My telephone continuously rings from clients who pay American taxation for the year 2019 to know the latest developments related to their tax payments whether any tax-related deadlines have happened. America is one of the largest tax-paying natin and that too over decades of disciplined behavior both from the tax payer’s side and the Internal Revenue Service, the treasury wing of American government has cultivated the habit of conducting the most complex tax regime in the simplest way. It is time to write about the latest developments related to tax the year 2019, particularly on the basis of Coronavirus Pandemic and its after-effects.
To start with, the proper web is the learning center:
Additional information for taxpayers: (All information from the above web and hence I may reproduce the instructions directly)
Individuals and Families
If I have filed the tax return but not the taxes due by April 15, 2020, what to do? Can I avoid interest and penalties on the taxes owed? Let me reply from the IRS web for this question. “To avoid interest and penalties, pay your taxes in full by July 15, 2020. If you filed Form 1040 or Form 1040-SR, the tax payment amount can be found online 23. If you filed Form 1040-NR, the tax payment amount can be found online 75. For a corporation filing a Form 1120, the tax payment amount can be found online 35. For an exempt organization required to file Form 990-T, the tax payment amount can be found online 54.
If you do not pay your taxes by July 15, 2020, you will be subject to interest and penalties from July 16, 2020, until the date of payment.” In simple terms, the postponement of the date for filing of returns to July 15, does not entail postponement of taxes.
So far, we talked about federal tax filing and postponement of deadlines. What about state taxes or filing of returns?
The following web would take care of your requirement.
Let us worry about routine tax returns and any updates.
Individual taxpayer (1040) instructions
About your economic impact payment, the following news may gladden you.
“The IRS is committed to helping you get your Economic Impact Payment as soon as possible. The payments also referred to by some as stimulus payments, are automatic for most taxpayers. No further action is needed by taxpayers who filed tax returns in 2018 and 2019 and most seniors and retirees.”
Let us proceed with form 1040 and more.
Form no 1040
Let the preamble be from the IRS.
“For 2019, you will use Form 1040 or, if you were born before January 2, 1955, you have the option to use new Form 1040-SR. You may only need to le Form 1040 or 1040-SR and none of the numbered schedules, Schedules 1 through 3. However, if your return is more complicated (for example, you claim certain deductions or credits or owe additional taxes), you will need to complete one or more of the numbered schedules.”
The following information is for your eyes only since we, CPAs do not give casual advice. Each case of the taxpayer requires careful study, deep analysis and suggests suitable forms and proper usage of software which has lasted a few decades since many of inferior quality or poor customer service or cheaper by market just vanished like thin air.
The following schedules inherit the tax form.
To a sensible and inquisitive mind, for academic purposes, what do these schedules indicate the purpose of usage.
Additional income, such as business or farm income or loss, unemployment compensation, prize or award money, or gambling winnings, student loan interest, self-employment tax, or educator expenses, owing AMT or need to make an excess advance premium tax credit repayment, to owe other taxes, such as self-employment tax, household employment taxes, additional tax on IRAs or other qualified retirement plans and tax-favored accounts, to claim a nonrefundable credit other than the child tax credit or the credit for other dependents, such as the foreign tax credit, education credits, or general business credit, to claim a refundable credit other than the earned income credit, American opportunity credit, or additional child tax credit, such as the net premium tax credit or health coverage tax credit or to have other payments, such as an amount paid with a request for an extension to le or excess social security tax withheld.
One can visualize that the need for each schedule is complicated and with the most advanced and updated software with decades of experience, a CPA decodes the mysteries to meet the client’s individual tax needs.
Is there any change in the form 1040?
It is reproduced for information.
What’s new? (All compiled from 108 pages of IRS booklet; a huge task)
Simple facts for your eyes.
Some more interesting tidbits.
Let us see the tax slabs for payment of tax due. (for most people, perhaps)
IF your filing status and at the end of 2019 you were File if your gross income at least ($)
|Single||under 65||$ 12,200|
|65 or older||13,850|
|Married filing jointly||under 65 (both spouses)||24400|
|65 or older (one spouse)||25700|
|65 or older (both spouses)||27000|
|Married filing separately||Any age||5|
|Head of household||under 65||$18,350|
|65 or older||20,000|
|Qualifying widow(er)||under 65||$24400|
|65 or older||25700|
Let us look at other forms for partnerships, S Corporation, LLCs, nonprofit organizations, etc.
