E.L.M Accounting, Payroll & Tax Services INC

Multiple IRS Deadlines Fall on July 15 – Important RemindersThe U.S. Treasury's COVID-19 (coronavirus) pandemic relief e...
07/13/2020

Multiple IRS Deadlines Fall on July 15 – Important Reminders

The U.S. Treasury's COVID-19 (coronavirus) pandemic relief efforts included postponing many IRS deadlines to July 15, 2020. As a result, numerous federal tax forms and payments are due this week. The most important July 15 IRS deadlines to keep in mind include:

2019 INDIVIDUAL FEDERAL TAX RETURN FILING: U.S. resident individual and joint tax filers, along with U.S. citizens and resident aliens living abroad or on military duty, must file 2019 Form 1040 or 1040-SR and pay any tax due. If you cannot file your return by the deadline, request an automatic filing extension to October 15 by submitting Form 4868. However, if you expect to owe tax, estimate the amount and pay it by July 15 to avoid late payment penalties. (Military personnel in combat zones may be entitled to filing extensions beyond October 15.)

FIRST TWO 2020 QUARTERLY ESTIMATED TAX PAYMENTS: If you earn income and either do not pay federal taxes through paycheck withholding or do not expect your withholding to cover your 2020 tax obligations, you may need to make quarterly estimated tax payments. In particular, this requirement applies to many self-employed taxpayers and “gig economy” workers. Your first two quarterly estimated payments for 2020 (payments for Quarter 1 and Quarter 2) are due on July 15.

DEADLINE FOR 2019 IRA AND HSA CONTRIBUTIONS: You may be able to treat contributions made by July 15 to your IRA or health savings account (HSA) as 2019 contributions, provided you have not reached your 2019 contribution limit.

2019 FEDERAL TAX AND 2020 ESTIMATED TAX DEADLINES FOR CORPORATIONS: Corporations must file their 2019 federal income tax returns and pay any tax due, and also make their first two 2020 estimated income tax payments, by July 15.

The IRS urges taxpayers who cannot pay the tax they owe to file by the July 15 deadline and pay what they can. By making a payment in any amount now and setting up a payment plan, you may be able to significantly reduce penalties and interest charges.

Unclaimed 2016 IRS Refunds Deadline – Did You Know?The IRS has issued a reminder that time is running out to claim your ...
07/08/2020

Unclaimed 2016 IRS Refunds Deadline – Did You Know?

The IRS has issued a reminder that time is running out to claim your 2016 tax refund if you did not file a 2016 federal return. The U.S. Treasury is currently holding unclaimed 2016 refunds totaling over $1.5 billion. The deadline to file a 2016 IRS return and claim your refund is July 15, 2020.

If you are entitled to a refund for tax year 2016 (or any later year), you will not be charged a penalty for submitting your return after the original filing deadline. However, the IRS only allows a three-year window to claim a tax refund. Since the original filing due date for 2016 returns was April 15, 2017, this three-year window would have normally expired on April 15, 2020.

In response to the COVID-19 (coronavirus) pandemic, the IRS extended the final deadline to July 15. After that date, unclaimed 2016 federal tax refunds will become the property of the U.S. Treasury. If you have not yet filed your 2016 return, file today to claim your refund before it's too late.

Extended 2020 Estimated Tax Deadlines and Special Rules for Irregular IncomeIf you receive income that does not have tax...
06/29/2020

Extended 2020 Estimated Tax Deadlines and Special Rules for Irregular Income

If you receive income that does not have taxes withheld, such as business, self-employment or investment income, you may need to make quarterly estimated tax payments to avoid incurring IRS penalties when you file your 2020 tax return.

Ordinarily, the first two quarterly estimated tax due dates of the year are April 15 and June 15. However, the IRS extended both of these deadlines to July 15, 2020 due to the COVID-19 pandemic. You may make your payments for the first two quarters of this year (either separately or as one combined payment) at any time until that date. The deadlines for the third and fourth quarters currently remain September 15, 2020 and January 15, 2021, respectively. You may skip the January 15 payment if you file your 2020 return by February 1, 2021 and pay all tax due.

