Top #5 things to note about the extended Tax deadline July 15-2020 from April 15-2020 which is just round the corner

Top #5 things to note about the extended Tax deadline July 15-2020 from April 15-2020 which is just round the corner

Top #5 things to note about the extended Tax deadline July 15-2020 from April 15-2020 which is just round the corner

Millions and millions of Americans have been affected by the deadly coronavirus whose impact is worsening further day-by-day. Americans are facing health problems, losing their sources of income and are facing a very difficult time. In such bad times, the Federal Government has been quite supportive and has taken up various initiatives by which the economic stress of the Americans would be reduced.

One of the major initiatives taken by the Federal Government to reduce the economic burden on the Americans affected by the pandemic COVID-19 is the extension of the tax return filing and the tax payment deadline to 15th July 2020 by the IRS. This extension in tax filing deadline is applicable for all taxpayers i.e. both residents and non-residents and including individuals, corporations, estates, trusts, and other non-corporate tax filers as well. 

Let us know about the major five things about this tax deadline extension provided by the Federal Government.

a.Extension for filing tax return and tax payment

This extension offered by the IRS is applicable both for filing Federal tax return and Federal tax payment. Originally, the Federal Government was about to give the deadline until 15th July 2020 to pay the taxes along with penalties and interest. However, the rules have been modified due to the economic stress caused due to the pandemic COVID-19. But, those taxpayers who are expecting their tax returns must file them soon to obtain the refunds faster.

b.Eligibility for availing the extended deadline

According to the IRS, there are is no such eligibility criteria for a taxpayer to avail the extended deadline. Any person who has a pending Federal Income Tax payment or returns due for 15th April 2020 can avail of the relief of deadline extension. This extended timeline is also applicable for the estimated Federal Tax Income payment 2020. This timeline extension is only applicable for those payments or return filing due on 15th April 2020 and not due on any other date.

c.State tax laws

There are a large number of states who have also extended their timeline for Federal income tax return filing and payment dates to 15th July 2020 as that of the Federal Government. States such as Alabama, Arizona, Kansas, Ohio, South Carolina, District of Columbia, West Virginia, Michigan, New Jersey, Montana, Oklahoma, Minnesota, Kentucky, Wisconsin, Maine, Georgia, Illinois, California, Colorado, and many more have their tax return filing and payment extended up to 15th July 2020. 

However, there are some states like Hawaii, Idaho, Iowa, and Virginia which have extended their timelines differently than that of the Federal Government. The timeline in Hawaii has been extended to 20th July, in Idaho has been extended up to 15th June 2020, in Virginia had been extended up to 1st June 2020 and up to 31st July 2020 in Iowa.

d.Inability to pay by 15th July 2020

In case a taxpayer feels that he would not be able to pay his Federal Income tax even by the extended timeline i.e. 15th July 2020, then he would have to file for an automatic extension. The taxpayer must request for the automatic extension of the timeline by 15th July 2020. He can be able to request for the extension automatically by e-filing using Form-4868. Moreover, if business entities or trusts would be interested in filing for an extension, then it can be done electronically through the Form-7004.

 

e.IRA and HSA

 Since the deadline for filing tax returns and tax payment has been extended till 15th July 2020; the taxpayers can make contributions to their IRA and HSA up to 15th July 2020.

 

Additional Information

However, there are some other items whose deadlines have been extended until 15th July 2020. 

  1. The Estimated Federal Tax payment for the second quarter has also been extended till 15th July 2020 which was 15th June 2020 earlier. So, by this, the taxpayers would have to now submit both the Estimated Federal Tax payments for both the 1st quarter and the 2nd quarter by 15th July 2020.
  2. The partnership return filings and the corporate return filings have been extended till 15th July 2020.

Hence, the extended timeline for making the Federal tax payment, filing the Federal tax returns, and even payment of State Tax is almost round the corner and taxpayers should be prepared for it from now.

How can the pandemic affect my taxation as an NRI in the US?

How can the pandemic affect my taxation as an NRI in the US?

