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January 7, 2021

This week, Treasury and the IRS started to send approximately 8 million Economic Impact Payments (EIPs) by prepaid debit card. The distribution of EIP Cards follows the millions of payments already made by direct deposit and the ongoing mailing of paper checks and are part of Treasury’s and is IRS’s plan to deliver Economic Impact Payments as rapidly as possible.

EIP Cards are safe, convenient, and secure. Cardholders can make purchases online or in-stores anywhere Visa® Debit Cards are accepted, get cash from domestic in-network ATMs, transfer funds to a personal bank account, and obtain a replacement EIP Card if needed without incurring any fees. They can also check their card balance online, through a mobile app, or by phone without incurring fees. The EIP Card provides consumer protections including certain protections against fraud, loss, and other errors.

EIP Cards will be sent in a white envelope that prominently displays the U.S. Department of the Treasury seal. The EIP Card has the Visa name on the front of the Card and the issuing bank name, MetaBank®, N.A. on the back of the card. Each mailing will include instructions on how to securely activate and use the EIP Card.

EIP Cards are being issued to eligible recipients across all 50 states and the District of Columbia. In order to quickly disburse EIPs, some people who received EIPs by paper check for the first round of EIPs might receive an EIP Card this time, and some people who received an EIP Card for the first round may receive a paper check.

EIP Cards are sponsored by the Treasury Department’s Bureau of the Fiscal Service. The EIP Card is part of Treasury’s U.S. Debit Card program, which provides prepaid debit card services to federal agencies for the electronic delivery of non-benefit payments. MetaBank N.A. was selected as Treasury’s financial agent for the U.S. Debit Card program in 2016, following a competitive selection process conducted by the Treasury’s Bureau of the Fiscal Service. For more information about EIP Cards, please visit EIPCard.com.

The swift issuance of this second round of payments follows the successful delivery of more than 159 million CARES Act Economic Impact Payments totaling more than $270 billion last year.

January 3, 2021

The President signed the $900 billion stimulus bill on the 27th of December 2020. This relief legislation gave way to a second round stimulus payment, and offer an unassertive lift to the 60% of Americans who have suffered financial woes due to the Covid19 Pandemic, yet millions may be disappointed to discover they're among the groups who don't qualify for the payment. The second round stimulus checks amounts to $600 for each qualifying adult and child — half the amount of the $1,200 checks sent on the first round. The IRS will use people's 2019 tax returns to determine their stimulus payments.

The second round of checks will have the same type of income phase outs as in the CARES Act, with the stimulus check payments reduced for earnings above $75,000 - $87,000 per single person or $150,000 - $174,000 per married couple. The amount of payment individuals receive will be reduced by $5 for every $100 of income earned above those thresholds, according to the House Appropriations committee.

Efforts to boost the Economic Impact Payments to $2,000 per adult was stalled after Senate Majority Leader Mitch McConnell in December blocked an attempt to vote on the issue. In crafting the latest stimulus bill, lawmakers tried to rectify several restriction from the first round of payment. Some eligibility changes on the second round of payments includes;

- Checks will be distributed to "mixed-status" immigrant families — families where American citizens are married to immigrants without Green Cards — a group that was blocked from receiving the checks earlier this year. Families with members of mixed immigration status with a valid Social Security number for one spouse are also eligible for the payments.

- Children under 17 years old will also receive the same $600 payment as adults, compared with $500 in the first round.

Groups who will miss out on a $600 second round stimulus check includes;

- Unfortunately for parents of older teens, the tax code defines "qualifying children" as those who haven't yet hit their 17th birthday. Child dependents who are 17 years old are not able to get a stimulus check.

- Adults who are claimed as dependents on another person's tax return, as is typical with college students, are not able to get a stimulus check.

- Older adults, from seniors to disabled individuals, who are claimed as dependents are also excluded.

The IRS "Get My Payment" website is up and running, allowing consumers to check on the status on their payments. The update bank account information feature has been disabled.

Janaury 1, 2021

Preparing for you tax appointment – Make sure to have all your documents.

Look at last year’s tax return for income and expense reminders. Make sure you have all the 1099s from your bank reporting your interest and dividend income. If you opened new bank accounts, make sure you have those statements as well. You will also need your bank mortgage statement.

Gather all your W-2s for both you and your spouse, if married. If you have income from other sources, such as pensions, S Corporation, partnership, estate or trust, make sure you have all your K-1s. If you are collecting Social Security you need the form.

Do you claim dependents? Each dependent must have a Social Security number. If you have added a new dependent, we need their social security number and date of birth. If you are dropping a dependent, let us know. If one of your dependents has started or is still in college, you will need the Form 1098-T from the educational institution they are attending. If you collected unemployment in 2020, it is taxable. Be sure to include the Form issued by the State.

