By now, we all know quite well that the COVID-19 pandemic is more than just a healthcare crisis; it has also crushed the U.S. economy and sent unemployment levels through the roof. And Washington's response to the crisis means that there are tax implications for you to consider too. Here are several you'll really want to know about.
1. You have until July 15 to file your 2019 return
Americans have had a lot on their minds over the past eight weeks: Transitioning to working at home -- or not working at all; child care in the wake of school closures; social distancing; the constant worry that we haven't washed our hands enough. And since all of those changes and more made it harder for many people to submit their taxes by the normal April 15 filing deadline, the IRS pushed the deadline back to July 15. But if you decided last month to take advantage of that, don't lose track. File your return by mid-July, or request an extension if you don't think you'll manage to complete your taxes by then. If you owe money for 2019 and your tax return is late, you could face costly penalties if you don't fill out the form asking for an extension.
IMAGE SOURCE: GETTY IMAGES.
2. Refunds are taking longer to process
The IRS typically issues refunds for electronically filed tax returns within three weeks of receiving them, while refunds for paper returns normally take about six weeks. But early reports indicate that the agency has been slower than normal to issue refunds for electronically filed returns, while refunds for paper returns may be on hold indefinitely with field offices shut down and not enough agents available to process them.
If you think you're due a refund and are eager to get your money as quickly as possible, get moving on your tax return, even though you're technically not required to submit it until mid-July. And also, if you have kept filing your taxes on paper, consider switching to an electronic tax return this year. Not only will you avoid an even more extensive refund delay, using the digital forms significantly reduces the chances that you'll make an error that puts your refund on hold while the IRS figures out what you're actually owed.
3. Your stimulus payment won't count as taxable income
Many Americans have already received stimulus payments as part of the massive COVID-19 relief package passed in March. If you didn't register direct deposit details with the IRS, and the agency didn't have that information on file for you from tax returns filed in previous years, then you'll need to wait for a paper check in the mail. Those are continuing to arrive every day, but if you haven't gotten yours yet, it could conceivably still take a few months. The good news, however, is that that money -- up to $1,200 for adults depending on their income, and $500 apiece for children in your household -- is yours free and clear of taxes. It won't count as taxable income when you file your return next year.
4. Unemployment benefits are taxable
Since mid-March, more than 38 million U.S. workers have filed initial unemployment claims. In other words, there are a whole lot of Americans out of a job right now. If you're receiving unemployment benefits, they may be keeping you afloat financially. But unfortunately, those benefits are subject to taxes, which means you'll either need to sign up to have a portion withheld up front, or pay estimated taxes on your benefits during the year. If you can get by without that extra money in the immediate term, having taxes withheld from the start is probably your best bet. That way, you won't have to worry about paying them in large chunks later on.
There's pretty much no aspect of our lives that COVID-19 hasn't touched, taxes included. Keep an eye out for further tax-related changes being made in light of the crisis, and consult the IRS's website for important updates. Staying informed will make it easier to manage your finances during this trying period.