The IRS expects most estimated tax payers to pay the same amount each quarter; a penalty may be assessed if any quarterly payment is too low. For example, whether you make separate payments for the first two quarters of 2020 or combine them into one July 15 payment, the total tax you pay by that date (including estimated payments and any paycheck withholding) must usually be at least 50% of your required minimum payment for the year. Generally, the minimum amount you must pay during the course of 2020 is either 100% of your 2019 tax or 90% of your 2020 tax, whichever is less.

However, if your income is irregular throughout the year—for example, if you had very low income during the first half of 2020 but will begin earning more in July—you may qualify to make unequal estimated tax payments, or even skip one or more payments. In addition, if you make a substantial portion of your income from fishing or farming, you may be able to make a single, year-end estimated tax payment instead of paying quarterly. A tax professional can help you determine your estimated tax payment requirements for 2020, and how to adequately document your income fluctuations if you choose to make unequal payments.

Discarded or Lost COVID-19 Stimulus Prepaid Debit Cards – Did You Know?In addition to direct deposits and paper checks, ...
06/24/2020

Discarded or Lost COVID-19 Stimulus Prepaid Debit Cards – Did You Know?

In addition to direct deposits and paper checks, the IRS is sending some Coronavirus Economic Impact Payments (EIPs, also called stimulus payments) to eligible Americans by prepaid debit card. Because these debit cards are not sent out in standard U.S. Treasury envelopes, some recipients may have mistaken them for junk mail and thrown them away. Fortunately, if you accidentally discarded an EIP prepaid debit card, you can request a free replacement.

EIP cards arrive in a plain envelope from Money Network Cardholder Services. The front of the card displays a VISA logo, while the back shows a MetaBank logo and the title “Money Network.” If you believe you may have received an EIP card and thrown it out, call Money Network at 1-800-240-8100 and choose the “Lost or Stolen Card” option. The bank will deactivate your original card and send you a new one. The first replacement card is free, but a fee of $7.50 will be charged for any subsequent replacement cards.

If you qualify for an EIP but your payment has not yet been sent, you may be able to request that your payment be added to a prepaid debit card you already have. Visit the EIP Get My Payment portal or Non-Filers: Enter Payment Info Here portal to learn more (links are below).

Get My Payment portal (for those required to file federal income tax returns): https://www.irs.gov/coronavirus/get-my-payment
Non-Filers: Enter Payment Info Here portal: https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here
EIP Card Website: https://www.eipcard.com/

Tax Rules for Tuition Refunds and Section 529 Plans – Did You Know?Many families and students may have received partial ...
06/18/2020

Tax Rules for Tuition Refunds and Section 529 Plans – Did You Know?

Many families and students may have received partial or complete refunds of school tuition and fees during the spring of 2020 as a result of the COVID-19 (coronavirus) pandemic. If you paid for these expenses using a Section 529 education savings plan (also called a Qualified Tuition Program, or QTP), your refund could be taxable income, and/or subject to a 10% penalty on interest earned by the account.

However, it is usually possible to avoid these taxes and penalties by properly handling the refunded money and carefully documenting your transactions. One option is to redeposit the funds into the same account from which they were originally taken, or a different QTP account set up for the same child. Generally, such redeposits or rollovers do not count toward your annual contribution limit.

To avoid tax implications, a redeposit or rollover of a QTP education expense refund ordinarily must be completed within 60 days of receiving the refund. However, special tax rules for the spring of 2020 may enable you to complete the reinvestment transaction within 60 days or by July 15, whichever comes later. Be sure to keep documentation of all actions taken.

If redepositing your refund is impractical, you may still be able to avoid paying tax on it by using the funds for other qualifying education expenses. In addition to tuition and fees, qualifying expenses may include computers and education-related software that will be used primarily by a child who is enrolled at an eligible postsecondary school. A tax professional can help you identify your best option to manage your refund, ensure that you complete any necessary transactions by the appropriate deadline, and maintain all records required by IRS rules.

Key Facts About IRS Economic Impact Payments (EIPs) – Did You Know?Although the IRS has sent out over 100 million Econom...
06/09/2020

Key Facts About IRS Economic Impact Payments (EIPs) – Did You Know?

