How does the coronavirus stimulus package help the NRIs in the US?

by Mounica Kota | May 18, 2020 | AGI, CARES, coronavirus, COVID - 19, IRS, US Government

How does the coronavirus stimulus package help the NRIs in the US?

The US Government has passed and signed a $2 trillion coronavirus bill otherwise known as the CARES Act. This is one of the largest emergency aid packages in the history of the country which has led to most of the taxpayers in the country receiving stimulus checks. These stimulus checks have helped in reducing the plight of the coronavirus affected Americans up to some level.

Along with the provision of all Americans receiving stimulus checks, this bill also includes $500 billion as loans for the struggling businesses, $150 billion for the local and state governments, $377 billion as grants for small businesses and $130 billion for the hospitals which are dealing with a very difficult situation as of now. To date, the IRS has sent around 140 million stimulus checks to the Americans who qualify for receiving the package.

Eligibility for receiving the Stimulus package

Major Queries

One of the major queries troubling the minds of the common people is what are the qualifying criteria for obtaining the Stimulus package? Are the NRIs living in the US eligible to obtain the Stimulus package or not?

All the US residents qualify to receive the Stimulus package as long as they possess a work-eligible Social Security Number (SSN) and can meet the income specific requirements.

a. The IRS will be determining the eligibility of an individual for the Stimulus package based on his adjusted gross income (AGI) on his 2019 tax return or 2018 tax return if not filed for 2019 yet.

b.The residents of the country who are filing their tax returns as individuals and have an AGI less than $75,000 would receive an amount of $1200 whereas residents who are married and are filing their tax returns jointly having an AGI less than $150,000 would receive an amount of $2400 as Stimulus payment.

c.An additional amount of $500 can be claimed for each dependent child who is below the age of 17 years, has been claimed in the tax returns of 2019 or 2018, and satisfies the other qualifying criterion.

d.Residents of the US who have nontaxable income such as Social Security benefits or Railroad benefits, etc. also qualify for receiving the Stimulus payment. These individuals do not need to file tax returns for obtaining Stimulus payment.

e.Residents filing tax returns as singles and having an AGI in between $75,000 and $99,000 would have their stimulus amount reduced by $5 for each $100 increase in the AGI above $75,000. Similarly, for married couples who have filed their returns jointly and have an AGI above $150,000 will have a reduction of $5 in their stimulus amount for every $100 increase in the AGI above $150,000.

Use of the Stimulus payment by NRIs in the US

a. The usefulness of the Stimulus payment obtained by the NRIs in the US depends upon various scenarios.

With the impact of the dreadful COVID-19 spreading rapidly across the US, many Americans have lost their jobs and livelihood. Businesses are being closed down and millions of workers across the country have become jobless. The Stimulus package announced by the Federal Government would include a weekly pay boost of $600 which is funded federally for the unemployed along with the regular State unemployment benefits.

However, for the NRIs in the US, there are no provisions to avail of the general state unemployment credit. So, if an NRI in the US loses his job during this pandemic it is difficult for him to manage his finances in the lockdown. The Stimulus package would be the savior for the NRIs at this point and can be used to meet the various financial needs.

b.In case an NRI in the US is into a profession where he would not be able to work from home during the corona times. NRI workers/employees from several industries such as Non-IT, retail, hospitality, restaurants, live entertainment, nightlife, etc. cannot perform their operations from home and thus, experience a partial or complete layoff from work. This would affect the livelihood and finances of the NRIs and the Stimulus checks can be used at this instance.

c.Moreover, since the pandemic COVID-19 is spreading widely across the country; an NRI might experience the situation of his family member or close relative being affected by the disease. In such a scenario, for availing the medical facilities good financial backup is necessary. The amount received by NRIs through the Stimulus package can be utilized for availing good medical facilities for their family members

References

https://www.cnbc.com/2020/04/01/whos-eligible-for-covid-19-stimulus-checks-your-questions-answered.htm

lhttps://www.forbes.com/sites/advisor/2020/04/28/real-stories-of-filing-for-unemployment-during-covid-19/#7b11b36715dd

https://www.forbes.com/sites/advisor/2020/03/25/what-you-need-to-know-about-expanded-unemployment-benefits-for-covid-19/#3e56a0436e4a

https://www.latimes.com/business/story/2020-03-27/who-qualifies-for-the-stimulus

As an NRI in the US, if your business is affected by the Coronavirus, these 3 credits can be of help

by Mounica Kota | May 11, 2020 | coronavirus, Employee retention credit, Family relief credit, IRS credits, paid sick leave credit

