oct. 15 deadline nears for taxpayers who requested tax filing extensions

The Internal Revenue Service today reminds taxpayers who filed an extension that the Oct. 15 due date to file their 2019 tax return is near.

Taxpayers should file their tax returns on or before the Oct. 15 deadline. For those who still owe, pay as soon as possible to reduce any penalties and interest.

Convenient electronic filing options, including IRS Free File, are still available. Taxpayers and tax professionals should continue to use electronic options to support social distancing and speed the processing of tax returns, refunds and payments.

Although Oct. 15 is the last day for most people to file, some taxpayers may have more time. They include:

Members of the military and others serving in a combat zone. They typically have 180 days after they leave the combat zone to file returns and pay any taxes due.
Taxpayers in federally declared disaster areas who already had valid extensions. For details, see the disaster relief page on IRS.gov.

Who Qualifies as a Dependent on Taxes?

Who Qualifies as a Dependent on Taxes?

Deciding if Someone Qualifies as a Dependent on Your Tax Return

How Do I Know if I Can Claim Someone as a Dependent?
To start, there are a few basic requirements that need to be met to claim someone else as a dependent:

No one else can claim you, or your spouse if you’re filing a joint return, as a dependent. Even if the person chooses not to claim you as a dependent, the fact that they could makes you ineligible.
You generally can’t claim anyone who is married and files a joint return. However, there are exceptions if the person only files a joint return to get back income taxes that were withheld from paychecks or estimated tax payments.
The person you’re claiming must be a U.S. citizen, resident alien (which can include undocumented residents), U.S. national, or resident of Canada or Mexico. There are also some exceptions for adopted children who lived with you in the U.S.
These general rules apply to everyone. Additionally, the person you’re claiming must meet all the requirements to be your qualifying child or qualifying relative.

The Two Types of Qualifying Tax Dependents
Children and relatives can qualify as tax dependents—but their definitions are broader than you may suspect.

In addition to your birth child or an adopted child, your foster child, siblings, half-siblings and step-siblings (along with all the siblings’ descendants) can be qualifying children. And your son-in-law, mother-in-law, parents, grandparents and in-laws could all be qualifying relatives.

A person doesn’t even need to be a relative to count as a qualifying relative. A girlfriend, boyfriend or roommate could be your dependent as long as the person is a member of your household for the entire year and meets all the other requirements.

The IRS’ Publication 17, chapter 3, has a complete list of which relationships can qualify someone as a child or relative for dependent purposes.

In addition to the relationship requirement, the qualifying child or qualifying relative has to pass a series of “tests.”

Qualifying Children
There are four tests for qualifying children:

The child must be 19 or younger at the end of the tax year and younger than you (and your spouse if you file a joint return). Qualifying children can be up to 24 years old if they’re also full-time students for at least five months of the year, or they can be any age if they’re permanently and totally disabled.
The child has to live with you for at least half the year. There are exceptions for temporary absences, such as when you or the child are away from home for school, business, vacation or military service.
The child can’t provide more than half of his or her own support during the year (scholarships don’t count as support).
The child can’t file a joint tax return unless the only reason for filing is to get back the taxes that were withheld from his or her pay or were part of estimated tax payments.
The rules for who can claim a qualifying child can get fairly complex when both parents can claim the child as a dependent but they aren’t married, or they file their tax returns using the married filing separately status.

Some parents switch off, letting one person claim the child one year and the other parent claim the child the next. The IRS also has an official series of tiebreaker rules (see page 30 of Publication 17) to determine who can claim the child if you can’t come to an amicable agreement.

Qualifying Relatives
There are three additional tests for your qualifying relatives:

The person can’t be anyone’s qualifying child.
The person’s gross income must be below $4,150. Income could include money, property, goods or services they received, and it may include Social Security benefits. However, there are exceptions for people with disabilities who received income from certain tax-exempt schools.
You have to provide more than half of the person’s support for the year.
If working through all the tests sound like too much work, you could also try the IRS’ interactive tool, which can help you determine if you can claim someone as a dependent.

DISCLAIMER: Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular
circumstances. For this reason, you are advised to consult with your own attorney, CPA, and/or other advisor regarding your specific situation. 

Have further questions?  Please contact our office and make an appointment.

7 Tax Deductions Self-Employed Workers Shouldn’t Overlook

7 Tax Deductions Self-Employed Workers Shouldn’t Overlook

Self-employment can bring more flexibility, but often it brings more pressure as well. You are both employee and employer, which means you can set your own hours and decide which projects you feel like taking on. It also means that if you don’t have any cash flow coming in, there’s no one to blame but yourself.

As taxes can get more complicated as self-employed, you must pay them quarterly and you owe a lot more in Social Security and Medicare tax, which in traditional jobs is split between employee and employer. But there is one big plus to being a self-employed person around tax time, and that’s all the deductions you can claim to lower your bill. Here’s a look at 7 that you don’t want to miss out.

1. Home office deduction
The home office deduction is one of the most popular self-employed tax breaks and also one of the most abused. You’re allowed to deduct expenses like electricity, heating, property taxes, and even your homeowners insurance as they relate to your home office. So if, for example, your home office takes up 10% of all the square footage in your home, you could deduct 10% of all the bills listed above as business expenses.

The big catch here is that you can only deduct home office expenses if that room is solely or primarily used for business. You cannot consider your living room as your home office just because that’s where you work from. You probably use it just as much, if not more, for personal purposes so it would not qualify as a deductible expense.

