Qualifying Low-Income California Residents to Get Additional Stimulus from State

Qualifying Low-Income California Residents to Get Additional Stimulus from State

Unemployment claims may have fallen since the initial months of the pandemic, but millions of Americans continue to struggle with long-term joblessness and medical bills caused by the coronavirus. While a third round of federal Economic Impact Payments is expected this year, qualifying Californians will also receive a separate, state-issued payment: The Golden State Stimulus.

According to the “Golden State Stimulus” page on the State of California Franchise Tax Board website, most qualifying low-income California residents will automatically receive a $600 or $1,200 payment 45 to 60 days after filing their tax year 2020 state return—provided they file by Oct. 15, 2021 and meet other criteria.

Who qualifies for the Golden State Stimulus payment?

Generally, two groups of California residents can qualify for the Golden State Stimulus:

  • CalEITC beneficiaries making $30,000 or less
  • ITIN holders making $75,000 or less

Those who change their permanent residence to another state or country before the state actually issues a stimulus payment may not qualify, even if they would otherwise meet all other prerequisites.

Are there resources to help determine Golden State Stimulus eligibility?

The FTP site provides the following tables to help qualifying Californians determine the amount they are eligible to receive and what they should do to get a payment.

The first table shows how being a CalEITC recipient, ITIN holder, or joint filer can affect the amount of the stimulus payment:

Your stimulus amount

On your 2020 tax return…

Stimulus amount

You are a CalEITC recipient with an SSN

$600

You are a CalEITC recipient with an ITIN

$1,200

You are not a CalEITC recipient, but you:

  • File with an ITIN and
  • Made $75,000 or less (total CA AGI)

$600

You file a joint return and:

  • At least one of you files with an ITIN
  • Made $75,000 or less (total CA AGI)

$600

You file a joint return and:

  • You are a CalEITC recipient
  • At least one of you files with an ITIN

$1,200

The second table contains four scenarios that can affect stimulus eligibility, like qualifying for CalEITC but not claiming it on the 2020 return:   

Scenarios for claiming the Golden State Stimulus

Scenario

What to do

You already filed your 2020 taxes and received a CalEITC refund.

You don’t need to do anything. You will receive your payment by direct deposit or paper check.

You filed your 2020 taxes with your ITIN and made $75,000 or less (total CA AGI).

You don’t need to do anything. You will receive your payment by direct deposit or paper check.

You filed your 2020 taxes but did not claim CalEITC and you’re eligible for CalEITC.

Amend your 2020 tax return immediately.

You will file a 2020 tax return but will not claim CalEITC.

You may still be eligible for the stimulus payment for 2020 if you (or your spouse):

  • File with an ITIN and
  • Made $75,000 or less (total CA AGI)

Be sure to file your 2020 tax return no later than October 15, 2021.

A final note: These stimulus payments are set to expire on November 15, 2021. That’s why the FTB recommends qualifying California residents file their 2020 return by October 15. Otherwise, they risk losing their payment.    

For more information about the Golden State Stimulus, visit FTB.CA.gov.

Source: “Golden State Stimulus,” FTB.CA.gov/About-FTB/Newsroom/Golden-State-Stimulus/index.html

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Texas Winter Storm Victims get Tax Relief

Texas Winter Storm Victims get Tax Relief

Texas taxpayers impacted by this month’s brutal winter storms are getting some help from the Internal Revenue Service. The help includes extended deadlines and other relief measures.

The entire state of Texas is included disaster declaration issued by the Federal Emergency Management Agency (FEMA) and the IRS’ relief measures apply to all the counties in the FEMA declaration.

Any counties outside of Texas that are added to the disaster declaration will automatically qualify for the IRS relief package as well. The list of eligible counties and localities is available on the disaster relief page on IRS.gov.

Extension to file and pay

The tax relief announcement postpones various tax filing and payment deadlines that kicked in with the beginning of the filing season on Feb. 11. For Texas taxpayers, affected individuals and businesses now have until June 15, 2021, to file their returns and pay any tax originally due during the period.

The extension includes 2020 individual and business returns normally due on April 15, as well as the various 2020 business returns that would have been due on March 15. It also means affected Texas taxpayers now have until June 15 to make 2020 IRA contributions.