Economic Impact Payments – How it affect your 2020 Tax Returns

As part of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), the IRS made economic impact payments (EIPs) to certain taxpayers. The eligibility for and the amount of an EIP generally depend on the taxpayer’s 2019 federal income tax return. If one wasn’t filed at the time of eligibility, the IRS used the taxpayer’s 2018 federal income tax return. If you received an EIP, the IRS mailed a Notice 1444 to your last known address. That form shows the amount of your EIP. Keep this notice with your tax records.

The EIP is considered an advance credit against your 2020 tax. You are not required to include the payment in taxable income on your 2020 tax return or pay income tax on the payment. When you file your 2020 income tax return, the EIP will not reduce your refund or increase the amount of tax you owe.

If the EIP was based on your 2018 tax return and your circumstances changed in 2019, you may claim any additional credit for which you are eligible on your 2020 filing. This may occur, for example, if you had a child or if your income was lower in 2019. If your payment was based on your 2018 return and circumstances changed so that you would have received a smaller amount based on your 2019 return, you are not required to repay the excess or reduce your 2020 refund.

Authorized by the newly enacted COVID-relief legislation, the second round of payments, or “EIP 2”, is generally $600 for singles and $1,200 for married couples filing a joint return. In addition, those with qualifying children will also receive $600 for each qualifying child. Dependents who are 17 and older are not eligible for the child payment.

The Internal Revenue Service and the Treasury Department began delivering a second round of Economic Impact Payments as part of the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 to millions of Americans who received the first round of payment earlier in 2020.

The IRS emphasizes that there is no action required by eligible individuals to receive this second payment. Some Americans may have seen the direct deposit payments as pending or as provisional payments in their accounts before the official payment date of Jan. 4, 2021. The IRS reminds taxpayers that the payments are automatic and they should not contact the financial institutions or the IRS with payment timing questions.

As with the first round of payments under the CARES Act, most recipients will receive these payments by direct deposit. For Social Security and other beneficiaries who received the first round of payments via Direct Express, they will receive this second payment the same way.

Anyone who received the first round of payments earlier this year but doesn’t receive a payment via direct deposit will generally receive a check or, in some instances, a debit card. For those in this category, the payments will conclude in January. If additional legislation is enacted to provide for an additional amount, the Economic Impact Payments that have been issued will be topped up as quickly as possible.

Payments are also automatic for anyone who successfully registered for the first payment online at IRS.gov using the agency’s Non-Filers tool by Nov. 21, 2020 or who submitted a simplified tax return that has been processed by the IRS.

Generally, if you have adjusted gross income for 2019 up to $75,000 for individuals and up to $150,000 for married couples filing joint returns and surviving spouses, you will receive the full amount of the second payment. For filers with income above those amounts, the payment amount is reduced.

For those eligible but who don’t receive the payment for any reason, it can be claimed by filing a 2020 tax return in 2021. Remember, the Economic Impact Payments are an advance payment of what will be called the Recovery Rebate Credit on the 2020 Form 1040 or 1040-SR.

People can check the status of both their first and second payments by using the Get My Payment tool, available in English and Spanish only on IRS.gov. The tool is being updated with new information, and the IRS anticipates the tool will be available again in early January 2021 for taxpayers.

New Charitable Contribution Rules

The CARES Act makes two significant changes to the rules governing charitable deductions for individuals.

Individuals will be able to claim a $300 above-the-line deduction for cash contributions made to public charities in 2020. Married taxpayers filing jointly will also be able to deduct only $300 and $600 in 2021. This rule effectively allows a limited charitable deduction to any taxpayer claiming the standard deduction.

Tax Savings Strategies

One way is if you have investments that are doing poorly, you might want to consider selling them so you can claim a capital loss. You can claim a capital loss to the extent you have capital gains, plus an additional $3,000. If you sell stock early in the year at a gain, selling stocks at a loss by year end will offset that gain and reduce your taxable income.

Maximize your 401(k) contributions in 2021

The 2020 limit was $19,500. Employees age 50 or older by year end were able to make an additional contribution of $6,500, for a total 2020 limit of $26,000.

Take advantage of your employer matching contribution. Review and make appropriate adjustments to the contributions you make to your employer’s 401(k) retirement plan for 2021 tax year. It’s also a good idea to review your investment elections and their periodic performance.

Another strategy, while not reducing taxable income, is to make Roth IRA contributions. The benefit of the Roth IRA is that the earnings on the IRA will not be taxable to you upon distribution (assuming distributed after reaching age 59 ½). The ability to make a Roth IRA contribution continues even if you’re participating in an employer savings plan like a 401(k), so it’s not subject to the “active participant” rule that may prevent employees who participate in an employer plan from making deductible contributions to traditional IRAs. Contribution to a Roth IRA in 2020 will be reduced if your adjusted gross income (AGI) exceeds $196,000 and you file married filing jointly (MFJ), or $124,000 if you file single. New for 2020, the age 70 ½ limit for making IRA contributions no longer applies.

