The Internal Revenue Service, the U.S. Department of the Treasury and the Bureau of the Fiscal Service announced they are disbursing approximately 37 million payments in the second batch of Economic Impact Payments from the American Rescue Plan. This brings the total disbursed payments from the American Rescue Plan to approximately 127 million payments worth approximately $325 billion.
As announced on March 12, Economic Impact Payments will continue to roll out in batches to millions of Americans in the coming weeks.
The second batch of payments includes direct deposits, as well as paper checks and debit cards being sent through the mail. Here is additional information on the second batch of payments:
- Like the first batch of payments, the payments announced today primarily were sent to eligible taxpayers who filed 2019 or 2020 returns. People who don’t typically file a return but who successfully used the Non-Filers tool on IRS.gov last year were sent payments in this batch.
- In total, this second batch includes approximately 37 million payments, with a total value of nearly $83 billion.
- As part of that, this batch of payments includes approximately 17 million direct deposit payments, with a total value of more than $38 billion. These payments began processing on Friday, March 19, and some Americans saw the direct deposit payments as pending or as provisional payments in their accounts before today’s official payment date.
- In addition, this batch of payments includes nearly 15 million paper checks (with a total value of nearly $34 billion) and approximately 5 million prepaid debit cards (with a total value of around $11 billion).
- Paper checks and debit cards – known as EIP cards –began processing on Friday, March 19, and will continue to be sent by mail over the next few weeks.
As announced last week, the first batch of payments was mostly sent by direct deposit. Here is additional information on the first batch of payments:
- The first batch of payments began processing on Friday, March 12, and some Americans saw the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of March 17.
- The first batch of payments primarily was sent to eligible taxpayers who provided direct deposit information on their 2019 or 2020 returns, including people who don’t typically file a return but who successfully used the Non-Filers tool on IRS.gov last year.
- In total, the first batch included approximately 90 million payments, with a total value of more than $242 billion.
- The use of direct deposit to issue these payments means that they were disbursed remarkably faster than would otherwise be possible.
- While most payments were disbursed by direct deposit, Treasury mailed roughly 150,000 checks worth approximately $442 million.
Additional batches of payments will be sent in the coming weeks as direct deposits and through the mail as paper checks or debit cards. The vast majority of all Economic Impact Payments will be issued by direct deposit. No action is needed by most taxpayers.
Many federal beneficiaries who filed 2019 or 2020 returns or used the Non-Filers tool were included in these first two batches of payments, if eligible. For federal beneficiaries who did not file a 2019 or 2020 tax return or did not use the Non-Filers tool, the IRS is working directly with the Social Security Administration, the Railroad Retirement Board, and the Veterans Administration to obtain updated 2021 information to ensure that as many people as possible are sent fast, automatic payments. More information about when these payments will be made will be provided on IRS. gov as soon as it becomes available.
Individuals can check the “Get My Payment” tool on IRS.gov to see the payment status of these payments.
Learn more about the third round of the Stimulus payment and see who is eligible for the Economic Impact Payment check out our blog post here.
Need to still schedule a tax appointment? Book online, or call Loeffler Financial Group today at 717-393-7366.
The IRS started issuing the third round of Economic Impact Payments. No action is needed by most taxpayers. The IRS will issue payments automatically to you by direct deposit and through the mail as a check or debit card.
Many people will receive the third payment the same way they received the first and second Economic Impact Payments. Because these payments are automatic for most eligible people, there’s no need to contact Loeffler Financial Group, or the IRS. Individuals can check the Get My Payment tool on IRS.gov for status of their third stimulus payment.
Highlights of the third Economic Impact Payments
In general, most people will get $1,400 for themselves and $1,400 for each qualifying dependent claimed on their tax return. As with the first two Economic Impact Payments, most people will receive their third payment without having to take any action.
The third Economic Impact Payment is based on the taxpayer’s latest processed tax return from either 2020 or 2019. This includes anyone who successfully registered at IRS.gov using the agency’s Non-Filers tool last year or submitted a simplified tax return. If the IRS received and processed a taxpayer’s 2020 return before issuing someone’s third Economic Impact Payment, the amount is based on the 2020 return.
Those who received the first or second payment but don’t receive a payment by direct deposit will generally receive a check or a prepaid debit card, referred to as an EIP Card. The IRS will not add the third payment to an existing EIP card that people received for the first or second round of stimulus payments.
