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I.R.S. will begin issuing tax refunds in May for unemployment tax break.

Taxpayers who received unemployment benefits last year — but who filed their federal tax returns before a new tax break became available — could receive an automatic refund as early as May, the Internal Revenue Service said on Wednesday.

The latest coronavirus relief legislation — signed into law on March 11, in the thick of tax season — made the first $10,200 of unemployment benefits tax-free in 2020 for people with modified adjusted incomes of less than $150,000. (Married taxpayers filing jointly can exclude up to $20,400.)

But some Americans had already filed their tax returns by March and have been waiting for official agency guidance. Millions of U.S. workers filed for unemployment last year, but the I.R.S. said it was still determining how many workers affected by the tax change had already filed their tax returns.

On Wednesday, the I.R.S. confirmed that it would automatically recalculate the correct amount of benefits subject to taxation — and any overpayment will be refunded or applied to any other outstanding taxes owed. The first refunds are expected to be issued in May and will continue into the summer.

an updated worksheet and additional guidance in March for taxpayers that prefer paper.

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Biden’s Push for Electric Cars: $174 Billion, 10 Years and a Bit of Luck

But production is only one piece of the puzzle. The transition away from gas-powered vehicles rests on convincing consumers of the benefits of electric vehicles. That hasn’t been easy because the cars have higher sticker prices even though researchers say that they cost less to own. Electricity is cheaper on a per mile basis than gasoline, and E.V.s require less routine maintenance — there is no oil to change — than combustion-engine cars.

The single biggest cost of an electric car comes from the battery, which can run about $15,000 for a midsize sedan. That cost has been dropping and is widely expected to keep falling thanks to manufacturing improvements and technical advancements. But some scholars believe that a major technological breakthrough will be required to make electric cars much, much cheaper.

“There’s a good sense that at least for the next maybe five years or so they’re going to keep declining, but then are they going to level off or are they going to keep declining?” Joshua Linn, a professor at the University of Maryland and a senior fellow with Resources for the Future, an environmental nonprofit, said about battery costs. “That won’t be enough, so then that’s given rise to a lot of attention to infrastructure.”

The federal government and some states already offer tax credits and other incentives for the purchase of electric cars. But the main such federal incentive — a $7,500 tax credit for the purchase of new electric cars — begins to phase out for cars once an automaker has sold 200,000 E.V.s. Buyers of Tesla and G.M. electric cars, for example, no longer qualify for that tax credit but buyers of Ford and Volkswagen electric cars do.

The Biden administration has released no details about its proposed E.V. tax credits.

Another big concern is charging. People with dedicated parking spots typically charge their E.V.s overnight at home, but many people who live in apartments or have to drive longer distances need to use public charging stations, which are still greatly outnumbered by gas stations.

“The top three reasons consumers give for not buying E.V.s are lack of charging stations, time to charge, and the cost of E.V.s,” said Sam Abuelsamid, an analyst at Guidehouse Insights. “They seem to be really emphasizing all three. So, over all, it looks very promising.”

There are well over 100,000 gas stations in the United States, most with multiple pumps. Mr. Biden’s plan calls for a national network of 500,000 electric vehicle chargers within the decade, up from about 41,000 charging stations with more than 100,000 outlets today, according to the Energy Department.

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Democrats Look to Smooth the Way for Biden’s Infrastructure Plan

WASHINGTON — Senior Democrats on Monday proposed a tax increase that could partly finance President Biden’s plans to pour trillions of dollars into infrastructure and other new government programs, as party leaders weighed an aggressive strategy to force his spending proposals through Congress over unified Republican opposition.

The moves were the start of a complex effort by Mr. Biden’s allies on Capitol Hill to pave the way for another huge tranche of federal spending after the $1.9 trillion stimulus package that was enacted this month. The president is set to announce this week the details of his budget, including his much-anticipated infrastructure plan.

He is scheduled to travel to Pittsburgh on Wednesday to describe the first half of a “Build Back Better” proposal that aides say will include a total of $3 trillion in new spending and up to an additional $1 trillion in tax credits and other incentives.

