How Recent Tax Policy Changes Could Impact You and Your Money
This article contains breaking news and events related to the current state of politics and the economy. While we try our best to keep our articles as up-to-date as possible, the ongoing effects of COVID-19 are happening in real time and information is subject to change.
It’s tax season…or is it?
Early spring is usually the time of year for cleaning out winter clothes, enjoying longer days, and filing taxes.
While the tax part of the equation isn’t exactly something to look forward to, it is important and can make a difference for your finances. This year, the date for filing taxes has been pushed back three months due to the COVID-19 crisis.
But don’t let procrastination get the best of you, especially if you expect a refund. We encourage you to file as early as possible to get that money in your pocket quickly. It could be especially helpful considering the uncertainty in the economy right now.
We know filing taxes can be tedious, and we want to help make sure you understand how some recent changes in tax policies could impact you and your money. You may even qualify for some of these new benefits.
The U.S. government has taken several steps that are impacting the tax filing season, including the recently announced extension of the filing deadline to provide relief to taxpayers amid the coronavirus. We outline the basics of what to expect throughout the upcoming tax filing season below.
The federal tax filing deadline has been pushed to July 15, 2020
Individuals do not need to take any action or fill out any forms to enact the federal extension to July 15. It automatically applies to all taxpayers. The July 15 extension also applies to your 2019 contribution to your IRA.
The majority of states have followed suit and pushed the deadlines for filing state income taxes to match the federal extension, but some have differing guidelines, so be sure to check on the information provided by your state.
Refunds are still being processed
The IRS plans to process refunds as normal and encourages taxpayers to go ahead and file on the normal timeline if they are expecting a refund. If you are in a position to receive a refund, we urge you to consider the IRS recommendation to file on time.
Last year, almost 72% of taxpayers received a tax refund of around $3,000. Times are very uncertain, and we want to make sure people are doing all they can to be secure with their finances.
Congress passed an economic rescue package
This week, Congress passed a massive economic rescue package to help address the health care and economic crisis we currently face. It includes several tax-related provisions :
• Employers are eligible for a 50 percent refundable payroll tax credit on wages paid up to $10,000 during the crisis.
• Employers may contribute up to $5,250—tax-free—toward an employee’s student loans for one year, a key issue SoFi has advocated for and we are eager to see it put into action.
• Allocation of $350 billion in loan forgiveness grants for small businesses and nonprofits that pledge to avoid layoffs, to help them make payroll, mortgages, rent, and other expenses.
• Direct payments of $1,200 for individuals ($2,400 for joint taxpayers) that will be given out by the IRS based on the income from your 2019 tax filing.
IRS announced the People First Initiative
On March 25, the IRS announced its People First Initiative , which includes several measures to help taxpayers affected by COVID-19, including by postponing compliance actions and suspending liens and levies from field collection activities.
Need more information?
We broke down the basics, but for additional specifics on the upcoming tax filing season, we recommend checking out the IRS Filing and Payment Deadlines Questions and Answers or you can talk to one of our financial planners at no cost. Schedule an appointment here.
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.