Overall Impact on Taxes
Covid19 has infiltrated the United States quickly and quietly. It has caused a great deal of physical, mental, and financial damages to a countless number of people. The virus has caused disruptions in many different areas all around the country and the world. With tax season looming, many people are wondering how their federal income taxes will be affected by the pandemic.
Tax Extensions due to COVID-19
Perhaps one of the most important updates to keep in mind is that the deadline to file taxes has been extended. Any federal income tax that was previously due in between April 1, 2020, and July 15, 2020, has now been moved to July 15, 2020. This change in deadline applies to both individuals and corporations. This will provide a short-term respite for people to get their affairs in order after many companies were forced to lay off employees.
This extension is helpful if someone expects to owe money in income tax, as the payments will be deferred for a little while. However, if someone is expecting a tax refund, it may be more beneficial to file earlier, so as to receive the funds quicker. Typically, someone could expect to receive a tax refund within 21 business days of filing their taxes online.
Corporate Tax Credits
For companies who are struggling financially due to Covid19, there are certain grants that have been set up to assist them. For example, the Families First Coronavirus Response Act (FFCRA): Employer Paid Leave allows employers to recoup some of the costs of providing paid sick leave for employees dealing with Covid19. This act covers the costs of employees who have taken leave of absence due to Covid19 between the period of April 1, 2020, and December 31, 2020.
The qualifications required to receive these credits are that the company needs to have fewer than 500 employees currently employed. They also must be required to pay qualified sick or family leave benefits to employees. The way that corporations can claim these benefits is by reporting them on their federal tax returns. They will receive these benefits from the IRS after their taxes have been filed.
Self-Employment & Pandemic Unemployment
The policies above also relate to self-employed individuals or people who own their own businesses. A new act has been introduced for self-employed workers and independent contractors who are currently unable to work, but do not qualify for UI payments. This is called the Pandemic Unemployment Assistance (PUA) program. Under this act, certain eligible workers will be able to receive $600 extra in federal benefits. This amount will be received every week for a maximum of 39 weeks, starting January 27, 2020, if work has been disrupted due to Covid19.
Qualifications for Tax Assistance
With so many tax credits and assistance options currently available in the United States, it is difficult to know what exactly someone can qualify for. The best bet in this situation would be to speak to an accounting professional, preferably one who is already familiar with your line of work and current financial position. They will be able to determine which benefits would be applicable, and how to best obtain them.