How can the pandemic affect my taxation as an NRI in the US?

The impact of the pandemic COVID-19 is on an increase across the entire world. Currently, more than 2 million people have been affected by COVID-19 out of which 1.7 lakhs have already died. The United States has also experienced a very rapid spread of the coronavirus with the number of affected people being 7.5 lakhs approximately whereas the deaths due to COVID-19 have reached 40 thousand persons.

Not only the lives of the people in the US are being affected due to COVID-19, but there has also been a hugely adverse effect on the livelihoods of common people. Several businesses have closed down leading to many people including NRIs losing their jobs. However, the Federal Government has implemented several changes in the tax laws for the NRIs intending to reduce the stress in such troublesome times.

Changes in tax laws for NRIs

a.Deadline extension for filing tax returns

 The IRS and the US Treasury had declared that the deadline to file for individual federal income tax return has been extended to 15th July 2020. For this extension of 90 days provided by the IRS, there would not be any penalties charged by the IRS.

b.Deadline extension for tax payment

The deadline for making the federal income tax payment has also been pushed to 15th July 2020. This means if an NRI has tax to be paid this season then there is ample time to make the payments. For providing this extension in the timeline for tax payment, the IRS will not be charging any penalties. Moreover, this deadline extension is also applicable for the first quarter payment of estimated tax payments which were due on 15th April 2020.

c.No necessity for additional forms  

An NRI would not need to file for a tax extension to avail of the extended deadline for federal income tax return filing and federal income tax payment as well. However, if an NRI thinks that he would not be able to file the tax returns or pay the taxes even after 3 months then he would have to file for an extension by 15th July 2020.

d.Deadline extension for quarterly estimated tax payment

 For the self-employed NRIs who had their quarterly estimated tax payment due on 15th April 2020 and 15th, June 2020 would obtain an extension for the payment till 15th July 2020.

 

e.Changes in the deadlines for payment of State Tax

In general, the deadlines for filing federal tax returns and payment of federal tax are different from that of the State tax. However, due to the outbreak of COVID-19 the deadlines for Federal tax returns and tax payment had been extended. Most of the States have aligned their tax payment deadlines with that of the new Federal deadline. Some states have defined their guidelines for the payment of tax and deadlines. Complete information on the State tax-related changes and deadlines can be obtained from the respective State tax agencies.

f.Deadline extension for contributions to be made into IRA, HSA, and MSA

 Along with the extension in the deadline of Federal taxes, there has been an extension in the deadlines for making contributions to the IRA, HSA, and MSA. The deadline for contributing to the IRA, HSA, and MSA has been extended to 15th July 2020. However, in the case of IRA, the NRI must ensure that when he is making the additional contribution towards the IRA the custodian should earmark the additional contribution for the year 2019 and not consider it as 2020 return.

 

g.Stimulus Payments

Under the Coronavirus Aid Relief and Economic Security (CARES) Act, the Federal Government has announced the process of one-time payments to be sent in the form of Stimulus payments. These Stimulus payments would mainly depend on the filing of tax returns for 2019 and the Adjusted Gross Income (AGI) of an NRI.

NRIs filing tax returns as single filers and having an AGI below $75,000 would obtain $1200 as Stimulus payment. When the AGI is above $75,000 then the amount obtained reduces by $5 for every $100 increase in the AGI above $75,000. NRIs filing tax returns jointly as married couples and having an AGI below $150,000 would receive $2400 as Stimulus payment. If the AGI exceeds $150,000 then the Stimulus payment received would reduce by $5 for every $100 increase in the AGI above $150,000. In both cases, an additional $500 can be obtained if the filer claims a dependent below the age of 17 years.

However, along with these changes being implemented in the tax laws, the IRS is also processing the tax returns according to the normal procedures. So, it is advisable for the NRIs also to file their tax returns soon if they have not done it yet and obtain their refunds.

