The economic stress caused by the COVID-19 outbreak has led the federal government to lighten the burdens on taxpayers. The government has extended the deadline for filing federal taxes and making federal tax payments to July 15. The deadline for first quarter estimated taxes in 2020 also has been extended to July 15. Taxpayers who have an IRA can wait until July 15 to make contributions to it for 2019. States generally have followed the example of the federal government in extending their tax deadlines to July 15. A few states have moved their deadlines to an earlier date. You should check the website of your state tax agency to find the deadline that applies to you.
Taxpayer Relief Under the CARES Act
The Coronavirus Aid, Relief, and Economic Security (CARES) Act is a federal stimulus package that is intended to boost the economy and relieve pressure on individuals and families. As part of this law, the federal government will distribute payments of up to $1,200 to qualifying individual taxpayers ($2,400 for joint taxpayers), which may be supplemented by additional payments to taxpayers with children. A qualifying taxpayer will receive an additional $500 for each child who is 16 or younger. The IRS estimates that 80 percent of the U.S. population will receive one of these checks.
Your payment will depend on your adjusted gross income. A taxpayer who has an adjusted gross income no greater than $75,000 (or a couple filing jointly with an adjusted gross income no greater than $150,000) will receive the full amount. A taxpayer who has an adjusted gross income over $99,000 (or a couple filing jointly with an adjusted gross income over $198,000 and no children) will not receive a check. A taxpayer who is filing as Head of Household will receive the full amount if their adjusted gross income is no greater than $112,500, while they will not receive a check if their adjusted gross income is over $146,500. Within these ranges, a sliding scale is used to determine the amount of the payment.
The CARES Act provides several additional benefits to taxpayers. Until January 21, 2021, it allows employers to make tax-free student loan payments for their employees, up to a $5,250 annual limit. The payments will not count toward the employee’s income. Meanwhile, the early withdrawal penalty will be waived for up to $100,000 withdrawn from a retirement plan. Businesses and self-employed individuals will not need to pay Social Security payroll taxes for employers in 2020, although they will need to pay back this amount in 2021 and 2022. Finally, the CARES Act provides supplements to unemployment benefits and loans through the Small Business Administration and the Federal Reserve lending program. Read more here about unemployment benefits, and read more here about business loans.