Yet with Republicans showing early opposition to such a large plan and some Democrats resisting key details, the proposals will be more difficult to enact than the pandemic aid package, which Democrats muscled through the House and Senate on party-line votes.

afford to lose only eight votes, Representative Tom Suozzi, Democrat of New York, warned that he would not support the president’s plan unless it eliminated a rule that prevents taxpayers from deducting more than $10,000 in local and state taxes from their federal income taxes. He is one of a handful of House Democrats who are calling on the president to repeal the provision.

And in the Senate, where most major legislation requires 60 votes to advance, Senator Chuck Schumer of New York, the majority leader, was exploring an unusual maneuver that could allow Democrats to once again use reconciliation — the fast-track budget process they used for the stimulus plan — to steer his spending plans through Congress in the next few months even if Republicans are unanimously opposed.

While an aide to Mr. Schumer said a final decision had not been made to pursue such a strategy, the prospect, discussed on the condition of anonymity, underscored the lengths to which Democrats were willing to go to push through Mr. Biden’s agenda.

The president’s initiatives will feature money for traditional infrastructure projects like rebuilding roads, bridges and water systems; spending to advance a transition to a lower-carbon energy system, like electric vehicle charging stations and the construction of energy-efficient buildings; investments in emerging industries like advanced batteries; education efforts like free community college and universal prekindergarten; and measures to help women work and earn more, like increased support for child care.

The proposals are expected to be partly offset by a wide range of tax increases on corporations and high earners.

would have temporarily removed the cap, but it stalled in the Senate and attempts to include it in pandemic relief legislation were unsuccessful.

“It has to be elevated as part of the conversation,” Mr. Suozzi said. “There’s a lot of different talk about going big and going bold and making significant changes to the tax code. I want to make SALT part of the conversation.”

Frequently Asked Questions About the New Stimulus Package

The stimulus payments would be $1,400 for most recipients. Those who are eligible would also receive an identical payment for each of their children. To qualify for the full $1,400, a single person would need an adjusted gross income of $75,000 or below. For heads of household, adjusted gross income would need to be $112,500 or below, and for married couples filing jointly that number would need to be $150,000 or below. To be eligible for a payment, a person must have a Social Security number. Read more.

Buying insurance through the government program known as COBRA would temporarily become a lot cheaper. COBRA, for the Consolidated Omnibus Budget Reconciliation Act, generally lets someone who loses a job buy coverage via the former employer. But it’s expensive: Under normal circumstances, a person may have to pay at least 102 percent of the cost of the premium. Under the relief bill, the government would pay the entire COBRA premium from April 1 through Sept. 30. A person who qualified for new, employer-based health insurance someplace else before Sept. 30 would lose eligibility for the no-cost coverage. And someone who left a job voluntarily would not be eligible, either. Read more

This credit, which helps working families offset the cost of care for children under 13 and other dependents, would be significantly expanded for a single year. More people would be eligible, and many recipients would get a bigger break. The bill would also make the credit fully refundable, which means you could collect the money as a refund even if your tax bill was zero. “That will be helpful to people at the lower end” of the income scale, said Mark Luscombe, principal federal tax analyst at Wolters Kluwer Tax & Accounting. Read more.

There would be a big one for people who already have debt. You wouldn’t have to pay income taxes on forgiven debt if you qualify for loan forgiveness or cancellation — for example, if you’ve been in an income-driven repayment plan for the requisite number of years, if your school defrauded you or if Congress or the president wipes away $10,000 of debt for large numbers of people. This would be the case for debt forgiven between Jan. 1, 2021, and the end of 2025. Read more.

The bill would provide billions of dollars in rental and utility assistance to people who are struggling and in danger of being evicted from their homes. About $27 billion would go toward emergency rental assistance. The vast majority of it would replenish the so-called Coronavirus Relief Fund, created by the CARES Act and distributed through state, local and tribal governments, according to the National Low Income Housing Coalition. That’s on top of the $25 billion in assistance provided by the relief package passed in December. To receive financial assistance — which could be used for rent, utilities and other housing expenses — households would have to meet several conditions. Household income could not exceed 80 percent of the area median income, at least one household member must be at risk of homelessness or housing instability, and individuals would have to qualify for unemployment benefits or have experienced financial hardship (directly or indirectly) because of the pandemic. Assistance could be provided for up to 18 months, according to the National Low Income Housing Coalition. Lower-income families that have been unemployed for three months or more would be given priority for assistance. Read more.

