In March 2020, the Internal Revenue Service (IRS) announced that Americans would have until Wednesday, July 15 to pay federal income taxes. The extension came as business closures and unemployment soared in the wake of the COVID-19 global pandemic.
Tax time is always stressful, and the current climate has only compounded the stress and created confusion. The USBG National Charity Foundation has compiled a list of resources, and selected last-minute tax tips, that it hopes will help navigate this challenging time, within a challenging time.
Many bartenders wonder about whether benefits received from both the Pandemic Unemployment Assistance ($600) and the CARES Act stimulus (typically between $1200-2400) are taxable. They are not. As both were enacted in 2020, neither would taxable for 2019 tax returns being filed on July 15th.
● Pandemic Unemployment Assistance (PUA): The federal government taxes unemployment benefits. While workers have been able to tell the Department of Labor to take taxes out of their regular benefits, no taxes have been withheld from the additional weekly $600 benefit that runs through July. Taxes on those benefits are not due as part of 2019 taxes. You will need to include them as part of 2020 income.
● CARES Act: The stimulus checks associated with the CARES Act will not be taxed in 2019. Additionally, they’re officially addressed in the CARES Act as a “Recovery Rebate for Individuals.” These payments won’t push you up into the next tax bracket for 2020 taxes, if you’re already on the edge.
Preparation tips from Motley Fool:
Know what paperwork you need: The amount of documentation you need to file your taxes will depend heavily on whether you’re claiming the standard deduction or are choosing to itemize. In 2019, the standard deduction was:
● $12,200 for single tax filers and married couples filing separately.
● $18,350 for heads of household.
● $24,400 for married couples filing jointly.
If you think you can itemize enough deductions to exceed these totals, then that’s the way to go, as you’ll reap the most savings. But keep in mind that itemizing will require more of an effort on your part.
Read up on available tax credits and deductions: The IRS has made a host of tax credits and deductions available to filers, and knowing which ones you’re eligible for is a good way to help ensure that you reap the savings you’re entitled to. The Earned Income Tax Credit, for example, is a refundable tax credit designed to assist low-income households. The Child Tax Credit, meanwhile, will put money back in your pocket if you have children under age 17 who you claim as dependents.
Payment tips from IRS.gov:
If possible, file electronically: Taxpayers who file electronically will likely have fewer mistakes on their tax return. Electronic filing options like IRS Free File or commercial tax software do the math, flag common errors and ask for missing information.
Extensions: Taxpayers can request an extension to file until October 15. A common misconception is that this is an extension of the time to pay. Unfortunately, it is not. Taxpayers must estimate their tax liability on the form and pay as much as they can by July 15 to avoid possible penalties and interest.
Installment plans: Qualified taxpayers who cannot afford to pay their taxes in full can choose to pay their taxes over time through an installment agreement.
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Tune into the USBG National Charity Foundation’s weekly Instagram Live briefing @usbgncf on Thursday, July 9 at noon Pacific/3 p.m. Eastern.