As the world stops, my accounting and tax services firm is continuing business, more or less, as usual. But it’s been busy following the passage of the CARES Act, a $2 trillion economic stimulus package meant to mitigate the economic devastation of the coronavirus pandemic. Here’s what your household needs to know about this year’s filing season:
Although most operations of the Internal Revenue Service have shut down, the IRS is still urging taxpayers who are due a refund to file as soon as possible. If you are filing your return electronically and requesting a tax refund via direct deposit, most tax refunds are still being issued within 21 days. Note that the federal income tax filing and payment deadline has been automatically extended from April 15 to July 15. This extension applies to all individual returns, trusts, and corporations. This also includes estimated tax payments for fiscal year 2019 that were previously due on April 15, 2020.
Taxpayers can defer federal income tax payments due on April 15, 2020 to July 15 without penalties and interest, regardless of the amount owed. Penalties and interest will begin to accrue on any remaining unpaid balances after July 15, 2020.
Among the CARES Act’s most notable features is the distribution of “economic impact payments,” in the form of a check or direct deposit, which will be paid to individual taxpayers and their families in the amount of up to $1,200 for single taxpayers and heads of households and up to $2,400 for married taxpayers filing jointly.
The IRS will use information from your 2019 tax return — or 2018’s, if you have yet to file — to determine whether you are eligible for such a payment. Eligibility for a stimulus check is based on the following criteria:
- Must be a U.S. resident with a valid Social Security Number
- Adjusted Gross Income (AGI) is less than $99,000 for a single filer
- Adjusted Gross Income (AGI) is less than $146,000 for a head of household filer
- Adjusted Gross Income (AGI) is less than $198,000 for a married filing jointly filer
- In addition, families will receive $500 per child age 16 or younger.
- (Adjusted Gross Income (AGI) will be determined by line 8b from your 2019 1040 tax return or line 7 from your 2018 1040 tax return if you have not filed your 2019 return yet.)
Single filers with incomes up to $75,000 and heads of households with incomes up to $112,500 ($150,000 for joint filers) will receive the full $1,200 ($2,400 for joint filers) payment; reduced checks on a sliding scale will be distributed to individuals making less than $99,000 a year, married couples earning less than $198,000 a year, and heads of households earning less than $146,000.
The CARES Act also includes a number of provisions for small businesses, self-employed workers and nonprofit organizations. For help navigating those, consult with your tax and legal advisors.
Nisha Doshi, CPA, CFP is currently a partner at Doshi & Associates, CPA PLLC, specializing in the areas of Business Consulting, Financial Planning and Taxation. As a graduate from The University of Michigan, Nisha brings industry experience working for corporate giants PricewaterhouseCoopers, BDO Seidman, and Arthur Anderson.