Please note: Under the new law, the IRS can’t apply the third Economic Impact Payment to past-due federal debts or back taxes.
Who is eligible for the third Economic Impact Payment
Generally, U.S. citizens or U.S. resident aliens are eligible for the full amount of the third Economic Impact Payment if they and their spouse, if they’re filing jointly, are not a dependent of another taxpayer and have a valid Social Security number and their adjusted gross income on their tax return does not exceed:
- $150,000, if married and filing a joint return or if filing as a qualifying widow or widower.
- $112,500, if filing as head of household.
- $75,000 for eligible individuals using any other filing statuses, such as single filers and married people filing separate returns.
The payments phase out — or reduce — above those AGI amounts. This means taxpayers will not receive a third payment if their AGI exceeds:
- $160,000, if married and filing a joint return or if filing as a qualifying widow or widower.
- $120,000, if filing as head of household.
- $80,000 for eligible individuals using other filing statuses, such as single filers and married people filing separate returns.
Looking for more information on tax tips and strategies? Check out our 10 Tax Tips for Individuals, and Tax Strategies for Homeowners!
To schedule an appointment, call us today at 717-393-7366 or book online (virtual appointments and in-person appointments daily). Loeffler Financial Group is here for you!
FEDERAL INCOME TAX DEADLINE EXTENDED
The Treasury Department and Internal Revenue Service announced today that the federal income tax filing due date for individuals for the 2020 tax year will be automatically extended from April 15, 2021, to May 17, 2021. The IRS will be providing formal guidance in the coming days.
Individual taxpayers can also postpone federal income tax payments for the 2020 tax year due on April 15, 2021, to May 17, 2021, without penalties and interest, regardless of the amount owed. This postponement applies to individual taxpayers, including individuals who pay self-employment tax. Penalties, interest and additions to tax will begin to accrue on any remaining unpaid balances as of May 17, 2021. Individual taxpayers will automatically avoid interest and penalties on the taxes paid by May 17.
Individual taxpayers do not need to file any forms or call the IRS to qualify for this automatic federal tax filing and payment relief. Individual taxpayers who need additional time to file beyond the May 17 deadline can request a filing extension until Oct. 15 by filing Form 4868 through Loeffler Financial Group. Filing Form 4868 gives taxpayers until Oct. 15 to file their 2020 tax return but does not grant an extension of time to pay taxes due. Taxpayers should pay their federal income tax due by May 17, 2021, to avoid interest and penalties.
TAX REFUND
The IRS, and Loeffler Financial Group recommend individuals who are expected to receive a refund, to file as soon as possible. Most tax refunds associated with e-filed returns are issued within 21 days. You can follow your refund status at WHERE’S MY REFUND?
This relief does not apply to estimated tax payments that are due on April 15, 2021. These payments are still due on April 15. Taxes must be paid as taxpayers earn or receive income during the year, either through withholding or estimated tax payments. In general, estimated tax payments are made quarterly to the IRS by people whose income isn’t subject to income tax withholding, including self-employment income, interest, dividends, alimony or rental income. Most taxpayers automatically have their taxes withheld from their paychecks and submitted to the IRS by their employer.
STATE TAX RETURNS
The federal tax filing deadline postponement to May 17, 2021, only applies to individual federal income returns and tax (including tax on self-employment income) payments otherwise due April 15, 2021, not state tax payments or deposits or payments of any other type of federal tax. State filing and payment deadlines vary and are not always the same as the federal filing deadline. The IRS urges taxpayers to check with their state tax agencies for those details.
Contact Loeffler Financial Group today to file your tax return, or schedule your in-person or virtual appointment here.
Want to learn more helpful tips on taxes, tax planning, and your financial future? Head to our blog to learn more!
Out of sight, out of mind. When it comes to old tax returns, that’s an approach many people like to follow. But before you completely forget about your old tax forms, you may wish to consider filing an amended return.
Why file an amended return?
If you made a mistake on a prior-year tax return, an amended return is the way to set things right. Arithmetic errors, missing information, and oversights are all fairly common, and generally there’s no reason to fear filing an amended return – whether you owe money to the IRS or vice versa.