Required Minimum Distribution (RMD) rules were temporarily waived for 2020, but if you are of RMD age in 2021, you must resume RMDs and for all years after.

If you continuously owed taxes each year….

…consider adjusting your federal withholding. If you face a penalty for underpayment of federal estimated tax, you may be able to eliminate or reduce it by completing a new Form W-4 and increasing your withholding. You should review your withholding to ensure enough tax is withheld if you hold multiple jobs, you and your spouse both work or someone else can claim you as a dependent. If you become married or single in 2020, have added or lost a dependent or expect increased itemized deductions, be sure to provide your employer with an updated Form W-4 to adjust withholdings.

Corresponding with the IRS

The IRS’s ability to correspond with taxpayers about a variety of issues including request for information needed to process a tax return remains limited.

As the IRS took steps to return to normal operations, many notices to taxpayers were mailed with past due payment or response dates. To save time and costs, the IRS in most cases will not generate a new notice. Instead, the IRS included Notice 1052, Important! You Have More Time to Make Your Payment, as an insert that provided a new, updated pay or response date. The insert explains why the notice was delayed and, more importantly, provides a new date in which to pay or respond.

The IRS continues to make significant reductions in the backlog of unopened mail that developed while most IRS operations were closed.

As far as we know today, the IRS is on track with opening season and accepting e-filed returns at the end of January, just as they have in past years. However, it’s important to keep in mind that IRS operations are not fully restored, and it may not be business as usual this filing season.

July 29, 2020

Stimulus Payment:

The GOP unveiled details for a second round of direct payments to American households on Monday, in legislation that has been dubbed the HEALS Act.

If you qualified for a check in the first round, you are likely up for a second payment perhaps for an even larger amount.

The checks will largely follow the same guidelines as those issued under the CARES Act.

The payments are $1,200 per adult for those with adjusted gross incomes of up to $75,000. The threshold for married couples is $150,000 they are eligible for $2,400 and $500 per dependent.

The benefit phases out entirely for those earning more than $99,000, or $146,500 for heads of household with one child and $198,000 for joint filers without children.

The difference with this round of payments is that there will be no age cap on eligible dependents. While the CARES Act only allowed the additional $500 to be allocated for families with dependent children, now households will be able to claim the additional $500 for families of up to 5 people, dependents of any age;

- College students

- Dependents over 17

- Disabled relatives and taxpayers' parents

- families of up to five people

- SSDI recipients

- People who aren't US citizens and do file tax returns, pay taxes and otherwise comply with federal tax law using an individual taxpayer identification number instead of a Social Security number.

In order to receive the benefit, an individual must have a work-eligible Social Security number and he or she cannot be the dependent of another taxpayer.

Lawmakers also clarified a number of issues;

For example, the legislation stipulates that rebates are not subject to administrative offset for past debts, with the exception of past-due child support. The cash is protected from bank garnishment or levy by private creditors or debt collectors, which would be applied retroactively to the CARES Act money. Also, it clarifies that anyone who died prior to Jan. 2020 is not eligible for a payment.

If Congress and President Donald Trump can't agree on the provisions in the new stimulus bill and miss the Aug. 7 deadline, it will be another month before the next session and the Senate and the House can reconvene and propose, debate and pass the bill. Both chambers of Congress and the president appear motivated to pass the bill before Aug. 7.

May 25, 2020

A controversial call by the IRS on deductibility of expenses under the Paycheck Protection Program is drawing fire from both parties and both houses of Congress.

No less than the chairmen of the congressional tax-writing committees have expressed concern with the IRS’ interpretation denying deductions for otherwise deductible expenses under the loan forgiveness of the Paycheck Protection Program—and a bipartisan group of senators have already introduced legislation to reverse the interpretation.

In a May 5 letter to Treasury Secretary Steve Mnuchin, Sen. Charles Grassley (R-IA), Chairman of the Senate Finance Committee; Sen. Ron Wyden (D-OR), the ranking Democrat on the Senate Finance Committee; and Rep. Richard Neal (D-MA), Chairman of the House Ways and Means Committee, argued that the position taken by Treasury and the IRS in Notice 2020-32 is contrary to congressional intent.

“We believe the position taken in the Notice ignores the overarching intent of the PPP, as well as the specific intent of Congress to allow deductions in the case of PPP loan recipients,” the tax-writing committee leaders say.

Notice 2020-32, released April 30, advised that the IRS will not allow a tax deduction for an expense that is otherwise deductible under Internal Revenue Code Sections 162 and 163 if the payment of the expense results in forgiveness of a covered loan under the PPP. The IRS notice points to Code Section 265 to justify its reasoning for denying deductions for forgivable loans, claiming that the purpose of that section is to prevent a double tax benefit.