Form No. 1065
Form 1065 is an information return used to report the income, gains, losses, deductions, credits, and other information from the operation of a partnership. A partnership doesn’t pay tax on its income but passes through any profits or losses to its partners. Partners must include partnership items on their tax or information returns.
One of the most critically scrutinized and investigated forms for tax purposes, form 1065 needs careful handling at the hands of an experienced CPA. I am reproducing the form for information.
Important note for the above form as copied from the IRS web.
“Form 1065 BBA Partnerships Filing Amended Returns for CARES Act Relief For tax years beginning in 2018 or 2019, BBA partnerships which filed Form 1065 and furnished all required Schedules K-1 prior to the issuance of Revenue Procedure 2020-23 may amend those returns by filing Form 1065, checking the “Amended return” box, and furnish corresponding amended Schedules K-1 prior to September 30, 2020. This will allow partnerships and their partners to benefit from the provisions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act, without waiting to file Administrative Adjustment Requests (AARs) for the current year, which would otherwise be required under section 6227. See Revenue Procedure 2020-23 for more information.”
Practically, only your CPA will handle the amended return or other related materials. Just for academic purposes, I have enclosed the above message.
Form 1065 is a 5-page document consisting of main form 1065, followed by Schedule B, Schedule K, Schedule L, Schedule M1, and Schedule M2.
Another popular tax entity in the U.S.A., is S Corporation whose form is 1120 S.
I enclose a copy of 1120s as under:
U.S. Income Tax Return for an S Corporation
Form No. 1120 is also enclosed for reference purposes.
In response to the COVID-19 pandemic, the IRS has taken many actions.
One significant change postponed the deadline to take certain actions. If the deadline for these actions fell on or after April 1, 2020, through July 14, 2020, the deadline has been extended to July 15, 2020. This includes, but is not limited to, the following.
1. Forms 1040, 1040-SR, 1040-NR, 1040-NR-EZ, 1040-PR, and 1040-SS.
2. Forms 1120, 1120-C, 1120-F, 1120-FSC, 1120-H, 1120-L, 1120-ND, 1120-PC, 1120-POL, 1120-REIT, 1120-RIC, 1120-S, and 1120-SF.
3. Forms 1041, 1041-N, and 1041-QFT.
4. Form 990-T.
1. Forms 706, 706-NA, 706-A, 706-QDT, 706-GS(T), 706-GS(D), and 706-GS(D-1).
2. Form 8971 (including Schedule A).
3. Form 709.
4. Form 1065.
5. Form 1066.
6. Forms 990, 990-EZ, 990-PF, and 990-BL.
7. Form 4720.
U.S. Corporation Income Tax Return, popularly known as 1120 is enclosed from irs.gov web.
Increase in penalty for failure to file. For returns due after 2019, the minimum penalty for failure to file a return that is more than 60 days late has increased to the smaller of the tax due or $435.
Disaster relief for charitable contributions. The 10% limit on the deduction for charitable contributions does not apply to contributions made after December 31, 2017, and before February 19, 2020, to certain charitable organizations for relief in qualified disaster areas.
Tax-exempt organizations, nonexempt charitable trusts, and section 527 political organizations file Form 990 to provide the IRS with the information required by section 6033.
Form is reproduced for information please. (Form 990, Return of Organization Exempt From Income Tax)
Let me share some information about the above form. This form of entity has been most widely abused by taxpayers resulting in the cancellation of thousands of licenses by the IRS. It is sincerely advised that only a CPA needs to file this form to avoid later investigation by IRS authorities and also I request these entities to indulge in genuine nonprofit activities exhaustively explained by IRS in their instructions on Form 990.
“A tax-exempt organization must file an annual information return or notice with the IRS unless an exception applies. Annual information returns include Form 990, Form 990-EZ, and Form 990-PF. Form 990-N (e-Postcard) is an annual notice. Form 990 is the IRS’s primary tool for gathering information about tax-exempt organizations, educating organizations about tax law requirements, and promoting compliance. Organizations also use Form 990 to share information with the public about their programs. Additionally, most states rely on Form 990 to perform charitable and other regulatory oversight and to satisfy state income tax filing requirements for organizations claiming exemption from state income tax.”
With many of my clients asking me frequent questions on the filing of tax returns to tax authorities in the U.S.A., particularly after the onset of Coronavirus, this article has been written containing the latest instructions from the Internal Revenue Service, U.S.A., the income tax wing of the Federal Government there. Even in spite of huge virus cases in the U.S.A., IRS continued to do its best for its taxpayers with constrained human resources. Let me appreciate them for their great services.