Certain special situations can also trigger amended returns. For example, if you suffer a casualty loss in a presidentially declared disaster, you may deduct the loss on your tax return for the year of the disaster, or you may amend the prior-year return and deduct the loss in that year. The best strategy depends on your tax bracket for both years, plus other factors such as the amount of your loss and whether it occurred early or late in the year.
An amended return can help ease the sting of certain business and worthless security losses. You also may benefit from an amended return if there’s a retroactive change in the tax law as a result of new legislation or a favorable court ruling.
Use Form 1040X
Form 1040X (“Amended U.S. Individual Income Tax Return”) is the IRS form designed for amended filings.
Generally, you have three years from the time your return was filed or two years from the time the tax was paid, whichever is later, to file an amended return.
Be sure the changes you want to make are valid. The tax laws have changed frequently over the past several years. What was deductible one year might not be deductible the very next year, and the list of items includable in taxable income has also changed from year to year.
Also, although filing an amended return is not necessarily a red flag for an audit, some changes are looked at more closely than others. For example, claiming additional travel and entertainment expenses on an amended return may be risky.
If you have omitted income from your return, you should file a 1040X as soon as you become aware of the omission. You may owe additional taxes, interest, and perhaps penalties. The proper presentation of previously omitted items is crucial and is best left to a professional.
Regardless of the reason for the amended return, be sure to keep good records to substantiate the reasons for the change.
If, as a result of the changes, the IRS owes you, you will receive a refund with interest. If you owe the IRS, payment should be made with the 1040X. The IRS will bill you for any additional interest.
Looking to have your return amended? Contact Loeffler Financial today at 717-393-7366.
Your home. Your office. Are they one and the same? If so, you may be able to take a home-office deduction that can save income and self-employment taxes.
The deduction gives you the opportunity to claim expenses related to the business use of your home, such as utilities, repairs, and insurance. Meet the requirements, and you’re eligible whether you rent or own your home.
Taxpayers who qualify may use a simplified deduction calculated at $5 a square foot for up to 300 square feet of an area in a home that is used regularly and exclusively for business. The deduction is capped at $1,500 a year.
Here are two questions that can help you decide if you qualify for a home-office deduction.
Do you pass the regular and exclusive business use test? The rules say you have to use your home office on a continuing basis, and that it has to be dedicated to your business.
While you’re not required to have a separate room, personal or family use of your work area means no deduction.
What business activities do you conduct in your office? Meeting customers or clients in your home office qualifies as business use.
Taking care of management and administrative tasks such as writing reports and billing clients also qualifies, as long as you don’t have another office that you use primarily for the same activities.
If your office is separate from your home and you meet the regular and exclusive business use test, you can deduct related business expenses – even if you don’t meet clients or perform management activities there.
Special rules apply to work-at-home employees and daycare facilities. In addition, exceptions apply when you use your home for storing inventory or product samples. Please call Loeffler Financial Group at 717-393-7366 if you would like more information.
Be aware that important tax consequences are often associated with some fairly common events involving your home. Here are some handy things to know.
Home purchase. When purchasing a home, you may pay a portion of the mortgage interest in advance. This loan origination fee, or “points,” is a percentage of the total amount borrowed.
If points are paid for a principal residence, you generally can deduct the full amount in the year paid, even if the points were paid by the seller. One caution: you must reduce your home’s tax basis (cost) by the amount of seller-paid points.
Of course, one of the greatest tax benefits of home ownership kicks in during the early years of the mortgage, when most of your payments go toward tax-deductible interest.
IRA withdrawals. The tax law allows penalty-free IRA withdrawals, up to a lifetime limit of $10,000 for the purchase of a first home for you or members of your family. Withdrawals from Roth IRAs for qualifying first-home expenses can be both penalty- and tax-free after the Roth is five years old.
Refinancing. What happens if you refinance? If you pay points, the general rule requires that you prorate deduction over the life of the loan. But if some of the refinance proceeds go toward home improvements, you may be able to take a current deduction for the portion of the points related to those improvements.
Improvements. If you take out a loan to make substantial improvements to your principal residence, and the loan is secured by that property, the interest is generally deductible. Remodeling often increases the value of your property. Remodeling costs also increase the property’s basis, potentially reducing capital gains tax if a future sale is partially or fully taxable.
