Tax Changes and Stimulus Payments Due to COVID-19
The news about the coronavirus pandemic is changing every day—as is the news about how the crisis is affecting your finances. With stay-at-home orders shuttering businesses, cutting paychecks and sending the stock market into a tailspin, the federal government has been working to provide some economic relief for individuals and businesses.
Joseph Smith, EA/MS Tax, president and founder of TravelTax, has been keeping his healthcare traveler clients and others informed about these changes, including the $2.2 trillion Coronavirus Aid, Relief and Economic Security Act, or CARES Act, signed into law on March 23, 2020.
Smith recently shared the following summary of current tax changes with TravelNursing.com.
Summary of tax changes related to COVID-19*
Individual taxpayers
The due date for filing and paying federal tax returns is now July 15
- This includes first quarter (Q1) estimated taxes
- Q2 estimated tax payments are still due on July 15
- The deadline to file an extension is still October 15 (for now)
- States can have their own deadlines, but most are following the federal changes
The CARES Act includes a stimulus tax payment of up to $1,200 for single taxpayers, $2,400 for joint filers plus $500 for each dependent. Payment amounts are calculated on adjusted gross income from 2018 or 2019 (whichever has been filed). An upward adjustment could be made if your 2020 income is less.
Phase outs (payment reductions) begin at the following income levels:
- Single taxpayer - $75,000 - $99,000
- Head of household - $112,500 - $146,500
- Joint filers (combined) - $150,000 - $198,000
Student loans
- Federal loans through the Department of Education are interest free for 60+ days
- There is also an option to suspend student loan payments for 60 days
- Employers are now able to give up to $5,250 as a tax-free payment to reduce an employee’s loan principal. (Student loan forgiveness payments are normally taxed as income.)
Taxpayers will receive an automatic $300 charity deduction on 2020 returns, regardless of itemizing
Required minimum distributions (RMDs) of retirement plans are waived for 2020
Up to $100,000 in loans or distributions can be withdrawn from retirement plans, penalty free, and repaid in three years OR recognized as income over the next three years
Individuals in collections with the IRS
Installment agreement payments currently in place are suspended from April 1-July 15
Offers in compromise (OICs) agreements for settling tax debt:
- Will not default with non-filing 2018 return
- Have until July 15 to provide additional documentation
New tax audits and liens are on hold
Self-employed individuals (independent contractors)
- 50% of Social Security taxes may be postponed (12.4%)
- Unemployment benefits have been expanded to include self-employed individuals affected by COVID-19; individuals should contact their residence state agency
- Payroll protection loans are available from the Small Business Administration (SBA)
Businesses (including self-employed with employees)
- Employer payroll taxes postponed
- Employee retention credits include 50% of qualifying wages paid up to $10,000 per employee
- Payroll protection loans are available from the Small Business Administration (SBA)
*Information summary provided as of March 29, 2020.
For more information
Smith posted a YouTube video on March 29, 2020, with more details about some of these tax changes related to COVID-19, and invites people to follow his TravelTax blog for continuing updates in tax changes.
He noted that taxpayers can also find answers to frequently asked questions here: IRS FAQs.
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