State and Local Tax relief laws for COVID-19

State and Local Tax relief laws for COVID-19

State and Local Tax relief laws for COVID-19

The novel coronavirus (COVID-19) is spreading rapidly with a huge toll on the lives of common people and the global economy as well. In the US, the number of people being affected by the COVID-19 is on an increase and has reached around 4 lakhs now. The number of people who have died due to COVID-19 in the US is approximately around 11,000. Similarly, many people have even lost their livelihoods due to the closing or the downfall of several businesses.

However, Tax relief laws the Federal Government has been extremely considerate towards the sufferings of the common people and has taken several initiatives for providing some relief to them. The income tax payment and return filing deadline for the taxes due on 15th April 2020 has been postponed to 15th July 2020 by the IRS. Also, several new laws have been implemented by the Federal Government for the support of individuals, small and medium scale businesses even. The Coronavirus Aid, Relief and Economic Security Act (CARES), Families First Coronavirus Response Act, Stimulus Package, etc. are some of the major initiatives taken by the Government for providing support and assistance to people. 

Tax relief laws by State Government  

In the US, the tax rules and laws associated with the Federal Government and the State Government are different from each other. In this distressful period, the State Government of different states of the country has announced various changes and new rules related to the tax laws.

Let us talk about some of the major tax relief laws imposed by the State Government in the different states to deal with the economic disruption caused by COVID-19.

Alabama

  • In Alabama, the Revenue Department has announced on provisions for tax relief to small businesses that would not be able to pay their Sales tax for February, March, and April. Those small retail businesses whose monthly sales in the previous year have been $62500 or less on average can have the liberty to file their sales tax return for February, March, and April without paying the State Sales tax. There will be a waiver of late tax payment penalties for these small retail businesses through 1st June 2020.
  • The deadline for motor vehicle registration and vehicle property tax payment for March 2020 has been extended through 15th April 2020. Moreover, tax relief would be available for State lodgings tax account holders who are unable to make their payment for February-April 2020.
  • The due date for payment and filing returns for 2019 Income tax and 2020 estimated Income tax which were due on 15th April 2020 has been extended to 15th July 2020.

California

  • The Income Tax deadline for return filing, payment for 2019 and 2020 estimated tax payments Quarter 1 and Quarter 2 has been extended to 15th July 2020. This is also applicable for 2020 LLC taxes, fees, and 2020 non-wage withholding payments. 
  • The Californian Employment Development Department (EDD) has declared that the employers in the State who have been impacted by COVID-19 can request a delay of up to 60 days in filing their State payroll reports or in the deposit of their payroll taxes without the payment of any penalty. The employers must provide a written request for this extension within 60 days of the original tax filing/payment due date.
  • Moreover, there has been an announcement on the deferral of business taxes for supporting small businesses that have been affected by the COVIS-19.

Connecticut

  • The Department of Revenue Services in Connecticut has extended the deadlines for filing the annual tax returns due on or after 15th March 2020 and before 1st June 2020 to 15th June 2020.
  •  Also, the tax payments which are associated with these tax returns have been extended to the due date available in June.
  • The personal income tax return filing deadline has been extended to 15th July 2020 and this extension is also applicable for estimated tax payments of 2020 Quarter 1 and Quarter 2.

Columbia

  • For income tax returns, the deadline for tax payment and return filing which was due on 15th April 2020 has been extended to 15th July 2020.
  • In the District of Columbia, penalties/interest will be waived for the failure of sales tax payment for a period that ends on 29th February 2020 or 31st March 2020 if all the taxes are paid completely on or before 20th July 2020. This waiver does not apply to hotels or motels which can defer property tax under another emergency legislation. 
  • This legislation states that hotels/motels can avail penalties waiver for the delay in payment of the property tax’s first installment of 2020 if the installment is paid by 20th June 2020.

Texas

  • In Texas, the Comptroller has declared that the sales tax collected in March 2020 would be remitted and would be available for emergency health care and other emergency operations for the people.
  • The Texan Comptroller has also insisted on the businesses in the State to make use of short term payment agreements for meeting the deadline of March 2020. 

