A provision of the American Rescue Plan is being readied for action, targeting nearly 90 percent of American households with children to receive monthly payments of the Child Tax Credit.
The Internal Revenue Service and the Department of the Treasury expect to send out the first monthly payments of the expanded Child Tax Credit (CTC) on July 19.
How will it work?
Monthly payouts for the Child Tax Credit were made possible by the American Rescue Plan that was passed into law in March of this year. The law increased the maximum cap to $3,600 for children under age 6 and up to $3,000 per child for those between age 6 and 17.
The ARP also made the credit advance able, enabling regular payments to qualified families.
The recurring CTC payments will be made on the 15th of each month, unless the 15th is a weekend or holiday. Those families who get the credit via direct deposit will be able to plan around the regular receipt of the payment.
Qualifying families receive a payment of up to $300 per month for each child under age 6 and up to $250 per month for each child age 6 and up.
Projections suggest the plans for the CTC could cut child poverty by more than half.
The IRS mails letters or notices to taxpayers for a variety of reasons including if:
- They have a balance due.
- They are due a larger or smaller refund.
- The agency has a question about their tax return.
- They need to verify identity.
- The agency needs additional information.
- The agency changed their tax return.
Here are some do’s and don’ts for taxpayers who receive one:
Don’t ignore it.
Do read the notice.
Do respond timely.
Do pay amount due. Taxpayers should pay as much as they can
Do keep a copy of the notice or letter.
Do avoid scams. The IRS will never contact a taxpayer using social media or text message. The first contact from the IRS usually comes in the mail.
Unclaimed income tax refunds worth more than $1.3 billion await an estimated 1.3 million taxpayers who did not file a 2017 Form 1040 federal income tax return, according to the Internal Revenue Service.
“The IRS wants to help taxpayers who are due refunds but haven’t filed their 2017 tax returns yet,” said IRS Commissioner Chuck Rettig. “Time is quickly running out for these taxpayers. There’s only a three-year window to claim these refunds, and the window closes on May 17. We want to help people get these refunds, but they will need to quickly file a 2017 tax return.”
The IRS estimates the midpoint for the potential refunds for 2017 to be $865 — that is, half of the refunds are more than $865 and half are less.
To help taxpayers, the Internal Revenue Service announced today that it will take steps to automatically refund money this spring and summer to people who filed their tax return reporting unemployment compensation before the recent changes made by the American Rescue Plan. The legislation, signed on March 11, allows taxpayers who earned less than $150,000 in modified adjusted gross income to exclude unemployment compensation up to $20,400 if married filing jointly and $10,200 for all other eligible taxpayers. The legislation excludes only 2020 unemployment benefits from taxes. Because the change occurred after some people filed their taxes, the IRS will take steps in the spring and summer to make the appropriate change to their return, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.
The Internal Revenue Service and the Security Summit today issued warnings to all taxpayers to beware of scams and identity theft schemes by criminals taking advantage of the combination of holiday shopping, the approaching tax season and coronavirus concerns.
The holiday shopping season combined with the impending tax season and an increased trend toward working remotely make online security an absolute necessity.
This year there is a dangerous combination of factors at play that should make people more alert.
A few simple steps to help protect tax and financial information:
- Don’t forget to use security software for computers and mobile phones
- Make sure purchased anti-virus software has a feature to stop malware
- Phishing scams- like imposter emails, calls and texts are the No. 1 way thieves steal personal data
- Use strong and unique passwords for online accounts
- Shop at sites where the web address begins with “https”- the “s” is for secure communications
- At home, secure home Wi-Fi’s with a password
The IRS will not call, text or email you about the Economic Impact Payment or your tax refund. Nor will the IRS call with threats of jail or lawsuits.
Here are six tips for new business owners.
Choose a business structure. The most common business structures are:
- Sole proprietorship: an unincorporated business owned by an individual.
- Partnership: an unincorporated business with ownership shared between two or more people.
