States Respond To Strong Fiscal Health With Income Tax Reforms
As states close their books for fiscal year 2021, many have much more revenue on hand than they anticipated last year. Eleven states have responded by reducing income tax rates and making related structural reforms as they strive to solidify a competitive advantage in an increasingly competitive national landscape.
New Relief For Taxpayers Experiencing Covid
Get to know the IRS, its people and the issues that affect taxpayers
At the IRS, we recognize these are challenging times for everyone, and we understand that many Americans still face COVID-related hardships.
Im from Louisiana originally, and I know this has been a difficult year in many states dealing with both COVID and natural disasters. In times like these, dealing with tax issues can be tough. And we want people to know our employees are committed to continue helping taxpayers wherever possible, including offering many options for those struggling to pay their tax bills.
Earlier this year, we provided extensive relief and temporarily adjusted our processes to help people and businesses through our People First Initiative, which was in effect for the first months of COVID. While its been important for us, and the nation to resume our critical tax compliance responsibilities, we continue to assess the wide-ranging impacts of COVID-19 and other difficulties people are experiencing.
To that end, were offering a wide range of taxpayer relief options. Our three main goals to help taxpayers are:
Heres an important point people shouldnt overlook. If you have questions regarding paying your taxes, dont go silent. Please dont ignore the notice arriving in your mailbox. These problems dont get better with time. We understand that dealing with the IRS can be intimidating, but our employees really are here to help.
Can An Employee Receive Both Qualified Sick Leave Wages And Qualified Family Leave Wages
Yes, but at different times. Qualified sick leave wages are available for up to 80 hours during which an employee cannot work or telework for any of six reasons related to COVID-19, including because the employee must care for his or her child whose school or place of care is closed, or whose child care provider is unavailable, for reasons related to COVID-19. By contrast, qualified family leave wages are available only because the employee must care for his or her child whose school or place of care is closed, or whose child care provider is unavailable, for reasons related to COVID-19, and only after an employee has been unable to work or telework for this reason for 80 hours.
Example: Your child-care provider is unavailable indefinitely due to the COVID-19 outbreak, leaving you unable to work or telework to care for your child. For up to the first 80 hours of any period of leave to care for your child, you are eligible for qualified sick leave wages, up to $200 per day and $2,000 in the aggregate. After that, you are eligible for qualified family leave wages for up to ten weeks of additional leave you need, up to $200 per day and $10,000 in the aggregate.
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Kansas Lawmakers To Consider Veto Override On Tax Reform Bill
Kansas has the revenue cushion it needs to provide tax relief to individuals and businesses and improve the structure of its tax code in the process. These pro-growth reforms would not only help taxpayers amid the pandemic but would also promote economic recovery and growth in a state that is lagging behind its competitors.
Figuring Out Phase Four: Next Steps On Federal And State Coronavirus Response
As U.S. businesses struggle to recover from the economic downturn, Congress and the White House continue to debate a phase four relief package, which could include anything from incentives for domestic travel and a payroll tax cut to more fundamental reforms like enacting permanent full cost recovery.
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Your Return May Look Different For This Year But Some Of These Changes Could Help You
We won’t be able to look back on 2020 without remembering the COVID-19 pandemic. It’s affected our health, our finances, and virtually every other aspect of daily life. And when it comes time to pay our 2020 taxes, we’ll be reminded all over again of everything we went through this year.
Some of the tax changes you’ll notice are helpful and others could lead to a nasty surprise if you’re not prepared. Here are four things you should know about how COVID-19 can affect your tax bill this year.
Lesson Learned From Canadian Wildfire
In addition to employment and income data, Id like to highlight an additional data asset that proved quite predictive in a past natural disaster. In May 2016, a wildfire struck Fort McMurray in Alberta, Canada. With damages exceeding $10 billion, it was the costliest disaster in Canadian history.
Like Harvey, it struck suddenly and had immediate economic impact. Sixty-five thousand people had to evacuate and over 80% experienced job disruption. Some accepted payment deferrals to manage the impact but many of those who didnt suffered from significant score decline.
To help lenders navigate which consumers were more likely to recover quickly and which ones would need more time, trended data attributes and scores using trended attributes proved to be the most predictive. Even better, they demonstrated the most value within the first six months after the wildfire. Additionally, the team in Canada added wealth data to the equation. It found it also helped to separate individuals who might recover more quickly from those who would take longer. In short, when you go beyond credit data alone and explore alternative data sources, youre likely to discover insights and patterns previously undetected.
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Where Should The Money Come From
The fiscal response to the COVID-19 pandemic will require policymakers to consider what revenue resources should be used to fill budget gaps. Tax policy experts have proposed wealth taxes, corporate minimum taxes, excess profits taxes, and digital taxes as opportunities for governments to raise new revenues.