Massachusetts

  • The Department of Revenue in Massachusetts has implemented an emergency regulation amendment. According to this amendment, the sales and use tax return filing and payment which are due for the period of 20th March 2020 to 31st May 2020 will remain suspended. These tax return filing and tax payments would be now due for 20th June 2020. 
  • Marijuana retailers, marketplace facilitators or motorcycle vendors are not included within this amendment. Any penalties or interest would be waived but the accumulation of statutory interest will continue.

Virginia

  • In Virginia, the Department of Taxation has announced that all the income tax payments which are due from 1st April 2020 to 1st June 2020 can be paid at the Department anytime on or before 1st June 2020. If all the payments are received by 1st June 2020, then the Department would waive all penalties for late payment otherwise penalties would start accumulating from the original payment due date. 
  • However, interest would also keep accruing from the original due date of payment. Some of the taxes which are eligible for this extension and waiver are individual, fiduciary and corporate income taxes and any estimated income tax payments in this period.  The State provides an automatic filing deadline extension for all the taxpayers for six months.  Also, the Department of Taxation would consider requests for sales tax dealers who would request an extension in the sales tax payment and return filing which was due on 20th March 2020 and would extend it till 20th April 2020.

Montana

  • The Montana Revenue Department would assess the situation of taxpayers on a case-by-case basis and might permit the deferral of tax payments for up to one month at an instance. 
  • The taxpayers must contact the Tax Collection Bureau by email, phone or mail at least one week before the actual due date of payment for making a deferral request.
  • The 2020 estimated tax payments for the first quarter have been extended to 15th July 2020 and the second quarter payment is also due on 15th July 2020.

Conclusion

Hence, along with the Federal Government, these are some of the tax relief laws/rules implemented by the different states. Taxpayers can communicate with their respective State tax agencies for complete details on the amendments made in their respective tax laws for COVID-19. These rules and amendments in State tax laws would act as a support for the distressed individual taxpayers or businesses in coping up with the economic disruptions.

References

https://tax.thomsonreuters.com/news/tax-relief-offered-by-states-and-localities-in-response-to-covid-19/?utm_campaign=T_CPE_NSL_9017597_covid19news_20200406_PR_EM1&utm_medium=email&utm_source=Eloqua&site_id=82769734&cid=9017596&chl=em&sfdccampaignid=7014Q000002SW4xQAG&elqTrackId=8432E59EA486AE4E4F693C86C8DF092E&elq=1fca5b09cc9e4a48adaa952eec158059&elqaid=22686&elqat=1&elqCampaignId=16486

https://www2.deloitte.com/us/en/pages/tax/articles/covid-19-state-and-local-tax-due-date-relief-developments.html  

 

How high deductible health plans would help in providing cover against COVID-19 expenses?

How high deductible health plans would help in providing cover against COVID-19 expenses?

How high deductible health plans would help

in providing cover against COVID-19 expenses? 

Lately, people across the world have been struggling hard to combat the dreadful effects of the pandemic COVID-19. The number of deaths occurring due to coronavirus is on an increase and is also leading to an increase in the fright of the common people. Any symptoms of the COVID-19 and there have to be several tests, quarantining without any idea about what the future holds.Amidst all this chaos, the US Government has taken some very necessary steps to lessen the stress among common people. Extension in the tax return filing and tax payment deadlines, extension in the deadline for making contributions to IRA and HSA, Tax stimulus package, Families First Coronavirus Response Act, etc. are some of the major changes implemented by the US Government to bring some relief to the impacted taxpayers. Another major initiative taken by the US Government for helping the common people is the implementation of testing /treatment of COVID-19 by HDHP with no deductible or sharing of the cost.

What is a High Deductible Health Plan (HDHP)?

What is a High Deductible Health Plan (HDHP)?

A high deductible health plan (HDHP) is a type of health insurance plan which has a lower premium in a month and a higher deductible. HDHPs are more affordable by common people in terms of their monthly premiums. Since the name suggests, high deductible health plan; it implies that the deductible for the health plan is high than that of a traditional healthcare plan. However, by the time the policy holder reaches the annual deductible, he would be covered 100% for the rest part of the calendar year. 

