by MEA Tax Advisors | Apr 29, 2020 | Tax Tips and News
The Internal Revenue Service wants to make sure taxpayers timely receive their Economic Impact Payments, which is why they worked with the tax industry to develop online reporting and tracking tools for IRS.gov. While non-filers receiving Supplemental Security Income (SSI) and Veterans Affairs (VA) benefits are scheduled to automatically get a $1,200 Economic Impact Payment, the IRS says beneficiaries need to report qualifying dependents before May 5, 2020, to receive an additional $500 per qualifying child with their EIP.
What is the $500 dependent payment?
With the CARES Act, Congress authorized $1,200 Economic Impact Payments to help Americans facing financial hardship due to the coronavirus epidemic. The legislation also included a provision designed to give families extra help: Eligible filers receive an additional $500 payment per qualifying dependent. The recent IRS press release is the agency’s latest effort in its “Plus $500 Push” campaign.
Why do SSI and VA beneficiaries need to report dependents?
While non-filers who receive SSI and VA benefits will automatically receive a $1,200 payment in the coming weeks, the IRS does not currently have information related to those Americans’ qualifying dependents. So, beneficiaries need to supply the IRS with additional information to receive the “plus $500.”
How do SSI and VA beneficiaries report dependents to the IRS?
The agency developed the Non-Filers: Enter Payment Info Here tool on IRS.gov to help Americans who don’t normally file a tax return conveniently report their EIP qualifying information. To find it, go to IRS.gov and click the upper-left-hand link titled “Non-Filers: Enter Payment Info Here.”
Why is May 5 the deadline for SSI and VA beneficiaries to report dependents to the IRS?
Since the IRS is automatically sending SSI and VA beneficiaries their $1,200 Economic Impact Payment in a few weeks, the only way they will get the additional $500 payments at the same time is if they report that information to the IRS by May 5. Here’s another wrinkle: They will not be able to use Non-Filers: Enter Payment Info Here to report qualifying beneficiaries after the deadline.
Can SSI and VA beneficiaries who miss the dependent reporting deadline still receive the additional $500 payments?
SSI and VA beneficiaries will still be able to receive the additional $500 payments per each qualifying child if they report those dependents to the IRS after May 5, 2020. Those payments will simply come separately from the initial $1,200 EIP.
Source: IR-2020-81
– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Apr 26, 2020 | Tax Tips and News
The CARES Act removes an ACA limitation on using FSA, HSA, and HRA funds to pay for over-the-counter medication.
The CARES Act—famous for authorizing the $1,200 Economic Impact Payments that Americans have begun receiving—also includes important, coronavirus-related changes for flexible spending accounts (FSAs), health savings accounts (HSAs), and health reimbursement arrangements (HRAs).
This isn’t the first time that changes have been made to tax-advantaged health plans during the coronavirus outbreak. As noted in a previous Taxing Subjects blog, the IRS issued a notice allowing taxpayers with high-deductible health plans to pay for COVID-19 medical care with funds in a qualifying HSA account. NPR’s Selena Simmons-Duffin’s reports that this CARES Act change further expands how policy holders can spend funds in their FSA, HSA, or HRA by classifying other-the-counter (OTC) medication and medical products as reimbursable expenses.
Essentially, the CARES Act removes an Affordable Care Act provision stipulating that only prescribed medication qualified to be purchased with FSA, HSA, and HRA funds—disallowing OTC meds. Simmons-Duffin speculates that this change will help the policy holders “[stock] up on fever reducers and cough medicine as the coronavirus spreads around the country,” something that could affect “‘nearly 60 million Americans.’”
Depending on the length and severity of the COVID-19 outbreak, Congress could pass further tax relief measures in the coming months. Just this week, the House of Representatives seems poised to pass a bill providing relief to small businesses. For the latest coronavirus tax relief information, be sure to regularly check “Coronavirus Tax Relief and Economic Impact Payments” on IRS.gov.