As an NRI in the US, if your business is affected by the Coronavirus, these 3 credits can be of help

The pandemic COVID-19 has had a disastrous impact on the economic lives of the people in the US. The NRIs in the US who are having their businesses have incurred huge losses and many are even on the verge of being shut down either temporarily or permanently. Coronavirus In such difficult times, the Internal Revenue Service (IRS) has introduced three different and new credits which would be helpful for the business owners and their employees as well.

Employee Retention Credit
Paid Sick Leave Credit
Family Leave Credit

The Internal Revenue Service (IRS) has introduced three different and new credits which would be helpful for the business owners and their employees as well.

Employee Retention Credit

1. The major objective behind the design of the Employee Retention Credit is to motivate various businesses to continue keeping their employees on their payroll rather than opting for a lay-off.

2. The Employee Retention Credit would be in the form of refundable tax credit which is 50% of up to $10,000 in wages which are paid by a business owner whose business has been affected due to the outbreak of COVID-19.

3. All business owners inclusive of those organizations which are tax-exempt are eligible to avail this credit irrespective of their sizes.

4. Any business owner whose business has undergone suspension either completely or partially due to COVID-19 is eligible to avail the Employee Retention Credit.

5. Moreover, an employer or a business owner would receive the Employee Retention Credit until the gross receipts of his business are below 50% of the comparable quarter of 2019. However, once the gross receipts are increased to 80% of a comparable quarter of 2019 then the business would no longer receive this credit.

6. Small businesses who might be taking small business loans and other State/Local Government instrumentalities are not eligible for availing the Employee Retention Credit.

Paid Sick Leave Credit

1.Paid Sick Leave Credit would enable businesses to obtain credit for those employees who are unable to work during COVID-19 due to either being self-quarantined or exhibiting symptoms of COVID-19 and are under medical supervision.

2. These employees would be paid sick leave credit for up to 10 days which is equivalent to 80 hours. This credit would be paid at the regular rate of up to $511 per day and $5,110 in total.

3.Those employees who work on a part-time basis would be eligible for receiving paid sick leave based on the number of hours the employee works on an average in two weeks.

Family Leave Credit

1.Business owners or employers would receive credit for those employees who are not able to come to work due to the need for taking care of family member who has been affected by the Coronavirus or due to need for taking care of a child who is below the age of 18 years whose school/daycare is being closed due to the pandemic.

2.These employees are eligible to avail paid sick leave for up to 80 hours i.e. up to two weeks at the rate of 2/3 of his regular pay or up to $200 each day i.e. $2000 in total.

3.Employees can also receive paid family leave and medical leave which is equal to 2/3 of the regular pay obtained by the employee that is up to $200 each day and resulting in $10,000 total. Family leave credit can be calculated towards up to 10 weeks of qualifying leave.

How can business owners/employers obtain credit?

1.The business owners/employers can immediately obtain the entire amount of sick leave credit and family leave credit along with the expenses involved in health care plans plus the employer’s share of the Medicare tax on the leave for the period ranging from 1st April 2020 to 31st December 2020.

2.The business owners would be able to reimburse these credits immediately by making a reduction in their required deposit of payroll taxes which have been withheld from the wages of the employees by the credit amount.

3.Those business owners who are eligible to obtain these credits can report about their total qualified wages and the costs incurred in health insurance for each quarter either by filing Form 941 or by filing their quarterly employment tax returns.

4.In case, the tax deposits of a business owner are not sufficient enough to cover the credits then the owner can receive an advance payment by submitting Form 7200 with the IRS.

Hence, these credits would be of immense help to the NRI business owners to support their employees during this difficult economic period caused by the pandemic.

References

https://www.irs.gov/newsroom/irs-three-new-credits-are-available-to-many-businesses-hit-by-covid-19

https://www.dol.gov/newsroom/releases/osec/osec20200320

https://www.foxrothschild.com/publications/irs-issues-guidance-on-tax-credits-for-required-paid-leave-under-ffcra/

https://www.irs.gov/newsroom/covid-19-related-tax-credits-for-required-paid-leave-provided-by-small-and-midsize-businesses-faqs

What does the Coronavirus Stimulus Package mean for you?

by Mounica Kota | Apr 27, 2020 | CARES Act, coronavirus, Stimulus payment

What does the Coronavirus Stimulus Package mean for you?

The Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law by the US President on 27th March 2020. This is an economic relief package worth $2 trillion which commits of protecting the Americans from the hazardous impacts caused by the COVID-19. The Coronavirus Stimulus package would help provide some amount of relief to the Americans affected by the pandemic.

Let us talk about the different facets included within the Coronavirus Stimulus package which would help provide economic assistance to the Americans.

Stimulus Checks

Through the CARES Act, around 80% of the American population would be eligible to receive a one-time payment in the form of Stimulus Checks. The amount that would be received as Stimulus payment is mostly dependent on the Adjusted Gross Income (AGI) of the taxpayers. AGI of an individual can be obtained from Line 8b of Form 1040. It is calculated by the Gross income of an individual minus the adjustments made for eligible deductions like IRA deduction or interest on the Student loan, etc.

If you are filing your tax returns as a single filer and your AGI is below $75,000 then you are eligible to receive Stimulus payment of $1200.
In case, you are claiming a dependent below 17 years of age then you would be eligible to obtain an additional $500 for the dependent.
However, there would be a reduction in the Stimulus payment by $5 for every $100 rise in AGI above $75,000.
In case, you are married and are filing your tax returns jointly then your AGI must be below $150,000 to obtain a Stimulus payment of $2400. You can also obtain an additional $500 if you can claim a dependent below the age of 17 years.
Moreover, in this case, also there would be a reduction of $5 from the Stimulus check for every $100 increase in AGI above the $150,000.
For individual tax filers, if the AGI is above $99,000 and no dependent has been claimed by the individual then Stimulus payment will not be received by the individual.
Similarly, for married couples filing tax returns jointly if the AGI is more than $198,000 and no dependents are being claimed then the Stimulus payment would not be received.

Unemployment payments

There would be an increase in the unemployment payment for four months through 31st July 2020 by an amount of $600 per week.
This increase in unemployment payment would be applicable for those who were not qualifying for any employment including freelancers, self-employed individuals, gig workers, part-time employees, etc.

Relief on the payment of Student Loan

The employers would be able to make the payment of the Student loan on behalf of the employees in a tax-free manner. This payment of the Student loan could be up to $5250 in a year.
This implies that there would be an exclusion of the loan payment done from the income of an employee.
This provision is being implemented from the date of signing of the CARES Act into law i.e. from 27th March 2020 until 1st January 2021.

Delay in the payment of Social Security Payroll tax

A portion of the Social Security Payroll tax needs to be done by the employers and this is even applicable to the self-employed individuals. According to the provisions of the CARES Act, the employers can make a certain delay in the payment of their part of the Social Security payroll tax for the rest of the part of the year. The liability can be paid easily over the next two years.

Economic assistance for Small businesses and Self-employed individuals

By the CARES Act, the Small Business Administration has been provided with $349 billion for distributing it among self-employed individuals, independent contractors, and non-profit organizations by the Paycheck Protection Program (PPP).
The Federal Reserve Lending Program would also be receiving support in the form of $454 billion. This amount has to be utilized in providing economic support to non-profit/small businesses that have a workforce of around 500-10,000 employees. The major objective of providing aids to these Small businesses is to retain their workforce by providing them compensation and benefits.

Waiver of penalty for the early withdrawal of retirement funds

A qualified individual who has been affected by COVID-19 might need to withdraw money from his retirement funds. In such a scenario, the individual would get a 10% waiver of the early withdrawal penalty. This waiver would be applicable for up to $100K of retirement funds.
An individual would be qualified for this waiver only if

An individual, his spouse, or his dependent have been diagnosed with COVID-19.
An individual has been experiencing adverse financial conditions due to being quarantined.
If an individual’s working hours have reduced or he is not able to work for taking care of his child as child care/schools have been closed due to COVID-19.

Hence, the Coronavirus Stimulus Package is an effective initiative by the Federal Government which would help reduce the stress of Americans caused due to the pandemic COVID-19.