Other home improvement costs generally are not deductible, but if you upgrade your home for medical reasons – say, to add a wheelchair ramp or stair lift – you may be able to deduct a portion of the cost as a medical expense.
Home office. The home office deduction can be another tax break of home ownership. If you use part of your home regularly and exclusively as a principal place of business, you may be able to deduct costs associated with that part.
Home sale. When you sell a home that you have owned and used as your principal residence for at least two of the five years before the sale, you can generally exclude from taxation up to $250,000 of profit if you’re single and up to $500,000 if you’re married filing jointly. Profits in excess of those amounts are subject to regular capital gains rates and rules.
The definition of “principal residence” includes not only the conventional single family house, but also such homes as house trailers, mobile homes, houseboats, condominiums, cooperative apartments, and duplexes.
Selling at a loss. Unfortunately, if you sell your home for less than you paid for it, you may not take a tax deduction for your loss.
Taxes often come into play for homeowners, and it’s important to be aware of potential benefits and pitfalls.
Contact Loeffler Financial Group today to learn more about your personal tax planning as a homeowner, 717-393-7366.
Tax season is about to begin across the country. If you’re like us, you probably never want to think about 2020 again, however you do need to file your 2020 taxes.
Thanks to the coronavirus, a lot has changed for the 2021 tax season. That’s why you need to start thinking about your tax situation
Loeffler Financial Group recommends scheduling an appointment with a tax professional to ensure taxes are accurate, especially with some people having major income changes due to unemployment, and pandemic relief programs and tax credits, including additional allowances for charitable donations and the Recovery Rebate Credit.
First, here are the main things you need to know right off the bat for the 2021 tax season:
- Tax Day is Thursday, April 15, 2021. You must file your 2020 tax returns by this date!
- The standard deduction for 2020 increased to $12,400 for single filers and $24,800 for married couples filing jointly.
- Income tax brackets increased in 2020 to account for inflation.
Tax Deductions and Credits to Consider for Tax Season 2021
When it comes to filing taxes there are 2 things to pay attention to: deductions and credits. Both help you keep more money in your pocket in different ways!
Tax deductions help lower how much of your income is subject to federal income taxes while tax credits lower your actual tax bill dollar for dollar.
Here are some deductions and credits you might be able to claim on your 2020 tax return:
Charitable Deductions
NEW this tax filing year, taxpayers who don’t itemize deductions may take a charitable deduction of up to $300 for cash contributions made in 2020 to qualifying organizations.
Medical Deductions
If you spent a lot of time in the hospital or have large medical bills, you might be able to find at least some tax relief.
You can deduct any medical expenses above 7.5% of your adjusted gross income (AGI), which is your total income minus other deductions you have already taken.
Business Deductions
If you’re self-employed, there are a bunch of deductions you can claim on your tax return—including travel expenses and the home office deduction if you use a part of your home to conduct business.
TAKE NOTE: If you’re one of the millions of workers who were sent home to work remotely through the pandemic, you won’t be able to claim the home office deduction since it’s reserved for self-employed individuals only.
Earned Income Tax Credit
The EITC is a refundable credit designed to help out lower-income workers. Depending on your income, your filing status and how many children you have, the credit could save you anywhere from a few hundred to a few thousand dollars on your taxes.
Child Tax Credit
Families can claim up to $2,000 per qualified child with this tax credit (the income limits for this credit are $200,000 for single parents and $400,000 for married couples).
You should work with a tax advisor who can make sure you’re not leaving any deductions or credits on the table. Depending on your situation there are other tax deductions and tax credits to take!
The Coronavirus and Your Taxes
Here are some things to keep in mind when you file your 2020 taxes:
Stimulus Checks
As part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act’s $2 trillion relief package, the government sent out a stimulus check to millions of Americans.
This stimulus check will not count as taxable income. Instead, it’s being treated like a refundable tax credit for 2020. In layman’s terms, the stimulus check is like an advance on money you would have received as part of your tax refund in 2021.
Paycheck Protection Program (PPP) Loans
The CARES Act also tried to help struggling small business owners stay afloat by offering them Paycheck Protection Program (PPP) loans. As long as these loans were used on certain business expenses—payroll, rent or interest on mortgage payments, and utilities, to name a few—these loans were designed to be “forgiven.”
