Millions of American households are being given assistance in the middle of the Coronavirus pandemic as part of President Trumps $2 trillion economic relief plan.
Money is being sent direct to homes and there are also a number of additional changes. Everfair Tax has compiled some answers to many of the common questions we are currently being asked
Payments to households
These are being referred to as stimulus payments and the majority of adults will receive $1,200, although some will receive less. In addition, qualifying children under the age of 16 will receive an additional $500.
There will currently only be one payment, unless future bills are passed to agree further amounts. The money will be transferred direct into the individual’s bank account, the details of which are recorded when filing tax returns. Should you wish to add or amend these details, the IRS said on 30 March that it would be building a portal on it’s website to enable this.
Payments are expected to be received by 17 April, but may be longer for those that have added or amended their bank details. Date confirmation has not currently been given for paper cheque payments. After your payment has been made into your account a letter will be sent detailing where the payment was made and in which format.
Receiving the full $1,200 will depend on an individual’s income:
A single adult with a Social Security numbers and adjusted gross income of $75,000 or less will receive the full $1,200.
Married couples without children who earn $150,000 or less will receive a total of $2,400.
Taxpayers filing as head of the household, will receive the full $1,200 provided they earn $112,500 or less.
Payments decrease and eventually stop for single people earning $99,000 or for married couples without children who jointly earn $198,000 or above.
Families with two children and an income in excess of $218,000 will not be eligible for payments.
You are not eligible for payment if you have been declared as a dependent, even if you are an adult.
College students are unable to claim if a person has declared them as a dependent on a tax return.
The majority of people must have a social security number to be eligible. The exception to this is for members of the military.
The grant is not liable to income tax
The payment will not be garnished and all income tax refunds that are currently garnished due to a student loan have been temporarily suspended.
Stimulus payments will be paid to the majority of people who are receiving Social Security retirement and disability payments, those who are unemployed, veterans and U.S. citizens living abroad get a payment, providing they are eligible regarding the income requirements and have a Social Security number.
It is the 2019 tax return that will be used to ascertain if an individual qualifies for the payment. If this has not been submitted the 2018 tax return may be used, and if this has not been prepared, it is possible to use a 2019 Social Security statement that details the income the employer reported to the IRS.
The payment depends on how much a taxpayer earns. If recent income has made an individual ineligible, but they believe they will be eligible due to a loss of income in 2020, the stimulus payment will not be of use now, but may be able to be claimed once the 2020 taxes are filed.
For those that do not usually file a tax return including; individuals with disabilities, low-income taxpayers and veterans, a simple tax return will now be required in order to receive an economic impact payment. Information is due to be posted on how to file a simple return with the necessary information on the IRS website.
The unemployment benefit plan has been considerably extended and encompasses a wider range of eligibility including the self-employed and part-time workers.
Many that are currently unemployed, partly employed or cannot work as a result of COVID-19 will be more able to apply for benefits. However, the amount received depends on individual circumstances:
Benefits have been extended in a bid to replicate an average worker’s salary.
An average salary is around $1,000 a week and unemployment benefits frequently cover around 40 to 45 percent of this. The additional funds will provide extra funds to fill the gap.
An additional $600 will be provided to those eligible, to top up their state benefit. However, each state is determining its own maximum weekly benefit and so actual amounts may be more or less than this. This an extra payment will last for a maximum of 4 months ending 31 July 2020.
Self-employed people are also now covered by these new unemployment benefits and the additional $600 from the federal government. The amounts paid will be calculated and based on previous income.
Part-time workers are covered, but the unemployment benefit and how long it continues for is dependent on each state. However, they are eligible for the additional $600 weekly benefit.
The cover also extends to those unable to work due to:
Having COVID-19 or caring for a family member with the virus
Being in quarantine as recommended by a healthcare provider
Expired unemployment benefits
Being unable to get to work due to a lockdown
If you were made redundant from a new job and did not have a sufficient work history to qualify for benefit.
If unemployed, partly unemployed or unable to work due to your place or work closing
You have not worked but relied on a breadwinner in the household who has now died
The unemployment bill does not include:
People who work from home
Individuals receiving paid sick leave
People receiving paid family leave
Those who are just starting their working life and are unable to find a job in the current situation
Benefit payments have been extended for 13 weeks in addition to the 26 weeks currently provided by many states. However, some states have extended this and others have cut back, or are providing a sliding scale of benefit payments. The total amount may not exceed 39 weeks
The expanded coverage is valid from 27 January 2020 through to 31 December 2020 with all unemployment benefit recipients benefiting from the extended 13 weeks and additional $600 weekly benefit.
If an individual’s employment benefit has recently run out, eligible workers can reapply but the amount that will be paid and the length of time for is dependent on each state.
The additional $600 benefit will be counted as income and may prevent an individual from claiming for other means-tested programs, with the exception of Medicaid and the Children’s Health Insurance Program.
Many federal student loan borrowers have already had their payments and interest charges for the next two months cancelled and until 30 September, all student loan payments have been automatically suspended.
Notices will be sent out detailing what is occurring with an individual’s federal loan, and they may then continue to pay, or stop, until 1 August 2020 when the loan will be restarted. Interest will not be charged during this six-month period.
All Direct student loans borrowed from the federal government are eligible, along with 90% of all other student loans. Many loans in the other 10% bracket are also providing relief during the crisis.
Any seizure of tax refunds or wage garnishment as a result of past payment default, will be ceased during this period.
Should an employer repay part of a student loan as an employee benefit, they can offer up to $5,250 of assistance without that money counting as part of the employee’s income. Any tuition classes for an employee will also count toward the $5,250.
Required minimum distribution removals are being suspended for the 2020 calendar year, so that investors will not have to sell investments that may have fallen in value and lock in losses.
In addition, for I.R.A.s or workplace retirement plans, up to a$100,000 may be withdrawn without the 10% penalty that is usually applied, providing the withdrawal is as a result of the outbreak.
Income taxes owed may be spread over three years from the date the withdrawal was made, and the money may be replaced in the account before the three years expire. However, this exception is only validated if it applies to COVID-19 related withdrawals.
You can also now borrow from a 401(k) or other workplace retirement plan and may withdraw twice the standard amount. For up to 180 days after the bill is signed into law, providing you have certification to show that you have been affected by the pandemic, you can take out a loan of up to $100,000. Existing loans that should have been repaid by December 2020 will now extend for an additional year.
It is now possible to donate $300,000 in annual charitable donations providing the individual donations are not itemized and are calculated by deducting the amount given from gross income.
To qualify, the cash has to be given to a qualified charity and not a donor-advised fund. Any money donated since 1 Jan 2020 will be taken into account.
In addition, donors may now deduct 100% of the gift against their 2020 adjusted gross income, but the new rules only apply to cash given to public charities. For donations to a private foundation, the old deduction rules apply.
Any virus-related payment relief, including the student loan suspension should be marked as current by the lender, regardless of the use of a delayed payment opportunity, so as not to affect an individual’s credit rating.
Landlords are not able to charge a fee or penalty for non-payment of rent for 120 days after the bill commences and all tenant evictions have been stopped if a landlord has a mortgage backed by Fannie Mae, Freddie Mac or other federal entities.
In a change to health savings accounts and health care flexible spending accounts, menstrual products are now eligible for reimbursement.
Internet and utility providers will still be able to cease service due to non-payment of accounts.
Should you have any queries regarding your U.S. Tax requirements or the ongoing updates, please contact our dedicated team on 01932 320800 or email email@example.com.