- Corporation: also known as a C corporation. It’s a separate entity owned by shareholders.
- S Corporation: a corporation that elects to pass corporate income, losses, deductions and credits through to the shareholders.
- Limited Liability Company: a business structure allowed by state statute.
Choose a tax year. A tax year is an annual accounting period:
- Calendar year: 12 consecutive months beginning January 1 and ending December 31.
- Fiscal year: 12 consecutive months ending on the last day of any month except December.
Apply for an employer identification number:
- It’s used to identify a business.
Have employees complete these forms:
Pay business taxes:
- The form of business determines what taxes must be paid and how to pay them.
Visit state’s website:
- Prospective business owners should visit their state’s website for info about state requirements.
The tax deadline was July 15 this year. Taxpayers who submitted an extension have until Oct. 15 to file and do not face the failure to file penalty if they file their taxes by the deadline.
But taxpayers need to remember that an extension to file is not an extension to pay. Any taxes owed after the July 15 deadline are subject to the failure to pay penalty and interest.
Those taxpayers who didn’t request an extension, and still owe taxes, face both the failure to file and failure to pay penalties.
The penalty for not filing a federal tax return by the due date, or extended due date, is generally 5% of the unpaid tax for each month that the tax return is late, up to 25% of unpaid tax.
If return is more than 60 days late a minimum penalty applies. If no return has been filed after 60 days, the minimum penalty that can be charged is $435 or 100% of unpaid tax whichever is less.
Remember, if a refund is due, no penalty is charged on the late return filed.
The Coronavirus Aid, Relief, and Economic Security (Cares) Act can help eligible taxpayers in need by providing favorable tax treatment for withdrawals from retirement plans and IRA’s.
Under the CARES Act, individuals eligible for coronavirus-related relief may be able to withdraw up to $100,000 from IRA’s or workplace retirement plans before December 31, 2020, if their plans allow. In addition to IRA’s this relief applies to 401(k) plans, 403(b) plans, profit-sharing plans and others.
These coronavirus related withdrawals:
- May be included in taxable income either over a three-year period (one third each year) or in the year taken, at the individual’s option.
- Are not subject to the 10% penalty on early distributions that would otherwise apply
- Are not subject to mandatory tax withholdings
- May be repaid to an IRA or workplace retirement plan within 3 years
Who is eligible?
- The individual is diagnosed with the virus SARS-CoV2 or with coronavirus disease 2019 (collectively COVID-19) by a test approved by the Center for Disease Control
- The individual’s spouse or dependent is diagnosed with COVID-19 by such a test
- The individual experiences adverse financial consequences as a result of
- The individual being quarantined, furloughed or laid off
- The individual’s spouse or a member of the household being quarantined, furloughed or laid off
- Closing or reducing hours of a business owned or operated by the individual, the individual’s spouse, or a member of the individual’s household, due to COVID-19
The IRS today reminds taxpayers who took advantage of the People First Initiative tax relief and did not make previously owed tax payments beginning March 25 through July 15 that they need to restart their payments.
As the IRS continues to reopen its operations across the country, taxpayers who were in payment agreements and skipped any payments from March 25 and July 15 should start paying again to avoid penalties and possible default on their agreements.
If a taxpayer can’t meet their current agreement terms due to a COVID related hardship, then they can revise the agreement on IRS.gov/paymentplan or call customer service on their IRS notice if they have a direct debit Installment agreement.
The Internal Revenue Service today announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now have the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.
The 60-day rollover period for any RMDs already taken this year has been extended to Aug. 31, 2020, to give taxpayers time to take advantage of this opportunity.
The CARES Act enabled any taxpayer with an RMD due in 2020 form a defined-contribution retirement plan, including a 401 (k) or 403(b) plan, or an IRA, to skip those RMD’s this year. This includes anyone who turned age 70 ½ in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined benefit plans.
An IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by Aug. 31, 2020. The repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.