Unemployment Benefits
Many Americans found themselves out of work after the pandemic shut down turning to unemployment for assistance. Those who received unemployment benefits will need to pay income taxes on that money.
Retirement Plans: 401(k)s, IRAs and More
There were a lot of changes to retirement plans in 2020—and some of those changes could impact your tax bill this year. Let’s tackle each of those major changes:
- The CARES Act allows folks under age 59 and 1/2 to take up to $100,000 out of their 401(k)s and IRAs up until the end of 2020 without having to pay an early withdrawal penalty.
- Taking money out of your retirement accounts before retirement is a terrible idea—penalty or not.
- The money you take out of tax-deferred retirement accounts like a traditional 401(k) or IRA will be taxed as ordinary income.
- If you own a traditional IRA, you have to take money out of your account once you reach a certain age. Those withdrawals are called required minimum distributions (RMDs).
- The SECURE Act pushed back the age for RMDs from traditional IRAs from 70 and 1/2 to 72 (if your 70th birthday was July 1, 2019 or later).
- The CARES Act allows seniors to skip RMDs altogether in 2020 without penalty. This could lead to significant tax savings for retirees with those accounts since the money that’s taken out of a traditional IRA counts as taxable income.
- The SECURE Act also allows owners of traditional IRAs to keep putting money in their accounts past age 70 and 1/2 starting in 2020. Since the money you put into a traditional IRA is tax deductible, you could lower how much of your income is taxed this year.
One last thing—It’s probably a good idea to reach out to a tax advisor who can assist you and review all the new tax laws and changes for the upcoming tax season.
With the coronavirus still spiking, Loeffler Financial Group will continue their virtual tax appointments and consultations, along with their easy and stream-lined drop off tax services. Book your virtual appointment today, or call us to learn more about our drop off program.
The holidays are here, and most small business owners are in the thick of what is for most the busiest time of the year. It’s easy to feel overwhelmed and move typical accounting tasks to the bottom of an already long to-do list. To help, we’ve compiled a list of ways to manage your accounting so you can enjoy the holiday season and start 2021 with ease.
DON’T WAIT. START NOW.
The best advice we can give any small business owner is not to put off until tomorrow what should be done today. Start preparing early. Do an inventory check and make sure your books are up-to-date.
TECHNOLOGY IS YOUR BEST FRIEND
Technology is not only the hottest gift during the holiday season but it could be your solution to keeping on top of your accounting tasks. Accounting platforms such as QuickBooks Online can help categorize business transactions in a single platform. Making it easier for you to keep a handle on your inventory and keep customers satisfied. You can also count on Loeffler Financial Group to keep track of your accounting and bookkeeping needs.
PREPARE FOR THE EXTRAS
Your employees work hard all year, reward them. Year end bonuses and zoom holiday parties are great ways to thank employees for all they do. Embrace the holiday festivities, but understand what needs to be done in order for everyone to have a happy new year. If you plan on providing year-end bonuses, make sure you document it accordingly. Research what the tax rate will be applied to the bonus and if you have questions, reach out to your tax accountant or payroll provider for assistance.
DEVELOP AN ORGANIZATION PLAN
The holidays are stressful. With the demands on inventory and working to keep up with customer demands, try to find a way to keep your business operations organized. Develop a plan that has clear guidelines that reference when invoices need to get paid, how to handle late fees, and inventory checks and balances. A great way to get started is to complete one accounting task each day; this will keep your to-do list from piling up and keep you up-to-date and organized as you finish up the holiday season.
ASK FOR HELP WHEN NEEDED
There is no shame in asking for help. Hiring during the holiday season is one of the best ways to handle the influx of customers your business is likely to see. Consider hiring an accounting firm to give yourself more time to focus on other areas of your business.
SO, WHY DOES ALL THIS MATTER?
Believe us when we say there is a reason we are so focused on numbers and financial statements this time of year. While you’re focusing on marketing campaigns and promotions, we understand that numbers matter, and without a vast understanding, those holiday campaigns and promotions can go unfunded.
Implementing the tips referenced above can not only prevent a massive headache at the beginning of 2021, but help you avoid accounting and bookkeeping issues during tax time. Not only will these tips help you keep your sanity during the holiday season, but they will also help you keep your eyes on your business! Contact Loeffler Financial Group today to learn how we can help your business grow!
717.393.7366 | info@loefflerfinancial.com