A high deductible health plan is suitable for those policyholders who are quite healthy and rarely visit the doctor. In these types of cases, HDHP is an excellent option to cut expenses and it is a better option rather than going without health insurance. However, it should be kept in mind that the policyholder must set aside a considerable amount of liquid savings which would help in covering the deductible and the out-of-pocket expenses.

How does a High Deductible Health Plan work?

How does a High Deductible Health Plan work?

The minimum deductible in an HDHP is $1350 for an individual whereas it is around $2700 for a family. The out-of-pocket expenses for an HDHP are limited to $6650 for an individual and $13300 for a family. To offset the cost of the HDHP it is necessary to open a Health Savings Account (HSA). The HSA offers a tax-advantaged method by which healthcare costs can be saved.  

There is a limit on the annual contribution which can be made to the HSA; it helps in rolling over the balance from one year to another. It is ideal for a policyholder to contribute the amount of deductible of HDHP into the HSA so that there are enough funds to cover the medical expenses.

HDHPs and expenses associated with COVID-19

HDHPs and expenses associated with COVID-19

The US Government issued a notice i.e. Notice 2020-15 which states that a health plan which satisfies the requirements to be a high deductible health plan (HDHP) shall not fail to be an HDHP if it provides health benefits related to the testing of COVID-19 and its treatment. This testing and treatment of COVID-19 by the HDHP would be available without a deductible or with a deductible which is below the minimum deductible. So, the evident implication from this notice is that an individual who is covered under the HDHP will still be an eligible individual who might make tax-favored contributions to an HSA.                     

The Notice 2020-15 also states that all the medical care services received and the materials purchased for the testing of COVID-19 which are provided by a health plan which is either without a deductible or with a deductible that is below the minimum deductible needed for a health plan to be HDHP should be disregarded.

The relief provided by the Notice 2020-15  

The relief provided by the Notice 2020-15  

This notice does not modify any of the requirements or conditions which are needed for a health plan to be an HDHP other than the relief related to the testing/treatment of COVID-19. However, vaccinations would continue to be considered as preventive care materials for determining if a health plan is an HDHP or not.

So, if a policyholder is availing a health plan with no deductible or less deductible than the minimum annual deductible needed to be an HDHP for testing/treatment of COVID-19 he would still make contributions to the HSA which can help in tax relaxation.

Conclusion

Hence, this effort by the US Government for providing some relief to the affected citizens is commendable and would be helpful for the citizens in these times of distress.

References

  1. https://www.irs.gov/pub/irs-drop/n-20-15.pdf
  2. https://www.thebalance.com/what-is-high-deductible-health-insurance-2385898

 

People First Initiative: Everything you should know about this IRS initiative during the COVID-19 outbreak

People First Initiative: Everything you should know about this IRS initiative during the COVID-19 outbreak

People First Initiative: Everything you should know about this IRS initiative during the COVID-19 outbreak

The number of people affected by COVID-19 is going on increasing very rapidly and so are the challenges, issues faced by the common masses. In such a situation, the Internal Revenue Services (IRS) has announced a series of steps and guidelines which would help common people in providing some relief related to tax payment compliance. The IRS is highly concerned about the well-being and the working together of people.

The People First Initiative of the IRS has the main objective of helping those people who are facing economic issues and uncertainty in payment of taxes. This program implements temporary changes to the various IRS activities beginning on 1st April 2020 through 15th July 2020. These changes in the tax processes have been made temporarily by the IRS to help people and business entities during these difficult times.

  • The new changes made by IRS include several issues which are ranging from the postponement of specific payments that are related to the Installment Agreements and Offers in compromise to the limiting of some enforcement activities.
  • While some of the activities have been suspended temporarily other activities would move in the modified manner up to a maximum extent.
  • Moreover, the IRS also would avoid any in-person contacts during this period.