State Conformity To Federal Pandemic
With so many federal changes occurring in such a short amount of timeincluding some federal provisions changing more than once and a major change to the treatment of UC income occurring in the middle of tax filing seasonstate legislators have faced the challenge of responding to these changes quickly in order to provide certainty to taxpayers.
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Can States Close Budget Deficits With Excise Tax Hikes
We examine whether excise taxes are a solution to budget deficits, and while the short answer to that question is no, there are of course nuances. Excise taxes can play a role in state revenues even as policymakers appreciate that excise taxes are not viable long-term revenue tools for general spending priorities.
Seventh Times The Charm: New Jersey Passes Millionaires Tax
After six unsuccessful tries at passage, it appears the coronavirus crisis has tipped the scales in favor of Gov. Phil Murphys millionaires tax. New Jersey may be feeling the financial squeeze right now, but this large income tax change will not solve budget problems and may exacerbate funding issues by making the state even unfriendlier to businesses.
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Special Treatment For Presidential Declared 2016 Disaster Areas
As part of the new tax law changes passed in late 2017, casualty loss deductions became easier to take form many taxpayers. The change in the law allows for these casualty losses to be deducted even if you take the standard deduction rather than itemizing your deductions as described above.
To take a casualty loss deduction in conjunction with the standard deduction, your net casualty loss that exceeds $500 is added to your standard deduction amount.
In addition to allowing the use of the standard deduction for these losses, the law also allows for special treatment of qualified disaster distributions from eligible retirement plans including:
- Paying the money back to the retirement plan
- Spreading the amount to be included in income over a three year period unless you elect out
You should contact your retirement plan administrator for the details associated with making these withdrawals.
These changes are only for 2016 Presidential Declared Disasters but they can affect your tax returns in other years.
Remember, with TurboTax, we’ll ask you simple questions about your life and help you fill out all the right tax forms. Whether you have a simple or complex tax situation, we’ve got you covered. Feel confident doing your own taxes.
New Accelerated Depreciation Policies To Spur Investment In Australia Austria Germany And New Zealand
In recent months, several countries have introduced accelerated depreciation as a measure to incentivize private investment, including Australia, Austria, Germany, and New Zealand. There are various ways of how this policy has been implemented in the respective countries, largely depending on the existing standard depreciation schedules.
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Gao Report Reveals Need To Simplify Next Round Of Rebates
A new Government Accountability Office report revealed that almost a half-million taxpayers missed their total rebate payment due to complications over disbursing funds to non-filers with eligible dependents. Administrability is just as important as rebate design and simplicity is just as important as speed.
Can You Include Sales Tax Paid By A Contractor In The Claim
People filing a claim for refund may also include the Tennessee sales or use tax paid by their contractor on eligible items purchased and used to making repairs to their home. Affected individuals should ask their contractor to provide them with an invoice listing the items purchased and the amount of Tennessee sales tax the contractor paid on those purchases.
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Louisiana Can Look To Tax Reform For Aid In A Post
As states look for a path out of these fiscally troubling times, Louisiana has several options for aspects of its tax code to promote economic recovery and growth. The Pelican States federal deductibility, Corporation Franchise Tax, and sales tax structure present opportunities for beneficial tax reform in the wake of the coronavirus crisis.
How Taxpayers Can Use Section 165 Of The Tax Code To Deduct Covid
BY: DUT LeBLANC | Executive Vice President, Argent Financial Group
Individuals whose wealth has been negatively affected by the COVID-19 pandemic may be eligible to deduct certain losses attributable to the pandemic on their 2019 and/or their 2020 tax returns under a special provision in the U.S. tax code Section 165 related to natural disasters.
Most people are not familiar with or even aware of Section 165. It usually applies to taxpayers who suffer financial losses due to a hurricane, tornado, earthquake or fire. When President Trump under the Robert T. Stafford Disaster Relief and Emergency Assistance Act, it opened the door for taxpayers to take advantage of Section 165 and potentially reduce the amount of taxes paid to the IRS.
There are limits to what can be deducted and how much on tax returns. For example, the deduction must exclude costs that are covered by insurance. Additionally, taxpayers must have an established cost basis in the property or asset that has been financially impacted. Taxpayers also must prove that COVID-19 caused the loss.
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National Emergencies Spur The Credit
The immediate effects of COVID-19 have hit U.S. households hard with layoffs, reduced hours, and business closures.
And with this comes another, under-the-surface issue that many dont think about right away: Credit scores.
National emergencies like COVID-19 can be disastrous for U.S. credit, creating new consumer debt cycles that are hard to escape.
Its important to protect your credit as best you can, to land on the other side of this crisis in a safe place.
But there are measures you can take to guard your own credit, too. Heres what you need to know.
