tax credits

IRS TAX TIP

COVID Tax Tip 2020-111, August 31, 2020

In mid-August interest payments were sent to nearly 14 million individual taxpayers. People who got these payments filed their 2019 federal income tax returns by the July 15 deadline and were owed refunds.

These interest payments averaged about $18. The IRS issued most of the payments separately from tax refunds.

Most taxpayers who received their refund by direct deposit had their interest payment sent to the same account. Everyone else received a check. A note on the check reads “INT Amount.” This identifies it as a refund interest payment.

These interest payments are taxable. Taxpayers who received a payment must report it on their 2020 federal income tax return next year. The IRS will send a Form 1099-INT in January 2021, to anyone who gets a payment of at least $10.

This interest payment is due to the IRS postponing this year’s filing deadline to July 15. The new deadline was related to COVID-19 and is considered a disaster-related postponement. Therefore, the law requires the IRS to pay interest calculated from the original April filing deadline. The taxpayer must have filed their 2019 federal income taxes by the July 15, 2020, deadline to get an interest payment.

This refund interest only applies to individual taxpayers. Businesses aren’t eligible.

Visit IRS.gov for details on how the interest payments are figured.

Originally posted: https://www.irs.gov/newsroom/millions-of-taxpayers-receive-a-tax-refund-interest-payment

If you’re a small and medium size business owner, this one’s for you. The IRS announced important refundable payroll tax credits that are much less talked about in the shuffle of COVID-19 relief efforts. These credits will continue to be important to businesses especially after states fully reopen, and employees may continue to find themselves to be sick with COVID-19, need to care for family members who are sick with Covid-19, and/or cannot come to work due to lack of childcare due to Covid-19.

Chris Strand, managing accountant at Ballast Tax and Business Services breaks down what small business owners need to know about this plan which has the goal to swiftly recover the cost of providing Coronavirus-related leave.

“There are two pieces to this tax credit which is available only to small and medium size business owners,” says Strand. “The paid sick leave credit and the paid family leave credit reimburses employers who provide up to 80 hours of sick leave for employees who are sick with Covid 19 or who must care for a family member with Covid 19. Secondly, it also reimburses employers who pay employees up to 10 weeks who must miss work due to the lack of available child care due to COVID-19.”

According to the IRS, not only does this cover wages, but It also covers health care costs for the employee, and employers are not required to pay FICA taxes on those wages.

“This is also available to self employed individuals,” says Strand. “The credit is refundable and the funds can be obtained quickly.”

In order to take advantage of the credit, the IRS states, employers simply deduct the credit amount from their payroll tax deposits for the current period. If there are more credits than payroll tax deposits, they can file to receive a check right away, not wait until the end of the year by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.

“To be clear, this only applies to wages paid to employees who come down with, or care family members who come down with, Covid 19. Or to wages paid to employees who lose their child care due to Covid 19,” Strand adds. “This pandemic has brought about challenges never before seen and rarely even foreseen in our business community. This tax credit can potentially provide a significant aid to those business owners striving to meet these challenges.”

For details about these credits and other relief, contact Ballast Tax and Business Services.

Millions of taxpayers receive a tax refund interest payment

Tax credits help business owners recover the cost of providing Coronavirus-related leave