Coronavirus tax reliefs for individuals
Updated: Apr 2
This is a summary of a few individual tax relief provisions as part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), P.L. 116-136 signed into law on March 27, 2020.
Tax filing &payments deadlines extended to July 15, 2020
The due date for filing of Federal income and gift tax returns and for paying income and gift taxes as otherwise due on April 15, 2020, are extended to July 15, 2020, as a result of the Coronavirus pandemic. The extension is automatic and available to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate entities, as well as those who pay self-employment tax. Any interest, penalty, or addition to tax for failure to file or pay tax will not accrue until July 16, 2020, as a result of the extension. Taxpayers do not need to file Form 4868 or Form 7004 or call the IRS to receive the extension. Standalone informational returns filing deadlines are not extended.
Any interest, penalty, or addition to tax for failure to file or pay tax will not accrue until July 16, 2020, as a result of this extension relief
State tax returns
Most U.S. states and local governments have provided some forms of tax relief due to the Coronavirus pandemic. For example, Ohio has extended the deadline to file and to pay income tax as well as to pay the first and second quarter of 2020 estimated taxes to July 15, 2020. Check with your state tax agencies here for more details.
Recovery Rebate Credit
The CARES Act provides that all U.S. eligible resident individuals may receive the full economic impact payment of $1,200 ($2,400 for married filing jointly). This credit is a refund advance of a 2020 refundable tax credit that is based on an individual 2020 tax return. However, the credit will not be reduced below zero.
Who is eligible for the economic impact payment? Individual tax returns filers with adjusted gross income up to $75,000 for single individuals and up to $150,000 for married couples filing joint returns may receive the full payment. For filers with income above those amounts, the payment amount is reduced by $5 for each $100 above the $75,000/$150,000 thresholds.
Single filers with income exceeding $99,000 and $198,000 for joint filers with no children are not eligible.
Eligible taxpayers who filed tax returns for either 2019 or 2018 will automatically receive an economic impact payment of up to $1,200 for individuals or $2,400 for married couples. Parents also receive $500 for each qualifying child. A qualifying child must be a dependent on a tax return and must have a social security number or adoption taxpayer identification number.
What is an eligible individual?
You are generally an eligible individual if:
your adjusted gross income is not more than $75,000 ($150,000 married), and
you are not a dependent of another taxpayer, and
you have a work-eligible social security number.
What do I need to do to receive my stimulus check?
If you are an eligible individual, there is no action on your part in order to receive a rebate check as the IRS will use your 2019 tax return, if filed. If not, the IRS will use your 2018 return for qualification purposes.
What are the income and AGI Limitations?
The tax rebate amount is reduced by $5 for each $100 that your income exceeds the phase-out threshold.
Single: AGI $75K to $99K = reduced checked; AGI =$99K+: no Check Married filing jointly: AGI $150K to $198K: reduced check; AGI =198,000+: No check
When and how the payments will be received?
The CARES Act states that the IRS should issue the payments or credit any overpayment attributable to this provision as rapidly as possible. However, no refund or credit shall be made or allowed under this provision after December 31, 2020.
Are payments recurring? will there be other checks?
Currently no. The treasury indicated this is a one-off payment as provided in the CARES Act.
Who doesn't qualify for the stimulus check?
The rebate is not available to:
any individual who is a nonresident individual,
any individual who can be claimed as a dependent on another’s return, nor
any estates and trusts.
any individual without a valid Social Security Number (or Adoption Taxpayer Identification Number for adopted children)
It is important to note the requirement that qualifying individuals and their children must have a social security number, although there is an exception for military spouses.
Do individuals with an Individual Taxpayer Identification Number (ITIN) qualify for the stimulus check?
No ITIN recipients do not qualify for the recovery checks. Any individual on a tax return must have a valid SSN or ATIN (in case of an adopted child).
The CARES Act denies the rebate, for example, to joint filers where one spouse has an ITIN on the tax return. Filing a separate 2020 tax returns solve the problem?
I am an expat who excluded all my income, do I qualify?
Yes, you do. Based on the CARES act, there isn't a lower AGI limit. Long as your AGI is not over the threshold limit per your filing status, you should qualify.
Do I have to repay the stimulus check?
No, you do not have to repay this advance refund. The checks are based on your 2019 or 2018 tax information. If you received more than you should have based on your 2020 tax return, then you do not have to repay the excess amount. The CARES Act provides that this refundable tax credit cannot be reduced below zero.
I will be a first-time filer in 2021. Will I receive a check when I file my 2020 taxes?
If you are an eligible taxpayer, this credit will be calculated and provided based on your AGI, similar to any other refundable credit.
My parents claimed me as a dependent but I file a tax return, do I qualify?
No, adult dependents are excluded.
How will the IRS know where to send my payment?
The vast majority of people do not need to take any action. The IRS may calculate and automatically send the economic impact payment to those eligible. For people who have already filed their 2019 tax returns, the IRS will use this information to calculate the payment amount. For those who have not yet filed their return for 2019, the IRS will use information from their 2018 tax filing to calculate the payment. The economic impact payment will be deposited directly into the same banking account reflected on the return filed.