Source: NPR.org
– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Apr 22, 2020 | Tax Tips and News
SSA and RRB beneficiaries with dependents who don’t normally file a tax return need to report eligible children to the IRS by noon EST tomorrow to quickly get an additional $500 per qualifying child in their Economic Impact Payment.
Since Economic Impact Payments were authorized by the CARES Act at the end of March, the Internal Revenue Service has worked with tax industry partners to raise awareness about various aspects of the EIP program. While the majority of taxpayers will automatically receive their payment, the agency wants to make sure a subset of non-filers know that they need to use online tools to report qualifying information. This week, the IRS highlighted the Wednesday, April 22 EIP reporting deadline for Social Security Administration (SSA) and Railroad Retirement Board (RRB) beneficiaries with dependents who receive certain federal benefits.
Why do SSA and RRB beneficiaries need to report dependents by Wednesday, April 22?
Non-filers who receive certain federal benefits—Railroad Retirement, Social Security, Social Security Disability, Supplemental Security Income, and Veterans Affairs beneficiaries, specifically—will automatically receive a $1,200 Economic Impact Payment. However, since these groups do not regularly file a tax return or list dependents in the application for their benefits, government agencies do not have that information.
While all of these government beneficiaries will need to report qualifying dependents—children younger than 17—to receive the additional $500 per qualifying child, the IRS release specifically notes that SSA and RRB beneficiaries who report by the deadline could get that money issued at the same time as their $1,200 EIP.
How do non-filers report qualifying dependents to the IRS?
The IRS launched the Non-Filers: Enter Payment Info Here tool on IRS.gov for non-filers to report EIP-qualifying information. To use it, either follow the provided link or go to IRS.gov, follow the Non-Filers: Enter Payment Info Here link, then scroll down to and click the blue Enter your information button.
Will SSA and RRB beneficiaries who miss the Wednesday, April 22 EIP reporting deadline be able to receive the additional $500 payments?
SSA and RRB beneficiaries who miss tomorrow’s deadline can still receive an additional $500 payment per qualifying dependent. They simply have to wait longer to receive additional payments if they report qualifying dependents after noon on April 22.
However, the IRS says those who miss the deadline will not be able to use the Non-Filers: Enter Payment Info Here tool to report that information. Instead, they will need to file an EIP return.
Source: IR-2020-76
– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Apr 18, 2020 | Tax Tips and News
For those taxpayers who qualify for an Economic Impact Payment, the IRS has now unveiled a new web page on the IRS website. On this “Get My Payment” tool, taxpayers who have filed either a 2018 or 2019 income tax return can find out if they qualify for the Economic Impact Payment, see if it has been mailed, and enter their banking information if needed.
What You’ll Need
First, have either the taxpayer’s 2018 or 2019 tax returns on hand. Once inside the tool you’ll be asked to supply the Adjusted Gross Income as shown on the Form 1040 as a way to verify the taxpayer’s identity.
You’ll also need the other, more usual information: name, Social Security number, address, and so on.
Getting to the tool is straightforward. Go to the IRS website, IRS.gov, and click on the “Get Info on Economic Payments” link on the main page. That leads to the “Economic Impact Payments web page.
In the center column, you’ll see a blue “Get My Payment” button. Click here to continue.
Patience May Be Needed
Now you’re on the Get My Payment web page, and it confirms that you’re in the right place to get information about:
- Your payment status
- Your payment type
- Whether the IRS needs more information from you, including bank account information
Select the blue “Get My Payment” button to actually enter the application.
Here’s where the patience part comes in. Given the fact that thousands – maybe hundreds of thousands – of taxpayers are trying to get this information all at the same time, it stands to reason it may take a while to actually get in.
When we tried, the wait time was somewhere between seven and 10 minutes. The good news is, you don’t have to leave the page, then come back through those blue buttons again. Instead, you’re automatically put “in line,” basically an electronic queue, that allows you to stay on that web page while you wait. The page will tell you when you can proceed.
You’re In!
Once into the tool’s main page, the rest is pretty simple. The usual identification information is first, name, address and SSN. Another blue button to Continue, and the rest of the functions appear after the AGI and any other needed information is entered.