Although the IRS has sent out over 100 million Economic Impact Payments (also called stimulus payments), some Americans are still waiting to receive their payments. Even if you have gotten your EIP, you may have questions about how the money affects your income or taxes. The IRS recently issued answers to some of the most common questions about EIPs, including:

- EIPs are NOT taxable income. You do not need to report your EIP on your 2020 tax return or pay tax on it, and it will not affect your eligibility for government programs with income limits.

- If you are not required to file a federal tax return but receive Form SSA-1099 or RRB-1099 for Social Security or Railroad Retirement benefits, you can use the IRS Get My Payment portal (see below) to check on the status of your EIP.

- If your direct deposit information has changed since you last filed a tax return and received a refund, you can NOT use the Get My Payment portal to provide the IRS with new account information. If your old account number is no longer valid or the account has been closed, the bank will return your EIP to the IRS. The Get My Payment portal will then be updated to show that you will receive a check in the mail, with an estimated delivery date.

- If you are a U.S. citizen living abroad, you qualify to receive an EIP as long as you do not exceed the income limit, are eligible to file IRS Form 1040 or 1040 SR, have a valid Social Security Number (SSN) and cannot be claimed as a dependent by another taxpayer. The basic income limit is $99,000 for individuals or $198,000 for joint filers.

Finally, the IRS reminds all Americans to stay alert for scams related to EIPs. You should ONLY provide your private information to the IRS through the official Get My Payment portal. Anyone who requests your bank or tax information in order to help you get your EIP, or asks you to sign your EIP check over to them, is a scammer. Hang up or delete the message immediately.

IRS Get My Payment Portal: https://www.irs.gov/coronavirus/get-my-payment

Economic Impact Payments by Prepaid Debit Card – Did You Know?As part of the U.S. Treasury's ongoing effort to get COVID...
06/03/2020

Economic Impact Payments by Prepaid Debit Card – Did You Know?

As part of the U.S. Treasury's ongoing effort to get COVID-19 Economic Impact Payments (EIPs, also called stimulus payments) to all eligible Americans, the IRS has begun sending payments by prepaid debit card in addition to direct deposits and paper checks. Many people who are still waiting for their payments will receive these prepaid cards in the coming weeks.

You can do any of the following with an EIP prepaid debit card with no transaction fees, until you use up the balance on the card:
- Make purchases anywhere Visa is accepted, including online and in-person stores
- Transfer funds from the card to your bank account
- Get cash from in-network ATMs (the ATM will tell you if it is not in-network, which could result in fees being charged)
- Check your card balance 24/7 by phone, online, or by using the mobile app

Prepaid debit cards also offer built-in protection against loss, fraud, theft or other unauthorized use. If you already have a prepaid debit card and the IRS has not yet scheduled your payment, you may be able to request that your EIP be loaded directly onto your existing card. To find out if you are eligible for this option, visit either the Get My Payment IRS portal or the Non-Filers: Enter Payment Info Here page (see links below).

NOTE: EIP prepaid debit cards will NOT come in an IRS or U.S. Treasury envelope. Instead, the card will arrive in a plain envelope from Money Network Cardholder Services, with a letter explaining that the card has been preloaded with your EIP. The front of the card has a Visa logo, while the back displays the name of the issuing bank, Metabank, N.A. The letter also explains how to activate and use the card, or you can learn more at www.eipcard.com.

IRS Get My Payment portal for federal return filers: https://www.irs.gov/coronavirus/get-my-payment
IRS Non-Filers – Enter Payment Info Here Portal: https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here

2020 Adjustments to Standard Deductions and Tax Brackets – Did You Know?The IRS has updated the 2020 inflationary adjust...
05/28/2020

2020 Adjustments to Standard Deductions and Tax Brackets – Did You Know?

The IRS has updated the 2020 inflationary adjustments for both standard deductions and the income limits for marginal tax rates. For individual taxpayers, the standard deduction for 2020 will be $12,400, up $200 from the 2019 amount. The deduction for joint filers will increase by $400 to $24,800, while the head-of-household deduction will be $18,650, an increase of $300 from 2019. As a reminder, there are no personal exemptions for tax year 2020, since the Tax Cuts and Jobs Act (TCJA) eliminated them through tax year 2025.

