$10,200 Unemployment Tax Break

$10,200 Unemployment Tax Break

Just as the Internal Revenue Service has extended the federal deadline for filers from the standard April 15 to May 17, the American Rescue Plan, which was signed into law by President Joe Biden on March 11, made the first $10,200 of unemployment income tax-free for single filers – or $20,400 for two workers in a married couple filing taxes jointly – with adjusted gross income of less than $150,000 in 2020.

But by the time the law passed, in the middle of tax season, some people who received unemployment income in 2020 had already filed and paid taxes on those benefits.

The IRS is working on a fix that means most people in that situation will not have to take any extra steps, such as sending in an amended tax return, to recoup the taxes they paid but don’t owe per the new rule.

People who had unemployment income in 2020 and have not yet filed their tax return may need to wait to ensure that they submit all information to the IRS correctly.

The agency released new instructions on Friday, including a worksheet for paper filers, and said it would work with online tax programs to update current software.

Dunham Tax Professionals is on it and will report in this blog space, any and all changes to the guidelines as they occur. In the meantime, and as always, we’re here to answer any questions you may have – especially in these uncertain times. Feel free to contact us today.

Tax Deadline 2021 Extension: What You Need to Know

Tax Deadline 2021 Extension: What You Need to Know

The Internal Revenue Service has given Americans an extra month to file their tax returns, with the traditional April 15 deadline pushed back to May 17.

Here’s all you need to know about the new deadline:

Taxpayers have until 11:59 p.m. ET on May 17 to file their tax returns, as opposed to the usual April 15 date. Forms must be postmarked or emailed by the deadline to avoid penalties and interest.

May 17 is also the last day taxpayers owing any money to the IRS can delay payments until: Those needing more time to file their returns, can apply for a further extension until October 15 by filling in Form 4868.

With all of the changes to the Tax law and guidelines that have come down, such as Form 7202, EITC and Family Leave for self-employed as caregivers, for example, taxpayers, filers and tax professionals need some extra breathing room and time to process everything.

It is worth noting, however, that the new deadline applies only to federal income taxes and returns. Taxpayers should double check if due dates for individual states have changed as not all of them have the same filing deadline as the federal government.

Dunham Tax Professionals is here for you every step of the way though these uncertain and everchanging times. As always, we’re ready to answer your questions and deal with your concerns – at tax time, and throughout the year. Contact us and schedule an appointment today.

PPP Deadline Extended

PPP Deadline Extended

Congress has approved the PPP Extension Act of 2021, which pushes back the Paycheck Protection Program – PPP – loan application deadline by an additional two months, from March 31 deadline to May 31. This means those businesses most affected by the pandemic are allowed to apply for a loan beyond this month.

In addition to having more time to complete the application for a first-draw or second-draw loan, this also gives the Small Business Administration more time – now until June 30 – to process loans, a move advocates say was needed to tackle the existing backlog of applications. To this point, it is noteworthy that 60 additional days were needed to clear the backlog of pending PPP applications halted by SBA coding errors.

The extension garnered support from banking and other groups involved in the PPP loan process. The 60-day extension provides necessary additional time for both applicants and lenders to review and submit the applications. Moreover, pushing back the PPP application deadline is also helpful to those businesses that are still in the process of applying, giving them a better chance of securing a loan.

Since its inception in March 2020, more than 7.8 million PPP loans have been approved totaling nearly $704 billion in aid. As of March 17, there is about $103 billion left in unclaimed PPP funds. As we all know, the first round of PPP draws had neither specific guidelines nor strict vetting in place, allowing bigger banks and bigger companies to grab most of the initial funds, the program has allotted more money and continued to adapt the rules and guidance in an effort to make funds more available to both the smallest businesses and underrepresented groups.


Substantiate Your Claims Under FFCRA and FMLA

Substantiate Your Claims Under FFCRA and FMLA

The COVID-19 Pandemic has hit us all severely: as business and industry has been shut down, the federal government scrambled to enact several relief bills in aid of stimulating our economy and keeping businesses – and families – afloat. 2020 has brought us, not one but two draws of Payroll Protection Plan loans from the Small Business Administration and qualifying forgiveness, and now, much needed tax breaks for the self-employed, including contractors and freelancers under the Families First Coronavirus Response Act.

In our previous blogs, we touched on tax credits for the self-employed regarding the inability to work due to either self-quarantining due to your symptoms or caring for someone else. We also discuss the tax credit due to the inability to work because your child’s school or daycare was affected by shutdowns.
Now, as you may recall, under the FFCRA sick leave portion, a self-employed individual who has self-quarantined may claim a maximum of $511 per day for ten days; or if you were unable to work because you had to care for a family member, you can claim $200 per day for ten days. Moreover, if you were unable to work due to your child’s school or daycare being shut down, the credit caps out at $200 per day for up to 50 days

These tax credits are relatively easy to qualify for, however that is not to say that this is an IRS free money bonanza, either. As new forms of relief bills and laws come from Congress, so does the potential for more guidelines and requirements, as well. Congress is also learning as they are going, and taxpayers need to know that there is a vetting process in place with these credits.

The IRS has said that the required proofs for qualifying eligibility are substantively like those proofs an employer would require. So, let’s go over those.
These requirements are:

  • The employee’s name – that’s you.
  • The date or dates for which leave is requested — Remember you can only claim up to 10 days and if this is you and you were caring for yourself, and you were the one that had symptoms; or you were the one that was self-quarantining that’s the 511 dollars per day

for up to 10 days. But if you were the one caring for somebody else, that maximum is 200 per day for that same 10-day period.