We were impressed by how straightforward the entire process is, as well as by the clarity of the Help text for entering banking information.
All in all, it took far more time to wait for our turn on the web tool than it took to complete it.
Now, all that’s left to do is sit back, and wait for that deposit.
– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Apr 18, 2020 | Tax Tips and News
The Economic Impact Payment (EIP) program designed to ease the shock of halted employment during the coronavirus-related isolation period could experience some unexpected loopholes.Jared Walczak of the Tax Foundation, one of the nation’s top tax policy centers, says that he found six states that could wind up taxing at least some of their citizens’ EIPs.
Backstory
The payments are authorized by the recently passed Coronavirus Aid, Relief, and Economic Security Act (called the CARES Act), which grants up to $1,200 to each adult individual who qualifies and up to $2,400 for those married couples filing jointly. In addition, there’s an additional $500 for each qualifying child under 17. All this phases out for higher wage earners.
While it sounds simply like free money, it’s actually designed as a refundable tax credit: The payments don’t qualify as taxable income on the state or federal levels. That is, unless the taxpayers live in Alabama, Iowa, Louisiana, Missouri, Montana, or Oregon.
Walczak says a little explanation is in order, and we agree.
“Technically, these rebates are a refundable tax credit for tax year 2020 (the tax return you file in April 2021). However, they are being paid out in advance based on your most recently filed tax returns (2018 or 2019 tax year) to get them to you immediately. It is not an advance on any existing credit, or on your 2020 tax refund; it’s a new credit, tied to 2020 taxes, being paid out in advance,” Walczak writes.
At higher incomes, the credit phases out. If a taxpayer’s income is lower in tax year 2020 than it was in the tax year when the original EIP was calculated, they can claim the residual amount on their 2020 return.
In the same vein, families grow, so some people will have dependents to claim on their 2020 returns who weren’t around to be claimed previously. That entitles the taxpayer to a larger benefit. Again, Walczak writes, the difference can be claimed as a refundable credit in 2020.
Keep in mind nobody has to return any of these payments if they would have been entitled to less of a payment using a 2020 income figure versus income from 2018 or 2019 when the credit was figured.
When the Check Arrives
When a taxpayer gets their Economic Impact Payment, it doesn’t reduce how much the taxpayer owes in tax. It’s viewed as being a stand-alone payment, separate from the tax calculations. However, if the taxpayer has an additional amount to claim the following year, that leftover comes as a tax credit that does reduce their income tax liability for the 2020 tax year.
For the six states we mentioned, that’s when the going gets a little bumpy.
Each of those six, Walczak writes, offers a deduction for federal taxes paid—in varying degrees. When taxpayers figure their taxable income for state purposes, they subtract the amount they owe in federal taxes.
“This is already a peculiar policy, as it essentially turns state income taxes into the mirror image of the federal code: things that increase your tax liability at the federal level reduce your state income tax liability, and vice versa,” Walczak writes. “Taking a federal child tax credit, for instance, means that you pay more in state taxes. (You still benefit overall; the federal savings are larger than your additional state tax burden.)”
Besides, having more of their income fall into a higher federal income tax bracket lowers a taxpayer’s effective rate at the state level.
The Tax Foundation figures all six states would be in better shape if they raised the same amount of tax revenue with lower rates but no federal deduction.
Iowa and Missouri, Walczak writes, have taken steps in that direction; Iowa’s deduction goes away in a few years and Missouri now has its deduction phased out for upper incomes as part of a tax reform package.
But even with those recent steps, Walczak says those six states have an unforeseen consequence to deal with: any residual amount of the rebate their residents claim on their 2020 taxes will reduce their federal income tax liability—but also will increase the amount of tax they’ll pay to the state.
Do any of the six states actually intend to tax their taxpayers’ Economic Impact Payments? Walczak sees this as unlikely. But he thinks a better idea is to have state lawmakers specifically exempt EIPs from state tax. Then, he says, everybody can let the dust settle before a conversation can start on whether to allow federal deductibility at all on the state level.
– Story provided by TaxingSubjects.com
MEA Tax Advisors