In this article
I Had To Withdraw Money From My Retirement Account What Are The Current Rules For That
More than two million people have pulled money from retirement accounts during the pandemic. During more normal times, withdrawing money from a tax-deferred savings account before age 59½ would set off a 10 percent penalty on top of any income taxes.
But under thetemporary rulesof the CARES Act, people with needs related to the coronavirus were permitted to withdraw up to $100,000 from any combination of tax-deferred plans, including 401, 403, and traditional individual retirement accounts without penalty. The distribution had to be taken by Dec. 30.
For tax purposes, the amount withdrawn is generally included in your income in equal amounts over three years, though you can opt to pay the entire bill this year.
Alternatively, you can return the money within three years and recover any tax paid by amending your returns. For example, if you took a distribution of $20,000 in 2020 and decided to repay the entire amount in 2022, you would need to file an amended federal tax return for 2020 and possibly2021 to collect a refund according to Randy Heidmann, a senior specialized consultant at Wolters Kluwer, an information services firm.
But if you return it all by the time you file, there will be no tax consequences.
All returned money whether a portion or all of the distribution is treated as a rollover butreported as a repayment on IRS Form 8915-E.
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A Visual Guide To Unemployment Benefit Claims
Another 1.4 million Americans filed initial regular unemployment benefit claims, the eleventh week of a decline in the rate of new claims, but still among the highest levels in U.S. history. The total number of new and continued claims now stands at 19.3 million, a marked decline from the peak of 24.9 million a month ago.
Helping People: Irs Taxpayer Relief Initiatives
- The IRS is highlighting reasonable cause assistance available through IRS procedures for failure to file, failure to pay and failure to deposit penalties. First time abatement relief is also available for the first time a taxpayer is subject to one or more of these tax penalties.
- For individual taxpayers receiving notices with tax liabilities up to $250,000 for Tax Year 2019 only, the IRS can offer one Installment Agreement opportunity with no lien filed.
- The IRS is extending the short-term payment plan timeframe to 180 days .
- The IRS is easing paperwork requirements to allow individuals more flexibility to get non-streamlined Installment Agreements up to $250,000 without financial verification, if their case is not yet assigned to a revenue officer.
- Extend guidance to automatically include new tax year balances accrued in existing Installment Agreements.
- The IRS will provide relief for taxpayers having difficulty meeting the terms of previously accepted offers.
Thats a lot of detail, but its important for taxpayers experiencing COVID-19-related financial difficulties to know about these available options and how to get the help they need.
These challenging times call for us to do what we can to help one another. Im proud to say the IRS stands ready to assist taxpayers as we work through this situation together.
Darren John GuillotDeputy Commissioner for Small Business and Self-Employed Collection & Operations Support
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About The Stay At Home Executive Order
On March 19, 2020, California Governor Gavin Newsom issued Executive Order N-33-20 in response to the COVID-19 pandemic. The public health directives required all residents to stay at home in order to prevent the spread of the virus. As a result, many individuals living in California who ordinarily did not telework from their homes began to do so. In some instances, the individuals living in California that were now teleworking from their homes might be employed by corporations that previously had no connections with California.
The following FAQs provide guidance as to the possible California franchise tax implications to corporations that previously had no connections with California but now have an employee indefinitely teleworking from California due to the Governor’s Executive Order. The responses to the FAQs are applicable until the Governor’s Executive Order is no longer in effect.
Options For Improving The Tax Treatment Of Structures
Improving the tax treatment of structures is one of the most cost-effective tax policy changes available to lawmakers as they consider how to remove investment barriers in the tax code to hasten the economic recovery. Policymakers must weigh the trade-offs among long-run economic output goals, revenue constraints, and the existing stock of structures.
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Tax Credits For Those Affected By Natural Disasters
The most significant helping hand offered by the IRS, the casualty loss deduction, provides an accelerated tax refund when you live in an area proclaimed as a “federally declared disaster area” by the president of the United States.
The article below is accurate for your 2017 taxes including a few retroactive changes due to the passing of tax reform. Some tax information below will changed for the 2018 tax year.
On average, more than 867,000 Americans experienced hardship from natural disasters each year between 1980 and 2010, according to the disaster information site PreventionWeb. Historically, the Internal Revenue Service acknowledges the financial impact of devastating storms, droughts, forest fires and earthquakes with extended deadlines and tax relief, rather than issuing new tax credits. The most significant helping hand offered by the IRS, the casualty loss deduction, provides an accelerated tax refund when you live in an area proclaimed as a “federally declared disaster area” by the president of the United States.
Who Is An Eligible Self
An eligible self-employed individual is defined as an individual who regularly carries on any trade or business within the meaning of section 1402 of the Internal Revenue Code, and would be eligible to receive qualified sick leave wages or qualified family leave wages under the EPSLA or Expanded FMLA if the individual were an employee of an Eligible Employer that is subject to the requirements of the EPSLA or Expanded FMLA.
