Finances during the COVID-19 relief efforts
Q: What can I do to ensure I get my Economic Impact Payment from the IRS?
A: You do not need to take any further action if you filed a federal income tax return for 2018 or 2019. If you already filed your tax return for 2019, the IRS will use this information to calculate the payment amount. If you haven’t filed your tax return for 2019 but filed a 2018 federal income tax return, the IRS will use the information from your 2018 tax return to calculate the payment amount.
Most payments are being received automatically via direct deposit as long as you filed your 2018 income tax return and had a refund using a direct deposit method. If that does not pertain to you, you will receive your check via mail. If you have not yet filed your 2018 tax return or you are not required to file one, you may file your 2019 tax return in order to receive your economic refund check.
Q: What if I have not yet received my payment? How long is the payment available?
A: Payments will be made throughout the rest of the year 2020. If you don’t receive a payment this year, you can also claim it by filing a tax return for 2020 next year.
Q: How much can I expect to receive from the government regarding the economic impact payment?
A: All eligible individuals will receive $1,200. Two eligible individuals filing a joint return will receive $2,400. You will receive an additional $500 payment for each qualifying child under 17 you claimed on your tax return.
To receive the full payments, individuals can earn up to $75,000, while married couples can earn up to $150,000 combined, with the head of household earning up to $112,500.
Note: Eligible individuals who filed their tax return for 2018 or 2019 will automatically receive their Economic Impact Payment.
Q: Taxpayers should be on the lookout for IRS impersonation calls, texts and emails about the economic Impact Payments. What can I do?
A: The IRS will not call, email or text you to verify or request your financial, banking or personal information. Taxpayers should not provide personal or financial information or engage with potential scammers online or over the phone.
Q: I heard about the payroll protection loans for small businesses. How can I obtain one?
A: The loan program is the Paycheck Protection Program with the Small Business Administration that you apply for directly through your bank. The purpose of the loan is for you to maintain your payroll through these trying times.
If you don’t have payroll but are a self-employed individual who files an IRS Schedule C with your Form 1040, you can still apply for and possibly receive loans to cover other certain expenses through existing SBA lenders. If the Schedule C filer has no employees, he or she should compute the maximum PPP loan amount as follows:
Step 1: If the Schedule C filer has filed a 2019 Schedule C (i.e., a Form 1040), the Schedule C filer should review Line 31, Net profit or (loss). If this amount is over $100,000, the amount is reduced to $100,000. If the amount is zero or negative, the Schedule C filer is not eligible for a PPP loan.
Step 2: Divide the amount in Step 1 by 12.
Step 3: Multiply the amount in Step 2 (i.e., the average monthly net profit) by 2.5.
Step 4: Add any outstanding Economic Injury Disaster Loan made between Jan. 31, 2020, and April 3, 2020, that will be refinanced, less the amount of any advance under an EIDL COVID-19 loan.
The Schedule C filer may use the PPP loan proceeds for the following eligible costs:
- Owner compensation replacement, calculated based on 2019 net profit (as described above).
- Employee payroll costs (as defined in the First PPP Interim Final Rule) for employees whose principal place of residence is in the United States, if applicable.
- Mortgage interest payments on any business mortgage obligation on real or personal property, business rent payments, and business utility payments. However, the Schedule C filer must have claimed or be entitled to claim a deduction for such expenses on their 2019 Form 1040 Schedule C for those costs to qualify as eligible costs during the eight-week period following the first disbursement of the PPP loan proceeds.
- Interest payments on any other debt obligations incurred before Feb. 15, 2020.
- Refinancing an SBA EIDL loan made between Jan. 31, 2020, and April 3, 2020 (with the maturity to be reset to PPP’s maturity of two years).
Q: Should I take money from my 401(k) retirement plan?
A: The CARES Act temporarily waived the 10% penalty from taking an early distribution up to $100,000 from your retirement plan if the withdrawal is linked to the coronavirus, such as a diagnosis or a layoff. You will still have to report it as income on your tax return. Additionally, you may be taking money that has been reduced by the stock market decline which can be difficult to make up. LL
This article has been presented by PBS Tax & Bookkeeping Service, a company that has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. If you would like further information, please contact them at 800-697-5153. Visit their website at www.pbstax.com.
Everyone’s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.