He is among the Democrats who have requested a meeting with Mr. Biden to discuss repealing the cap, according to a letter obtained by The New York Times.

“No SALT, no dice,” declared another Democrat, Representative Josh Gottheimer of New Jersey.

“There’s plenty of ways, in my opinion, to raise revenue and reinstate SALT,” he said in an interview, adding that he wanted to see the full details of the proposal.

budget blueprint that was approved last month to include the infrastructure plan, which would enable them to undertake a second reconciliation process before the end of the fiscal year on Sept. 30 and pass it with a simple majority.

Elizabeth MacDonough, the parliamentarian, will have to issue guidance on whether doing so is permissible under Senate rules.

If Democrats succeed, they could potentially use the reconciliation maneuver at least two more times this calendar year to push through more of Mr. Biden’s agenda.

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The Triple Tax Break You May Be Missing: A Health Savings Account

The federal government’s pandemic relief program expanded what H.S.A.s can pay for, including nonprescription medicine like pain relief and allergy pills, and menstrual products like tampons and pads. (The I.R.S. has a full list of eligible items.)

Some employers match contributions to H.S.A.s as they do retirement savings. But self-employed people and contractors can open them, too.

People often confuse H.S.A.s with other types of health accounts, such as flexible health spending accounts. But unlike F.S.A.s, health savings accounts are portable: If you change jobs or leave the work force, you keep the account. Contribution limits are higher for H.S.A.s, and there is no deadline to spend the cash. Unspent money can be invested for health needs in retirement.

A study published last summer in JAMA Network Open, a journal from the American Medical Association, found that many people with high-deductible insurance didn’t have a health savings account. And more than half who had one had not contributed to it in the previous year. People with health plans bought through a government exchange were more likely to not have an H.S.A., even though the average deductible in the federal marketplace is high enough.

How Has the Pandemic Changed Your Taxes?

Nope. The so-called economic impact payments are not treated as income. In fact, they’re technically an advance on a tax credit, known as the Recovery Rebate Credit. The payments could indirectly affect what you pay in state income taxes in a handful of states, where federal tax is deductible against state taxable income, as our colleague Ann Carrns wrote. Read more.

Mostly.  Unemployment insurance is generally subject to federal as well as state income tax, though there are exceptions (Nine states don’t impose their own income taxes, and another six exempt unemployment payments from taxation, according to the Tax Foundation). But you won’t owe so-called payroll taxes, which pay for Social Security and Medicare. The new relief bill will make the first $10,200 of benefits tax-free if your income is less than $150,000. This applies to 2020 only. (If you’ve already filed your taxes, watch for I.R.S. guidance.) Unlike paychecks from an employer, taxes for unemployment aren’t automatically withheld. Recipients must opt in — and even when they do, federal taxes are withheld only at a flat rate of 10 percent of benefits. While the new tax break will provide a cushion, some people could still owe the I.R.S. or certain states money. Read more.

Probably not, unless you’re self-employed, an independent contractor or a gig worker. The tax law overhaul of late 2019 eliminated the home office deduction for employees from 2018 through 2025. “Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home,” the I.R.S. said. Read more.

Self-employed people can take paid caregiving leave if their child’s school is closed or their usual child care provider is unavailable because of the outbreak. This works similarly to the smaller sick leave credit — 67 percent of average daily earnings (for either 2020 or 2019), up to $200 a day. But the caregiving leave can be taken for 50 days. Read more.

Yes. This year, you can deduct up to $300 for charitable contributions, even if you use the standard deduction. Previously, only people who itemized could claim these deductions. Donations must be made in cash (for these purposes, this includes check, credit card or debit card), and can’t include securities, household items or other property. For 2021, the deduction limit will double to $600 for joint filers. Rules for itemizers became more generous as well. The limit on charitable donations has been suspended, so individuals can contribute up to 100 percent of their adjusted gross income, up from 60 percent. But these donations must be made to public charities in cash; the old rules apply to contributions made to donor-advised funds, for example. Both provisions are available through 2021. Read more.