Major areas highlighted under the People First Initiative

The major areas which have been mainly given importance under the People First Initiative are 

A.Installment Agreement and Offers in Compromise payments

The IRS has offered expanded payment relief for the existing Installment Agreements and accepted the applications related to Offers in Compromise (OIC) until 15th July 2020. But, taxpayers must also be aware that any unpaid balances will get interest accrued on it as per the law.

For those installment agreements which already exist, the payments that are due between 1st April 2020 and 15th July 2020 are suspended. The IRS would not charge any default installment payment during this time. Those taxpayers who might find compliance with the Installment payment agreement and also with the Direct Debit Installment Agreement can suspend their payments during this time.

However, if a taxpayer is making the tax payments by mailing it or by visiting the IRS website then it is quite simple to stop the procedure. But, in case of direct debit payment, it might be difficult to suspend the process. Taxpayers will have to log in to the IRS website and change the payment information associated with the Direct Debit option.

B.Offers in compromise (OIC)

The various stages of OICs in which the IRS is helping the common people to resolve their issues are summarized below.

Pending OIC ApplicationsThe IRS will not be closing any pending OIC requests before 15th July 2020 without obtaining consent from the taxpayers. 

OIC PaymentsTaxpayers will have the option by which they can suspend all the payments until 15th July 2020 on those OICs which have been accepted.

Delinquent return filingsAny delinquent return filings are pending for 2018 then the taxpayers must complete them by 15th July 2020.

New OIC ApplicationsThose taxpayers who have liabilities more than their net worth then the OIC process can be designed by using “Fresh Start” to resolve the issues of outstanding liabilities. 

C.Compliance Actions

It has not been made clear from when the IRS would start the operations listed below.  However, the IRS will not pursue any compliance actions unless those actions are necessary for the protection of the Government’s interest.

  • New automatic system liens and levies would be suspended during this duration.
  • Liens and levies which have been initiated by field revenue officers would be suspended during his time.  However, the field revenue officers will keep on continuing high-income non-filers and would perform other such types of similar activities.
  • For seriously delinquent taxpayers, IRS would suspend new certifications to the Department of State during this period. This certification will prevent the taxpayers from receipt or renewal of passports.
  • If there are new delinquent accounts, then they will not be forwarded by the IRS to private collection agencies for performing the work during this period.
  • New audits will not be carried off by the IRS during this period.
  • The current audits might continue in some capacity but all those that happens in-person meetings are suspended. 

D.Independent office of appeals

The Appeals office will continue their work on their cases. Appeals would not currently hold an in-person conference with the taxpayers. The conferences can be held over the phone through videoconferencing.  Taxpayers can respond to any outstanding information request for all the cases in the Independent office of appeals.

E.Statute of Limitations

The IRS would take necessary steps for the protection of all applicable statutes of limitations. There can be instances where the statute expirations may be jeopardized during this period and taxpayers are encouraged to co-operate in the extension of such statutes.

 

Conclusion

Hence, the People First Initiative is mainly dedicated to helping the common people in having better lives during this period of crisis. The IRS team is committed to helping common people to get through this stressful situation. The IRS would keep on reviewing the “People First Initiative” and would make necessary changes whenever required. The taxpayers must extend their support and co-operation to the IRS as well to win over this tough situation together.

References 

https://www.irs.gov/newsroom/irs-unveils-new-people-first-initiative-covid-19-effort-temporarily-adjusts-suspends-key-compliance-program

https://www.eisneramper.com/people-first-covid-0320/

https://www.taxwarriors.com/blog/irs-unveils-people-first-initiative

https://rsmus.com/what-we-do/services/tax/federal-tax/tax-controversy/irs-announces-its-people-first-initiative-ir-20-59.html

https://www.foxrothschild.com/publications/irs-people-first-initiative-changes-collections-procedures/

 

What are the tax relief initiatives taken by the IRS for self-employed taxpayers during COVID-19?

What are the tax relief initiatives taken by the IRS for self-employed taxpayers during COVID-19?

What are the tax relief initiatives taken by the IRS

for self-employed taxpayers during COVID-19?