The maximum income for every tax rate bracket is also increasing in 2020. For example, in 2019, the jump from the 24% to the 32% tax rate occurred for individual incomes over $160,725 ($321,450 for married filing jointly). For 2020, the 32% rate will apply to incomes above $163,300 for individuals, or $326,600 for joint filers.

IRS Adjusts Tax Residency Rules for Travelers Affected by COVID-19 – Did You Know?As part of its COVID-19 (coronavirus) ...
05/19/2020

IRS Adjusts Tax Residency Rules for Travelers Affected by COVID-19 – Did You Know?

As part of its COVID-19 (coronavirus) tax relief package, the IRS is offering waivers of certain tax rules for individuals and businesses affected by coronavirus-related travel disruptions. Under standard IRS policies, anyone who spends time within the U.S. on a certain number of days during the tax year (for example, 31 days for most nonresident aliens) must pay taxes as a U.S. resident. This rule is known as the “substantial presence test.” Similarly, American taxpayers living in foreign countries must spend a specified number of days in their claimed country of residence in order to exclude foreign income from U.S. taxation.

Key IRS tax residency rules adjustments for 2020 include:

- For a person who visited the U.S., up to 60 consecutive days of presence in the U.S. may not be counted when determining if the person meets the “substantial presence test” for taxation as a resident. In most cases, this “COVID-19 Emergency Period” must have begun on or after February 1, 2020.

- For residents of foreign countries, certain days spent away from their home countries may not jeopardize their national residency status for the purpose of excluding foreign income from U.S. taxation.

- When performing calculations to determine if they are “engaged in a U.S. trade or business” for tax purposes, some businesses may exclude up to 60 consecutive days of conducting business activities within the U.S.

You may only claim these exemptions for days on which your personal or business activities took place in an unplanned location, as a result of travel disruptions caused by the COVID-19 pandemic. A tax advisor can help you determine whether your travel or business activities qualify for an exemption, and how the exemption rules affect your U.S. tax status.

2020 IRA Required Minimum Distributions Waived – Did You Know?The CARES Act that was signed into law on March 27, 2020 i...
05/11/2020

2020 IRA Required Minimum Distributions Waived – Did You Know?

The CARES Act that was signed into law on March 27, 2020 includes an important provision for taxpayers with various retirement accounts, including 401(k), 403(b), 457(b), traditional Individual Retirement Accounts (IRAs), and designated Roth accounts. For many taxpayers, the law waives their obligation to withdraw a certain amount from such accounts (called a required minimum distribution, or RMD) during tax year 2020.

Under standard IRS rules for the above retirement account types, you would need to accept a 2020 RMD if you turn 72 years of age in 2020, turned 70 1/2 in 2019 or before, or are any age and inherited the account as a beneficiary. RMDs are usually taxed as ordinary income. However, the CARES act allows you to skip your 2020 RMD without penalty. Note that Roth IRAs are not affected by this waiver, since they do not have RMDs under normal circumstances.

IRS Suspends Many Installment Payments Until July – Did You Know?To help people undergoing hardships as a result of the ...
05/04/2020

IRS Suspends Many Installment Payments Until July – Did You Know?

To help people undergoing hardships as a result of the COVID-19 crisis, the IRS has launched a set of new policies called the People First Initiative (PFI). The initiative provides temporary relief from certain payment obligations for many taxpayers, including those who either have an existing IRS installment payment plan, or are considering entering into such a plan.

For existing installment agreements, payments due between April 1 and July 15, 2020 are suspended at the taxpayer's discretion. In other words, if you are currently unable to make the payments required under your installment agreement (including Direct Debit payments), you may discontinue your payments until July 15. However, if you can make any payments during this period you should do so, since interest will continue to accumulate on unpaid balances.

The IRS strongly encourages taxpayers who cannot afford to pay their federal taxes to enter into a new installment agreement as soon as possible. The April 1-July 15 payment suspension period will apply to new agreements as well as existing ones.

A tax professional can help you determine your eligibility to suspend your installment tax payments, and whether it is best to do so. The IRS will not default any installment agreements during the suspension period. In addition, many collection activities, such as liens, levies, and referrals to third-party collection agencies, have been suspended until July 15. However, field collection officers may continue to pursue compliance from some high-income taxpayers.

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10474 Armstrong Street STE 209
Fairfax, VA
22030

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(703) 517-8043

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