2. Self-employment tax deduction
Everyone pays Social Security tax and Medicare tax, as mentioned earlier. Social Security tax is 12.4% of your income and Medicare tax is 2.9%, for a total of 15.3%. You’re only responsible for half of that when you have an employer. Your company pays the other half. But when you’re self-employed, you must pay it all on your own.

The good news is that the government enables you to write off half of what you pay in these taxes (your employer portion) so you don’t have to pay income tax on this amount. This puts self-employed workers on an equal footing with traditionally employed workers.

3. Travel expenses
Whether driving to see a client in your local area or flying across the country to attend a conference, you can deduct any travel expenses you incur on behalf of your business. This includes flights, rental cars, hotel stays, and even ride-sharing fees. If you’re driving your own vehicle, you can deduct 58 cents for every mile on your 2019 tax bill. In 2020, this drops to 57.5 cents per mile.

The government isn’t just going to take your word on these expenses, so keep documents to prove what you spent. The same goes for the home office deductions you plan to claim above: Keep receipts or else the government could disallow them if it audits you.

4. Office supplies
Simple things like paper and pens, all the way to expensive pieces of equipment you buy for your business, can be tax-deductible, as long as you use them primarily for business and you keep all receipts to prove your expenses. Go back through your bank and credit card statements for the last year and note any business-related expenses you may have forgotten about. Highlight them or record them on a separate sheet of paper so you have all the numbers you need when you’re ready to file your return.

5. Professional education
Attending conferences, taking a professional development course, or pursuing an advanced certification to improve the quality of service you offer your customers are all deductible expenses as long as they relate to the business you’re currently running and you have the documents to prove your expenses.

Courses to help you branch out into a new, unrelated business wouldn’t count, though. It’s fine to write off a course in graphic design if you’re already a graphic designer, because it can help you improve your skills and the services you offer. But if you run a bakery and just decide to take a graphic design course on a whim, you can’t count this as a business expense.

6. Advertising
Paid advertising, like ads online or a TV or radio commercial, is a deductible business expense. The same goes for maintaining a business website and any billboard space your company pays for. Keep track of how much you spend on advertising throughout the year and hold on to those receipts.

7. Health insurance premiums
Self-employed workers don’t have an employer to help them cover the cost of their health insurance, so the government enables them to write off their premiums. This only applies to health insurance that you’re paying for on your own. If you get health insurance through your spouse’s company, you cannot write this off even if you’re self-employed. But you can write off premiums for yourself, your spouse, and any dependents if you pay the full cost of the health insurance premiums yourself.

This isn’t a comprehensive list of all possible self-employed business deductions, but it should give you a sense for what you can and cannot write off. Only expenses that are primarily or solely for your business are tax-deductible and you must have documents to prove all of these deductions.

And remember this list as you move into 2020, so you can start keeping records of all tax-deductible expenses to make next year’s tax season go much smoother.

5 Ways that the Federal Income Taxes Will Be Different in 2020

5 Ways that the Federal Income Taxes Will Be Different in 2020

​1. No individual mandate penalty
Most of the tax code changes stemming from the Tax Cuts and Jobs Act of 2017 took effect in 2018. One exception is the change to the shared responsibility payment, which took effect in 2019.

The shared responsibility payment — commonly referred to as the individual mandate penalty — had applied to folks who were required to have health insurance under the Affordable Care Act but who didn’t get coverage and didn’t qualify for an exemption.

If you owed the penalty, it was due when you paid your taxes.

Starting with 2019, however, there is no longer a penalty. So, folks who didn’t have health insurance in 2019 will not owe the penalty when they file their taxes in 2020.

2. No alimony deduction
Elimination of the alimony deduction is another Tax Cuts and Jobs Act change that took effect for tax year 2019 rather than 2018. For divorce and separation agreements made or modified this year or thereafter, alimony payments will not be deductible, says IRS Publication 5307.

So, a spouse who got divorced this year and paid alimony in 2019 cannot write the payments off on a tax return in 2020. That also means that a spouse who got divorced in 2019 and received alimony this year cannot count the payments as income.

3. Higher Health Savings Accounts contribution limits
Health savings accounts are another type of tax-advantaged account for which the contribution limits generally increase as the years roll along.

HSAs are not strictly for retirement savings, although you can effectively use them as retirement accounts, as we explain in “3 Reasons to Get a Health Savings Account.”

The 2019 contribution limits for people who are eligible for an HSA and have the following types of high-deductible health insurance policies are:

Self-only coverage: $3,500 (up from $3,450 for 2018)
Family coverage: $7,000 (up from $6,900)

4. Higher standard deductions
Standard deductions are somewhat higher for tax year 2019 on account of inflation. The IRS reports that they are:

Married filing jointly: $24,400 (up $400 from last year)
Married filing separately: $12,200 (up $200)
Head of household: $18,350 (up $350)
Single: $12,200 (up $200)
The standard deduction reduces the amount of your income that’s subject to federal taxes. So, if a married couple filing a joint tax return are eligible for and choose to take the standard deduction on their 2019 return, they would not be taxed on the first $24,400 of their taxable income from 2019.

5. Higher income brackets
Income tax brackets are also somewhat higher for tax year 2019 than they were for 2018 on account of inflation.

The IRS reports that the tax rates and corresponding income brackets for 2019 are as follows for folks whose tax filing status is single:

37% tax rate: Applies to incomes of more than $510,300
35%: More than $204,100 but not more than $510,300
32%: More than $160,725 but not more than $204,100
24%: More than $84,200 but not more than $160,725
22%: More than $39,475 but not more than $84,200
12%: More than $9,700 but not more than $39,475
10%: $9,700 or less

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