People Should Have Tax Withheld From Unemployment Now to Avoid a Tax-time Surprise
Due to the Coronavirus pandemic, millions of Americans received or are currently receiving unemployment compensation, many of them for the first time. It’s important for these individuals to know that unemployment compensation is taxable.
People can have taxes withheld from this compensation now to help avoid owing taxes on this income when they file their income tax return next year.
By law, these benefits are taxable and must be reported on a federal income tax return for the tax year it was received. Taxable benefits include any of the special unemployment compensation authorized under the Coronavirus Aid, Relief, and Economic Security Act.
Withholding is voluntary
Federal law allows recipients to choose a flat 10% withholding from these benefits to cover part or all their tax liability. To do this, recipients should complete Form W-4V, Voluntary Withholding Request, and give it to the agency paying their benefits. Don't send the form to the IRS. If the paying agency has its own withholding request form, use it instead.
Recipients who don't choose voluntary withholding, or if the withholding isn’t enough, can make quarterly estimated tax payments. The payment for the first two quarters of 2020 was due on July 15. Third quarter is due September 15, 2020 and fourth quarter on January 15, 2021. Taxpayers can visit IRS.gov to view all payment options.
Here are other types of payments taxpayers should check for withholding:
• Benefits paid by a state or the District of Columbia from the Federal Unemployment Trust Fund
• Railroad unemployment compensation benefits
• Disability benefits paid as a substitute for unemployment compensation
• Trade readjustment allowances under the Trade Act of 1974
• Unemployment assistance under the Disaster Relief and Emergency Assistance Act of 1974
• Unemployment assistance under the Airline Deregulation Act of 1978 Program
Recipients who return to work before the end of the year can use the IRS Tax Withholding Estimator to make sure the right amount of tax is taken out of their pay. This online tool is available only on IRS.gov, and it can help workers or pension recipients avoid or lessen year-end tax bills or can estimate a refund.
Free COVID Relief Funds? Could Be a Grant Scam 🔴
In tough economic times, it can be hard to turn down free money – especially if it appears to come from a friend. BBB.org/ScamTracker is receiving numerous reports that con artists are stealing information from Facebook and Instagram accounts and promoting phony COVID-19 relief grants to their network and Friends list.
How the Scam Works
You get a Facebook Messenger chat or Instagram direct message that look like it comes from a friend, relative, community member, or another other person you trust. The message is telling you about a grant for COVID-19 relief. You “friend” may claim to have already applied and received thousands of dollars.
Scammers are either hacking social media accounts or creating separate lookalike profiles by stealing photos and personal information. Either way, these con artists are banking that you will trust a message that appears to come from someone you know. For example, one recent victim was contacted by someone posing as a leader in their church. “This scam was very convincing. [It looked like it came from] someone I know and trust,” they wrote. “Because of COVID-19, I’m laid off, so I would try it. [The scammer] said my name was on a list to receive this grant money. I lost $1,000.00 of my unemployment.”
While many people report being targeted through social media, that’s not the only way scammers are reaching potential victims. Other versions of this scam use phone calls and text messages.
No matter how you hear about a “grant,” there’s a major catch! To get the “grant,” you need to pay upfront first. The scammer will claim the money pays for “delivery” or “processing.” The scammer will take the money, and your grant will never materialize.
How to spot a phony grant scam:
• Be wary of your friends’ taste online. Your friend or family member may have impeccable judgment in real-life. But online, email messages, social posts, and direct messages could be from a hacked or impersonated account.
• Don't pay any money for a "free" government grant. If you have to pay money to claim a "free" grant, it isn't really free. A real government agency won't ask you to pay a processing fee for a grant you have already been awarded. The only official list of all U.S. federal grant-making agencies is www.grants.gov. For information regarding Canadian grants, contact the Financial Consumer Agency of Canada.
• Check for look-alikes. Be sure to do your research and see if a government agency or organization actually exists. Find contact info on your own and call them to be sure the person you’ve heard from is legitimate.
• Report scam accounts and messages to Facebook and Instagram. Alert administrators to fake profiles, compromised accounts, and spam messages by reporting them on Facebook and Instagram.
If you’ve fallen victim to this kind of scam, help others avoid the same pitfall by filing a scam report at BBB.org/ScamTracker.
BBB.ORG
BBB Scam Tracker℠ | Find and Report a Scam | Better Business Bureau
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House joins Senate in approving 5-week PPP extension!
The extension is intended to provide more time for small businesses to apply for the approximately $129 billion in PPP funding remaining. The PPP was launched in early April as the COVID-19 pandemic battered the U.S. economy and forced many businesses to close. The program provides forgivable loans that small businesses and other qualifying entities can use to cover payroll and other select costs.
JOURNALOFACCOUNTANCY.COM
House joins Senate in approving 5-week PPP extension
On June 5, 2020, President Trump signed into law the Paycheck Protection Program Flexibility Act (PPPFA) in an attempt to address many concerns expressed by the small business community around the Paycheck Protection Program (PPP) aimed at providing COVID-19 relief.
FORBES.COM
Trump Signs New Law Relaxing PPP Rules: What You Need To Know
PPP Forgiveness Changes Coming as Senate Passes House Bill
The U.S. Senate passed the House version of Paycheck Protection Program (PPP) legislation Wednesday night, extending the time allotted to spend the funds from eight-week period to 24 weeks.
Following is a summary of the legislation’s main points:
1. The payroll expenditure requirement drops to 60% from 75% but is now a cliff, meaning that borrowers must spend at least 60% on payroll or none of the loan will be forgiven.
2. Current PPP borrowers can choose to extend the eight-week period to 24 weeks, or they can keep the original eight-week period. New PPP borrowers will have a 24-week covered period, but the covered period can’t extend beyond Dec. 31, 2020. This flexibility is designed to make it easier for more borrowers to reach full, or almost full, forgiveness.
3. Borrowers can use the 24-week period to restore their workforce levels and wages to the pre-pandemic levels required for full forgiveness. This must be done by Dec. 31, a change from the previous deadline of June 30.
4. The legislation includes two new exceptions allowing borrowers to achieve full PPP loan forgiveness even if they don’t fully restore their workforce. New bill allows borrowers to adjust because they could not find qualified employees or were unable to restore business operations to Feb. 15, 2020, levels due to COVID-19 related operating restrictions.
5. New borrowers now have five years to repay the loan instead of two. Existing PPP loans can be extended up to 5 years if the lender and borrower agree. The interest rate remains at 1%.
6. The bill allows businesses that took a PPP loan to also delay payment of their payroll taxes, which was prohibited under the CARES Act.
7. June 30 remains the deadline for applying to receive a PPP loan.
#PPP #PaycheckProtectionProgram #SBA #Loan