  • A statement of the related reason the employee – again that’s you – are requesting leave and written support for that reason
  • A statement that the employee – you – are unable to work including by means of working remotely and written support for such reason. It is very important to note that this statement needs to also include – if you were in quarantine – the name of the government entity in your location ordering quarantine; or the name of the healthcare professional advising self-quarantine.

If the person that was in quarantine, or was having symptoms and required care was not you, the following additions to those previously stated are required:

  • That person’s name and the relation to you.

In the case of leave under FFCRA based on a school closing or childcare provider unavailability, the remitted statements – again in addition to those previously stated – should include:

  • The name and age(s) of the child or children to be cared for
  • The name of the school, enrichment program, camp or daycare program that has closed or was unavailable.
  • Representation that no other person was able to provide care for the child during the period of leave.
  • It is also very important to note here that if you were unable to work for the above reasons and that the child or children that you provided care for – during daylight hours – was older than 14, you are also required to submit statements that special circumstances exist.

So, the takeaway here is that you’re not just going to get these tax credits for no reason just because you’re self-employed. You’ve got to substantiate your eligibility which simply means that you must prove it with some written statements, with some documentation – and that documentation is going to be sent in along with the rest of your regular tax return , including attached form 7202

Moreover, the IRS has stated that this documentation needs to be maintained for a period of four years. So, as you can see – and as Dunham Tax Professionals is always reminding you – documenting everything is key.

Dunham Tax Professionals is skilled in every aspect of your business needs from taxes to bookkeeping; business licensing and more.  We’re here to help you be compliant and stay abreast of changes to the tax laws and regulations as they occur.  Contact us and schedule an appointment today.

How to Calculate the Self-Employed Tax Credit Amount Under FFCRA and FMLA

How to Calculate the Self-Employed Tax Credit Amount Under FFCRA and FMLA

In our last blog, we talked a bit about the term “qualified” as it pertains to eligibility for the tax credits for the self -employed as provided under the Families First Coronavirus Act – FFCRA – provision of the FMLA, which everyone is reasonably aware of as the Family Medical Leave Act.

So, what exactly is “qualified”?

 As always, we here at Dunham Tax Professionals want to remind you the importance of documenting everything. The bottom line with the IRS is: “Can you prove it?” so, if it happened, make sure there’s a record of it.

As a reminder, you should know that this credit applies to an eligible self-employed individual who is unable to work or telework because the individual:

  1. Is subject to a Federal, State, or local quarantine or isolation order related to COVID-19;
  2. Has been advised by a health care provider to self-quarantine due to concerns related to COVID-19; or
  3. Is experiencing symptoms of COVID-19 and seeking a medical diagnosis,

or an eligible self-employed individual who is unable to work or telework because the individual:

  1. Is caring for an individual who is subject to a Federal, State, or local quarantine or isolation order related to COVID-19, or has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  2. Is caring for a child if the child’s school or place of care has been closed, or childcare provider is unavailable due to COVID-19 precautions; or
  3. Is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor,

How These Amounts are Calculated:

Average daily self-employment income is an amount equal to the net earnings from self-employment for the taxable year, or prior taxable year, divided by 260.  A taxpayer’s net earnings from self-employment are based on the gross income that he or she derives from the taxpayer’s trade or business minus ordinary and necessary trade or business expenses.

That means that if you experienced symptoms yourself and had to quarantine, you would be able to claim $511 per day for a maximum of ten days, for a total of $5110; if you were on leave to care for someone else that number is capped at $200 for the same ten days, capping out at $2000.

Now for the Family Leave, amount of days is $200 per day for up to 50 days and the maximum amount is capped at $10,000. And the way all our schools and daycares have been closed either sporadically or consistently this past year, there should be no issue with qualifying for these days

As always, Dunham Tax Professionals is here to guide you through tax season and beyond. We’ve got the answers you need, so contact us today.


Tax Credits for Paid Sick and Family Leave for the Self-Employed

Tax Credits for Paid Sick and Family Leave for the Self-Employed

The Family First Coronavirus Response Act – or FFRCA – provides two important tax credits geared toward the self-employed to help cover the cost of taking time off due to COVID-19. While most of the text in these laws apply to businesses with employees, it also applies to self-employed individuals.

The tax credit for paid sick leave applies to eligible self-employed taxpayers who are unable to work (including telework or working remotely) due to:

  1. Being subject to a federal, state, or local quarantine or isolation order due to COVID-19.
  2. Being advised by a health care provider to self-quarantine due to COVID-19.
  3. Experiencing COVID-19-related symptoms and seeking a medical diagnosis.

If you meet all the requirements, you would be eligible for qualified sick leave for each day during the year that you were unable to work for the above reasons (up to 10 days). The tax credit is worth the lesser of

  • $511 per day or
  • 100% of your average daily self-employment income for the year per day.

The only days that may be considered – for tax year 2020 – in determining the qualified sick leave equivalent amount are days occurring during the period beginning on April 1, 2020 and has been extended to the period ending on March 31, 2021.

Under the expanded Family and Medical Leave Act – FMLA – provision of the FFCRA, you would be eligible for qualified family leave for each day that you were unable to work because:

  • You were caring for someone else impacted by COVID-19 (up to 10 days); or
  • Your child’s school or childcare provider was closed or unavailable due to COVID-19 (up to 50 days).

You can claim a tax credit for the lesser of $200 per day or 67% of your average daily self-employment income for the year per day.

Dunham Tax Professionals wants to remind you that you’re not in this alone: it’s always advisable to consult a professional if you have any questions. We’re here to help. Contact us or schedule a consultation today.


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