The US Government has recently made changes into the tax filing timelines as an effort to provide some relief to the taxpayers who are already suffering due to the outbreak of pandemic COVID-19. These changes were jointly announced by the US treasury and the IRS and are applicable for individual taxpayers, businesses and even self-employed taxpayers.

The US Government has extended the income tax filing deadline to 15th July 2020. The IRS would be processing the refund process for all the taxpayers within the normal time frame which is around 21 days for those filing the tax returns by electronic medium or by direct deposit.

Tax-filing extensions for self-employed taxpayers

Tax-filing extensions for self-employed taxpayers

The tax filing timeline has been extended for 90 days without the payment of any penalty and this change is also applicable on the estimated tax payment for the year 2020 which was also due on 15th April 2020.

For self-employed taxpayers, if there is a filing of the quarterly estimated tax then first-quarter filing must be due by 15th April 2020 previously. The timeline for the filing of the first quarter estimated tax has now been extended to 15th July 2020. However, for the other quarters, the filing dates remain unchanged such as the tax filing deadlines remain 15th June 2020, 15th September 2020 and 15th January 2021 for the second, third and fourth quarters. 

The Families First Coronavirus Act

On 18th March 2020, the US President signed into law the Families First Coronavirus Act which is the initial coronavirus relief bill. This Act provides several benefits to self-employed taxpayers and small-business owners.

1.Comparable tax credits for self-employed individuals

 

 

a.If a self-employed individual is affected by the coronavirus, then by this Act he is eligible to claim a refundable credit against the bill of his federal income tax including the self-employment tax hit. In case the credit is more than the bill amount then the Government will issue a payment for the excess to the taxpayer.

b.This refundable credit will equal to the sum of 100% of the self-employed individual’s sick leave equivalent and 67% of the sick leave equivalent amount needed for taking care of a family member who is sick or for taking care of the individual’s child due to the closing of the child’s school or child care center.

c.The sick leave equivalent amount would equal to lesser among the below-mentioned

  • average daily self-employment income of the individual or  
  • $511 each day for up to 10 days for self –care due to the COVID-19  or $200 each day up to 10 days for the care of a sick family member or child after the latter’s school has been closed due to COVID-19.

d.Moreover, self-employed individuals can claim a family-leave credit due to COVID-19 up to 50 days. The amount of this credit would be equal to the number of the qualified family day leaves multiplied with the lesser amongst $200 or the individual’s average daily self-employment income. The maximum total family-leave credit permissible is $10,000 which is equal to 50 days multiplied with $200 per day.

e.These credits which can be availed by the self-employed individuals are allowed only for the days during a particular period which is specified by the Treasury up to 31st December 2020. The beginning date is most likely to be within 15 days of the date this Act became a law i.e. 18th March 2020.

f.The self-employed individuals must maintain proper documentation needed to claim these credits.       

2.Small Business  Owners Tax Credits

  1. A small business owner is eligible to collect a tax credit which is equal to 100% of the qualified emergency sick-leave and family-leave payments made by him under the Families first coronavirus Act.
  2. This credit would only cover those leave payments which are made during the period specified by the Secretary of the Treasury up to 31st December 2020. 
  3. This credit can also be increased for providing cover to a portion of the small business owner’s qualified health-plan expenses which can be allocated for emergency sick-leaves and family-leave wages.
  4. However, this credit would not be available for those employers who are already receiving the pre-existing credit for paid family leave and medical leave under IRS Code Section 45S.

 

Conclusion

Hence, with the outbreak of the COVID-19 the self-employed individuals and small business owners have also suffered from certain economic and financial disruptions. The attempt of the US Government to bring certain relief to these taxpayers by changing tax laws and by passing the Family First Coronavirus Act is sure to be successful.

References

https://blog.turbotax.intuit.com/self-employed/what-the-coronavirus-relief-means-for-self-employed-taxpayers-46585/

https://www.marketwatch.com/story/what-the-family-first-coronavirus-relief-bill-means-for-small-business-owners-and-self-employed-people-2020-03-21