Eligible self-employed individuals are allowed an income tax credit to offset their federal self-employment tax for any taxable year equal to their qualified sick leave equivalent amount or qualified family leave equivalent amount.
60a. What individuals regularly carry on a trade or business for purposes of being an eligible self-employed individual for the qualified sick leave equivalent credit and the qualified family leave equivalent credit?
An individual regularly carries on a trade or business for purposes of being an eligible self-employed individual for the qualified sick leave equivalent credit and/or the qualified family leave equivalent credit if he or she carries on a trade or business within the meaning of section 1402 of the Internal Revenue Code , or is a partner in a partnership carrying on a trade or business within the meaning of section 1402 of the Code. Section 1402 of the Code defines trade or business and includes exceptions to this standard for purposes of section 1402 of the Code.
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Weighing The Benefits Of Permitting Business Credit Cashouts In Phase 4 Economic Relief
As lawmakers explore options for Phase 4 coronavirus relief legislation, one idea that has received renewed attention is allowing businesses to cash out business tax credits. This proposal would be strengthened by also permitting acceleration of firms accrued net operating loss deductions and designing the proposal so that firms can quickly convert these tax assets into cash.
Tax Season Will Start Later Than Usual
On January 15th, 2021, The Internal Revenue Service announced that the nations tax season would start February 12th a few weeks later than previous years. Normally, the IRS begins accepting and processing returns in late January. This delay allows the agency to do additional programming and testing of IRS systems following the second round of Economic Impact Payments, distributed in early January. The deadline to file taxes, however, is still scheduled for May 17, 2021.
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State Income And Sales Tax Revenues Slide In Second Quarter
Today marked the release of second-quarter GDP data and provides a new glimpse into early changes in state and local revenues and spending. All told, second-quarter state and local tax receipts came in about 3.8 percent lower than they did in the same quarter a year ago. Income and sales taxes fell considerably while property and excise tax collections remained stable.
Many Small Businesses Could Be Impacted By Biden Corporate Tax Proposals
Policymakers should recognize that corporate tax hikes will not only impact large firms, but many smaller and younger firms as well. Considering that many of these smaller firms are significant contributors to net job growth, raising corporate taxes at this time would not be conducive for a speedy economic recovery.
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Are Qualified Sick Leave Wages And Qualified Family Leave Wages Taxable To Employees
Yes, generally. Under sections 7001 and 7003 of the FFCRA, qualified leave wages are wages of the Internal Revenue Code determined without regard to section 3121- of the Code and without regard to section 7005 of the FFCRA), and compensation of the Code determined without regard to the exclusions under section 3231 of the Code and without regard to section 7005 of the FFCRA), so the employee must pay social security and Medicare taxes , unless the qualified leave wages are subject to an exclusion under section 3121- of the Code or exclusions under section 3231 of the Code. In addition, wages are generally compensation for services subject to income tax under section 61 of the Code and federal income tax withholding under section 3402 of the Code unless an exception applies. The FFCRA did not include an exception for qualified leave wages from income.
Receiving Relief For Student Loans
If youre one of the 45 million adult U.S. citizens who have student loans, the CARES Act may have provided temporary help during the pandemic.
For many months the legislation has let people skip principal payments on certain student loans without any negative effects on credit scores or lending reports. It also dropped interest rates for federally held loans to 0%.
In the past student loan interest payments let people take a student loan interest deduction, so if someone paid less interest, they will have a smaller deduction amount this year.
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Does Ppp Relief Need To Be Reported
Small-business owners who received a loan from the Payment Protection Program and qualify for loan forgiveness should make sure the information provided to obtain that relief matches what they’re reporting on their tax return.
“If your returns are not matching what’s reported, you can trigger an audit for yourself,” said Wilson. “So you want to make sure that your returns are consistent.” Document your expenses. Keep good records of your income. And remember even business expenses paid for with loan money are tax-deductible.
Finally, file your return early, especially if you’re due a refund or a recovery rebate credit.
“If you made less money in 2020 than you did in 2019, you definitely want to file early to ensure you get your stimulus checks, past checks owed or future checks yet to be approved,” said Wendy Barlin, a CPA and founder of About Profit.
And, what if you owe money to Uncle Sam?
“You can file your taxes now even if you owe,” Long said. “But you don’t have to pay until April 15.” That remains the deadline to file your 2020 federal income tax return.
Cbo Releases New Long
The pandemic precipitated the steepest decline in economic output and employment in recent history, which is leading to a drop in tax revenue. At the same time, the federal response to the crisis is producing a large increase in spending. This combination will cause the federal budget deficit to spike.
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