References

Everything you need to know about tax relief implemented for the ongoing coronavirus disease 2019

by Mounica Kota | Apr 2, 2020 | COVID - 19, HSA, IRA, IRS, state tax, tax deadline, Tax Exception, Tax regulations

Everything you need to know about tax relief

implemented for the ongoing coronavirus disease 2019

The dreadful coronavirus disease has taken a toll on the global economy. Businesses are suffering from losses and employees are losing their jobs. In such a situation, tax compliance is an additional factor of stress on the common people and business entities as well. In such difficult times, the US Government has taken an initiative and introduced certain changes to federal tax laws.

Extension in federal tax deadlines

The US Department of Treasury and the IRS issued Notice 2020-17on 18th March 2020. According to the guidelines of this notice, there has been an extension in the deadline for payment of federal income tax or federal tax return. Any taxpayer having a federal income tax payment or federal income tax return due on 15th April 2020 can file the returns by 15th July 2020. This extension of 90 days has been provided by the IRS without charging any penalties or interest for late filing. This tax relief is applicable for all taxpayers who include individual, trust, estate, partnership association, corporation, etc.

The affected taxpayers do not need to file the forms Form 4868 or Form 7004. Also, there is no limitation on the amount of payment that might be postponed. This relief on taxes is applicable for the Federal Income tax and Federal tax return of 2019 and for the estimated federal income tax payment of 2020 which were due on 15th April 2020. However, no extension has been announced for the filing of any other type of federal income tax or federal tax return.

Extension in State tax deadlines

The majority of the States have agreed to the tax changes implemented by the Federal Government and have responded accordingly. However, there are some states which have responded differently to these tax changes implemented by the Federal Government. Taxpayers can obtain all information related to the changes in State tax laws from their state tax agencies.

Contributions to IRA

With the changes in the deadlines for tax payment and filing of tax returns for the federal tax, the deadline for making contributions to IRA has also been extended. The deadline for making contributions to the IRA has been also extended to 15th July 2020. This extension of 90 days for making contributions to the IRA has been provided by the IRS without charging any penalties or interest.

Taxpayers can contribute a maximum amount of $6000 towards their IRA and if the taxpayer is above the age of 50 years then there can be an additional contribution of $1000.This is an excellent opportunity for the taxpayers to save more for their retirement if they have not done so.

Contributions to HSA

Along with the extension made in filing federal tax payments and federal tax returns up to 15th July 2020, the deadline for making contributions to HSA has also been changed to 15th July 2020.

In case if the taxpayer is having a high –deductible health insurance plan with an HSA then he can add up to $3500 if he has self-only coverage. This amount can be increased to $7000 in case of family health plans. In the case of the taxpayer being above the age of 55, a contribution of an additional $1000 can be made into the account.

The stimulus package and

Families First Coronavirus Response Act

The Stimulus package will help the taxpayers in obtaining stimulus checks. These stimulus checks would of amount $1200 for the individual taxpayers, $2400 for those who are filing tax returns jointly and $500 for each qualifying child. These payments related to the stimulus package would be done by using the tax information of the taxpayers based on their recent tax filings. The amount which would be paid would be reconciled on the next year’s tax return based on the taxpayer’s situation in 2020.

The Families First Coronavirus Response Act helps in providing relief to the individual taxpayers as well as self-employed individuals and small businesses. The eligible employees who have been impacted by the coronavirus would receive emergency sick leave and paid sick leave.

Under FMLA (Family Medical Leave Act), if an employee needs to be quarantined, took care of a family member who was quarantined or took care of minor children whose schools/child care centers are closed due to COVID-19 can avail 12 weeks of job-protected leave. Also, if an employee is himself seeking medical supervision or is being quarantined then he would be eligible to receive two weeks paid sick leave and two-thirds pay for the care of the family member/child.

Furthermore, self-employed taxpayers and small business owners can obtain tax credits for providing paid sick leave and emergency family medical leave to the employees. Self-employed taxpayers can obtain a tax credit which is equivalent to the qualified sick leave amount whereas they can obtain a refundable tax credit equivalent to 100% of a qualified family leave amount. Small business owners are eligible to obtain refundable tax credits equivalent to 100% of both the qualified paid sick leave and qualified family leave wages.

Conclusion

Hence, with the implementation of these tax relief strategies by the US Government the stress of the taxpayers would be reduced up to some extent until things return to square one.