The IRS does not have my direct deposit information. What can I do? Treasury plans to develop a web-based portal for individuals to provide their banking information to the IRS online so that individuals can receive payments as opposed to checks in the mail. Whin Global Oservation: This doesn't apply to US individuals that receives social security benefits and are not required to file a tax return
I have a filing obligation but I have not filed my tax return for 2018 or 2019. Can I still receive an economic impact payment? Yes. The IRS urges anyone with a tax filing obligation who has not yet filed a tax return for 2018 or 2019 to file as soon as they can to receive an economic impact payment. Taxpayers should include direct deposit banking information on the return.
I am not typically required to file a tax return. Can I still receive my payment?
Yes. The IRS will use the information on Form SSA-1099 or Form RRB-1099 to generate $1,200 Economic Impact Payments to recipients of benefits reflected in the Form SSA-1099 or Form RRB-1099 who are not required to file a tax return and did not file a return for 2018 or 2019. This includes senior citizens, Social Security recipients and railroad retirees who are not otherwise required to file a tax return.
Since the IRS would not have information regarding any dependents for these people, each person would receive $1,200 per person, without the additional amount for any dependents at this time. In order to receive the $500 for a qualifying child, you must file a tax return.
I receive social security benefits but I am not required to file, can I still receive a payment?
Yes, the IRS will use the information on the Form SSA-1099 to generate $1,200 Economic Impact Payments to Social Security recipients who did not file tax returns in 2018 or 2019. Recipients will receive these payments as a direct deposit or by paper check, just as they would normally receive their benefits.
I need to file a tax return. How long are the economic impact payments available? For those concerned about visiting a tax professional or local community organization in person to get help with a tax return, these economic impact payments will be available throughout the rest of 2020.
90 days of installment payments may be postponed without defaulting on the taxes due.
Existing Installment Agreements: For taxpayers under an existing Installment Agreement, payments due between April 1 and July 15, 2020, are suspended. Taxpayers who are currently unable to comply with the terms of an Installment Payment Agreement, including a Direct Debit Installment Agreement, may suspend payments during this period if they prefer. Furthermore, the IRS will not default any Installment Agreements during this period. By law, interest will continue to accrue on any unpaid balances.
New Installment Agreements: The IRS reminds people unable to fully pay their federal taxes that they can resolve outstanding liabilities by entering into a monthly payment agreement with the IRS. See IRS.gov for further information.
10% penalty waived for early withdrawal from a retirement plan
An individual may withdraw up to $100,000 penalty-free (no 10% penalty for early withdrawal) from a qualified retirement account for coronavirus-related purposes. The distribution is taxable over a three-year period. However, a taxpayer may opt to repay the amount to the retirement plan over those three years and avoid tax and penalty.
For example, you withdrew $90,000 on April 09, 2020 from your 401(k) plan for Coronavirus-related purposes. $30,000 must be included in your tax return for each of the next 3 tax years. However, if you repay the $30,000 back to the plan each year, then the $30,000 becomes nontaxable (treated as if you completed a qualified rollover).
Repayments of outstanding loans from retirement plans, that were otherwise due by December 31, 2020, are extended for one year.
Charitable deductions for non-itemizers and itemizers
Individuals are permitted to take a new above-the-line deduction for charitable contributions up to $300 of cash contribution made in 2020.
For those who itemize, the 50% AGI limitation is suspended in 2020. Therefore, 2020 charitable contribution up 100% of an individual adjusted gross income can be deducted.
Student loan repayment benefits
The CARES Act temporarily expanded IRC section 127 to include student loan debts. An employer is allowed to pay annually up to $5,250 towards an employee's student loans. The payment is not included in employee taxable income. However, the annual limit allowed under section 127 remains $5,250 and applies to both the student loans and other educational assistance previously cover under this section. Payments after 01/01/2021 are not covered.
Small business owners in all U.S. states, Washington D.C., and territories are eligible to apply for this EIDL advance of up to $10,000. This advance will provide economic relief to businesses that are currently experiencing a temporary loss of revenue. This loan advance will not have to be repaid. More
This program is a loan designed to provide a direct incentive for small businesses to keep their workers on the payroll. This program is for any small business with less than 500 employees (including sole proprietorships, independent contractors and self-employed persons), private non-profit organizations or 501(c)(19) veterans organizations affected by Coronavirusirus. SBA will forgive loans if all employees are kept on the payroll for eight weeks and the money is used for payroll, rent, mortgage interest, or utilities. More
This refundable tax credit is 50 percent of up to $10,000 in wages paid by an eligible employer whose business has been financially impacted by COVID-19. More
The Families First Coronavirus Response Act (the "FFCRA"), provides small and midsize employers refundable tax credits that reimburse them, dollar-for-dollar, for the cost of providing paid sick and family leave wages to their employees for leave related to COVID-19. More
Where can I get more information?
For official guidance and information for individuals as well as for businesses/employers due to the Coronavirus pandemic, please visit the IRS Coronavirus website.
Contact your CPA at Whin Global if you have any tax questions. We are here to assist.
Please Be Safe and Stay Healthy!