Also included in the relief package are quarterly estimated income tax payments normally due April 15, and quarterly payroll and excise tax returns normally due April 30. The extension also applies to tax-exempt organizations operating on a calendar-year basis, that have a 2020 return due on May 17.

Penalties on payroll and excise tax deposits due on or after Feb. 11 and before Feb. 26 will be abated as long as the deposits are made by Feb. 26.

The IRS disaster relief page has details on other return types, payments and tax-related actions qualifying for the additional time.

Tax relief is automatic

Taxpayers do not need to contact the IRS in order to qualify for the extensions and other relief. As long as the taxpayer’s address of record is in the federally declared disaster area, the extended deadlines are automatically applied.

If an affected taxpayer gets a late-filing or late-payment penalty notice from the IRS that has an original or extended filing, payment or deposit due dat that falls within the postponement period, the taxpayer should call the phone number printed on the notice to have the penalty abated.

An IRS statement says the agency is ready to help those taxpayers who may have affected by the winter storm but who live outside the current disaster area.

“The IRS will work with any taxpayer who lives outside the disaster area but whose records necessary to meet a deadline occurring during the postponement period are located in the affected area. Taxpayers qualifying for relief who live outside the disaster area need to contact the IRS at 866-562-5227. This also includes workers assisting the relief activities who are affiliated with a recognized government or philanthropic organization,” the IRS states.

Declaring losses

Individuals or businesses in a federally declared disaster area who suffered uninsured or unreimbursed disaster-related can claim them on either the return for the year the loss occurred (in this case, the 2021 return normally filed next year), or the return for the prior year. Taxpayers can, if they choose, claim these losses on the 2020 return they fill out this tax season.

Be sure to write the FEMA declaration number—4586—on any return claiming a loss.

The tax relief package is part of a coordinated federal response to the damage caused by this winter storm and is based on local damage assessments by FEMA. For more information on disaster recovery, visit disasterassistance.gov.

Source: IR-2021-43

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HealthCare.gov Special Enrollment Period Can Help Clients Get Insurance

HealthCare.gov Special Enrollment Period Can Help Clients Get Insurance

Tax professionals across the country have undoubtedly served clients who lost health insurance due to layoffs, a reduction in work hours, or another issue stemming from the coronavirus pandemic. The one-two punch of reduced income and possible uninsured medical expenses can be devastating for these families.

To help address this need, the president opened a special enrollment period for the Health Insurance Marketplace on HealthCare.gov, giving uninsured and underinsured Americans another opportunity to get coverage. Unfortunately, many may not be aware that the marketplace is open or how to even use it, which is why the Centers for Medicare & Medicaid Services (CMS) is asking tax professionals to help spread the word.  

To help tax pros be better prepared for these conversations, the agency created a fact sheet on CMS.gov: “2021 Special Enrollment Period in response to the COVID-19 Emergency.”

How long is the HealthCare.gov special enrollment period open?

The HealthCare.gov special enrollment period runs from February 15, 2021 to May 15, 2021. While applications are due by May 15, the fact sheet on CMS.gov notes that “consumers will have 30 days after they submit their application to choose a plan.” Currently enrolled consumers can also use this period to adjust their current plan.  

How do eligible consumers sign up for health insurance through the Health Insurance Marketplace?

Eligible consumers can visit HealthCare.gov or call 1.800.318.2596 to sign up for health insurance through the Health Insurance Marketplace. The CMS fact sheet includes a link to the “Getting Marketplace Health Insurance” quick guide on HealthCare.gov.

How much do HealthCare.gov health insurance plans cost?

According to CMS, roughly 75 percent of those who are enrolled through the Health Insurance Marketplace received financial assistance that reduced their monthly insurance cost to $50 or less.

Source: “2021 Special Enrollment Period,” CMS.gov

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Internal Revenue Bulletin Update Provides Interest Rates, Other Guidance

Internal Revenue Bulletin Update Provides Interest Rates, Other Guidance

An upcoming issue of the IRS’ Internal Revenue Bulletin (IRB) gives tax professionals updated guidance on federal interest rates in a number of areas.

