Important Tax Updates
Individual Tax Filing Deadline Extended to May 17, 2021
The Internal Revenue Service has announced that the April 15th filing deadline for individual taxpayers has been extended to May 17th. The extension applies to the 2020 individual income tax return and the related balance typically due April 15th. Penalties and interest will begin to accrue on any unpaid balance for the 2020 tax return beginning May 18, 2021. This relief does not apply to the 2021 first quarter estimated income tax payment due April 15th, therefore, be sure to remit that payment on or before April 15th to avoid additional penalties and interest. In February, the IRS announced relief for victims of the February winter storms in Texas, Oklahoma and Louisiana. These states have until June 15, 2021, to file various individual and business tax returns and make tax payments. State filing and payment deadlines vary and are not always the same as the Federal filing deadline. Although we are monitoring the changes daily, we encourage you to stay on top of your state's filing deadlines. Despite the deadline extension, it is business as usual at Hawkins CPA Solutions. We encourage you to submit your documentation via our client portal sooner rather than later. If you have not received access to the portal, please send an email request to email@example.com. Thank you for your continued support, understanding, and patience as we shift between tax season, helping clients secure much-needed relief during this pandemic (i.e. PPP loans, grants, loan forgiveness, tax credits, etc.), and staying abreast of the ever-changing tax laws and guidance due to the passing of Federal and State pandemic relief bills.
American Rescue Plan Act Highlights (Passed March 10, 2021)
Unemployment Compensation Exclusion
A taxpayer may exclude up to $10,200 of unemployment compensation received for the 2020 tax year from gross income ($10,200 for each spouse if filing jointly). The exclusion applies only if the taxpayer’s adjusted gross income for the tax year is less than $150,000. The Internal Revenue Service "will provide taxpayers with additional guidance on those provisions that could affect their 2020 tax return, including the retroactive provision that makes the first $10,200 of 2020 unemployment benefits nontaxable. For those who haven't filed yet, the IRS will provide a worksheet for paper filers and work with software industry to update current tax software so that taxpayers can determine how to report their unemployment income on their 2020 tax return. For those who received unemployment benefits last year and have already filed their 2020 tax return, the IRS emphasizes they should not file an amended return at this time, until the IRS issues additional guidance." At this time, we are holding any returns that falls in this category to avoid having to submit an amended income tax return at a later date. We will contact you directly if your return will be held or requires an amendment.
Advanced Child Tax Credit
Under the American Rescue Plan Act of 2021, the maximum child tax credit was increased to $3,000 for qualifying children up to age 18 ($3,600 for qualifying children under age six), which is fully refundable for most taxpayers. Half of the credit may be distributed in regular payments beginning July through December 2021. The remaining half of the credit not paid in advance is received when filing your 2021 tax return. The credit is reduced when adjusted gross income (AGI) is over:
$150,000 for a joint return or a surviving spouse,
$112,500 for a head of household, or
$75,000 for any other taxpayer.
In the case of a taxpayer who received advance payments in error, taxpayers are protected from having to pay back overpayments of up to $2,000 per child, assuming income does not exceed $40,000 for single filers, $50,000 for head of household filers, and $60,000 for joint filers.
Economic Impact Payment (Round 3)
Under the American Rescue Plan Act of 2021, eligible individual taxpayers will receive an immediate payment of up to $1,400 per individual ($2,800 for couples married filing jointly), plus an additional $1,400 per qualifying child. The amount will be based on the taxpayer’s 2020 federal tax return, but, if you have not filed your 2020 return yet, the IRS will use the AGI from their 2019 tax return in lieu of 2020 amounts. The payment is reduced or phased-out once income exceeds the following thresholds:
$75,000 for single;
$112,500 for head of household; and
$150,000 for joint returns or a surviving spouse.
The first round of payments were rolled out March 12th. More payments will be released over the next few weeks by direct deposit, check, or debit card. To check the status of your payment, utilize the Get My Payment tool on the IRS website. For additional information or questions on the American Rescue Plan Act, feel free to contact us.
SBA PPP Loan Application Deadline Extended
SBA is currently offering PPP loans until March 31, 2021. In accordance with the American Rescue Plan Act, the SBA has implemented changes to "reach small and low- and moderate-income (LMI) businesses who have not received the needed relief a forgivable PPP loan provides." For more information on the SBA PPP Loan Program, contact your bank or visit the SBA website for more information.
SBA Defers EIDL Loan Payments Until 2022
The U.S. Small Business Administration (SBA) announced Friday, March 12th, that payments for COVID-19 Economic Injury Disaster Loan (EIDL) will be deferred until 2022.
For all SBA disaster loans made in 2020, the first payment due date is 24 months, extended from 12 months, from the date of the note.
For all SBA disaster loans made in 2021, the first payment due date is 18 months, extended from 12 months, from the date of the note.
The SBA also granted an additional 12-month deferment of principal and interest payments for existing disaster loans approved prior to 2020 that were in regular servicing status as of March 1, 2020. Borrowers may voluntarily continue to make payments during the deferment, as interest will continue to accrue on the outstanding loan balance during this period.