The "American Rescue Plan" is now complete. There are also certain details about the latest stimulus package that our Charlotte clients should be aware of.
While I usually write once a week, there is material in this strategy note that you should be aware of right now and that may have an impact on how you move in the days ahead.
Congress has agreed as of this writing — but it's so new that many of my sector friends are scurrying, and the research services are still accumulating all the data. But I believed it was critical for me to go ahead of everything on your behalf.
If you know of anyone in Gastonia who requires assistance, please let us know. We are keeping track of everything for our clients and are now accepting new clients. Please feel free to refer individuals to us and have them contact us using the following information:
There's a lot to talk about with the new stimulus update, and I'll have more to say about it early next week, but there's one thing you should know right now. So let's get started...
(and how they might impact your tax paperwork)
These vary from earlier stimulus initiatives in that they provide $1,400 per taxpayer and dependant (with significant income limitations).
1) Previously, if you had a child above the age of 16 or an adult dependent, you were ineligible. Depending on your income, you'll get a payment for yourself and each dependent in this round.
2) There is a considerable and steep "phase out" for this. This suggests that the phase out was significantly more gradual in earlier rounds. The phase out started at the same figures (75K for an individual, 150K for a joint-filed return, and 112,500 for a HOH), but it was done in such a way that it had no impact on filing decisions.
Now, if your income exceeds $80,000 for individuals and $160,000 for married couples, you will not be eligible for these subsidies.
What Effects Could This Have? Taxpayers in the ProfileMarketArea (Tax Planning)
We want to make sure you get the most out of the new stimulus update. It's yours once the IRS delivers you a stimulus payment. THE ORDER IN WHICH YOU FILE IS IMPORTANT, AS IS THE TIME IN WHICH YOU FILE (in certain unusual cases).
If your salary in 2020 is higher than it was in 2019...
- If it didn’t take you over the phase out thresholds, there is nothing needed for you to think about.
- If it raised your AGI above the phase-out criteria (especially if you're above the 75K or 160K joint) and you haven't filed your return yet, we'll wait until you get your stimulus before filing it.
- If you are not our client and are reading this for some inexplicable reason, I strongly advise you not to file until you have received money.
- If your AGI rose above these levels as a result of your raise, and you've previously filed... I'm sorry, but the IRS bases its decisions on the most recently filed information.
Congratulations on your increased earnings... and let's discuss alternative options for reducing your tax liabilities in the future.
If your income in 2020 is lower than it was in 2019...
- You will not be harmed if your income was already below the phaseout criteria; you will receive the stimulus nonetheless.
- You do not need to rush to file your return if your income dropped below the criteria (i.e. your income in 2019 was above $75K or 150K filing joint and it is now below).
Payments are distributed in two phases under the current stimulus update. In the first phase, the IRS will pay out of the data it already has. You will not receive a stimulus if you did not submit a return in 2019 or 2020. But don't worry... There will be a second deadline for the IRS to calculate stimulus payments in phase 2. This will be for people who have seen a fall in their income. The earlier of 90 days following the tax deadline (whatever that may be – more on that later) or September 1 will be the date.
So long as your taxes are filed on time, you will receive it. RIGHT NOW, YOU DO NOT HAVE TO FILE YOUR TAXES. Don't let any shady Charlotte tax professionals or marketers convince you otherwise. Fortunately, this issue was (miraculously) addressed in the bill's text.
HOW YOU FILE:
In some unusual circumstances, it may make sense to file “married filing separately” for your 2020 taxes, even if you would pay somewhat more in taxes as a result, because you will be eligible for a larger stimulus payment. It would then outweigh any additional tax you might have to pay.
Most of my clients will not be affected, and it will largely affect Gastonia filers whose income is close to the phaseout limits. If this describes you, please contact us at:
“When Will I Get My Stimulus?”
Uncertain, although these are anticipated to start before the end of this month for people who are already below the levels and qualify.
Everything else will happen following the second step, which I already explained.
Unemployment Currently (Partially) Tax-Exempt (for most)
The first 10,200 dollars of unemployment benefits are tax-free — but only for those with incomes under $150,000. As I mentioned in a recent post, and as confirmed in the new stimulus update, the first 10,200 dollars of unemployment benefits are tax-free — but only for those with incomes under $150,000.
For many, this is a significant gain, likely amounting to around $1,500 in savings. However, because the IRS will have to publish instructions, this will take some time.
If you know somebody in Charlotte who is unemployed and has already submitted their tax return, they may need to alter it... However, this is not always the case. If you want to be certain, we can assist you.
The new stimulus update has (obviously) many more components, which I will dissect in the coming weeks.
Child tax credits, earned income credits, and other provisions have been altered. Next week, I'll give you an update on those topics.
Meanwhile, know that we are rooting for you.
(Also, please offer grace to us as we handle these problems for a variety of clients, many of whom are in extremely tough situations.) We're here to help, and we've planned for these kinds of legislative snares... but they're still snares.)