IRB 2021-10 will come out in March and spotlights Revenue Ruling 2021-05 and Notice 2021-16.

Revenue Ruling 2021-05

Revenue Ruling 2021-05 sets out the various prescribed rates for federal income tax purposes. These include applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, and the adjusted federal long-term tax-exempt rate.

The rates are determined as set out in section 1274 of the Code and are published monthly.

RR 2021-05 lays out the various rates, using a series of five tables.

Table 1 contains the short-term, mid-term, and long-term applicable federal rates (AFR) for the current month for the purposes of section 1274(d) of the Internal Revenue Code.

Table 2 has the short-term, mid-term, and long-term adjusted applicable federal rates (adjusted AFR) for the current month as laid out in section 1288(b).

Table 3 sets out the adjusted federal long-term rate and the long-term tax exempt rate described in section 382(f).

Table 4 has the appropriate percentages for figuring the low-income housing credit in section 42(b)(1) for buildings placed into service during the current month. (Note that under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed into service after July 30, 2008, shall not be less than 9%.)

Finally, Table 5 contains the federal rate to determine the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest as stated in section 7520.

Notice 2021-16

Notice 2021-16 gives tax professionals guidance on the corporate bond yield curve, corresponding spot segment rates used in section 417(e)(3), and the 24-month average segment rates under section 430(h)(2) of the internal Revenue Code.

The notice also has guidance for the interest rate on 30-year Treasury securities.

The IRS says Internal Revenue Bulletin 2021-10 is due out next month and will be dated March 8, 2021.

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All First and Second Economic Impact Payments Have Been Issued

All First and Second Economic Impact Payments Have Been Issued

The Internal Revenue Service says, as required by law, it has issued all the first and second round Economic Impact Payments (EIPs) that were legally permitted. So, the IRS is now turning its full attention to the 2021 filing season.

Beginning in April of 2020, the IRS and the U.S. Department of the Treasury began delivering the first round of Economic Impact Payments just two weeks after the enabling legislation was passed.

More than 160 million EIPs were issued to taxpayers totaling over $270 billion. This was done while the IRS had to simultaneously manage an extended filing season. Since Congress enacted the COVID-related Tax Relief Act of 2020, the IRS has delivered more than 147 million second-round Economic Impact Payments totaling over $142 billion.

Terms of the legislation dictated that the second round of payments had to be issued by Jan. 15, 2021.

Some of the second-round EIPs may yet be in the mail. But the IRS says it has issued all the first- and second-round Economic Impact Payments permitted by the law, based on eligibility.

The online IRS tool, Get My Payment, was last updated on Jan. 29 to show the final payments. The agency says Get My Payment won’t be updated again for first- or second-round EIPs.

The Recovery Rebate Credit remains for those not receiving EIPs

Most people who are eligible for the Recovery Rebate Credit have already received it, in advance, through the two rounds of Economic Impact Payments.

Those who didn’t receive an EIP—or didn’t get the full amounts—may be able to qualify for the Recovery Rebate Credit, but will have to file a 2020 income tax return to get it.

Eligibility for the credit and the amount a taxpayer is entitled to are based on 2020 tax year information. Economic Impact Payments were based on 2019 tax year information.

For the first round of Economic Impact Payments, a 2018 return may have been used for qualification if the 2019 return was not filed or processed.

Be prepared before filing

To claim the Recovery Rebate Credit, individuals need to know the amounts of any Economic Impact Payments they received. People who do not have their Economic Impact Payment notices can get the numbers of their first- and second-round EIPs through their individual online account.

Each spouse of married couples who file jointly will have to log into their own account.

The IRS urges taxpayers to file a complete and accurate tax return to avoid delays in refunds. Using a trusted tax professional can ensure that the taxpayer is claiming the credits and deductions they are qualified for and that the return will be e-filed securely. Using direct deposit further speeds up the process.

Direct deposit options go beyond just bank accounts. Many prepaid debit cards and several mobile apps can also be used to receive direct deposits when a routing and account number is provided on the return.

For more information, check out Publication 5486, Claiming the Recovery Rebate Credit on a 2020 Tax Return; and the Instructions for Forms 1040 and 1040-SR.

Source: IR-2021-38

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