The findings suggest that health plans, employers and financial advisers could do more to explain how H.S.A.s work, simplify their use and encourage contributions, said an author of the study, Dr. Jeffrey T. Kullgren, associate professor of internal medicine and health management and policy at the University of Michigan.

“Anything that makes it easier would be a good thing,” he said.

H.S.A. providers increasingly are cutting fees and using technology to encourage use. Fidelity Investments this month will test an app that will allow clients with employer H.S.A.s to track account balances, contributions and spending. The app will also let users scan products to check if they are H.S.A.-eligible.

Others are focusing on workers in the gig economy. Starship, a start-up, promotes its accounts through affiliations with ride-hailing and delivery companies. Its app allows workers to automatically invest contributions in low-cost index funds and exchange-traded funds. Because there is no required minimum balance, users are able to invest all of their contributions. But that would also leave no cash available to cover medical costs, unless the investments are sold. Starship sets the default minimum threshold before investing at $2,000, but users can lower it to zero, said Sean Engelking, the company’s chief executive.

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I.R.S. urges taxpayers not to amend already-filed returns to take new tax break.

Taxpayers who already filed their 2020 returns should not amend them to take advantage of tax breaks that were created by the new $1.9 trillion pandemic relief legislation, the Internal Revenue Service commissioner, Charles Rettig, told lawmakers on Thursday, saying that the I.R.S. would automatically send refunds to those who qualify.

Mr. Rettig, speaking at a congressional hearing, was referring to a provision in the law that provides a tax exemption on the first $10,200 of jobless benefits collected in 2020 by unemployed workers whose households earned less than $150,000.

“We believe that we will be able to automatically issue refunds associated with the $10,200,” Mr. Rettig said.

According to The Century Foundation, about 40 million Americans received unemployment insurance last year.

from April 15 to May 17, to give itself and taxpayers more time to handle returns and refunds.

The Treasury Department and the I.R.S. are also racing to develop new regulations and update systems to reflect other aspects of the March relief law.

Treasury officials said at a briefing on Thursday that they are working with the I.R.S. to develop a new online portal to disburse advance payments for the expanded Child Tax Credit, which will provide up to $3,600 per child under age 6 and $3,000 for children ages 6 to 17, regardless of whether a family earns enough to pay income taxes.

The portal will allow taxpayers to upload relevant data for midyear payment adjustments, such as the birth of a child, the officials said.

Treasury officials also said the department is working on additional guidance on how states can use money included in the relief law. That will include clarity about how states must repay relief funds if they decide to cut taxes after receiving aid.

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How Your 2020 Taxes Are Affected by the Coronavirus Pandemic

You’ll need to know how much you’ve already received to claim the credit; If you don’t have the notices detailing the amounts (Notice 1444 for the first stimulus payment and 1444-B, for the second), you can find the information by setting up an individual online account. (Spouses filing jointly will have separate accounts.)

The quickest way to receive the credit is by filing a tax return electronically and having the money direct deposited, even if you don’t need to file otherwise. If you earn $72,000 or less, you can do it free through the I.R.S. Free File program.

It’s possible, particularly if your financial situation or status changed last year.

The recovery credit on the 2020 return is based on an individual’s 2020 tax year information, while the second stimulus payment was based on the 2019 tax year. (For the first stimulus check, the I.R.S. said, a 2018 return may have been used if the 2019 one was not filed or processed.) So if your income dropped in 2020, and you didn’t receive the full amount, you could potentially receive more.

The same goes for changes in life circumstances. If you had a child in 2020, for example, you may be eligible for more money, or maybe you’re no longer a dependent on your parents’ tax return (and were in 2019), which may make you eligible.

Undocumented immigrants without Social Security numbers are ineligible for payments — and the CARES Act, the $2 trillion relief package signed into law in late March, also prevented most spouses and children from receiving checks as well, even if they were U.S. citizens.

The December relief bill changed that, at least in part. Now, married couples filing joint returns may be eligible to recover payments for a spouse who has a valid Social Security number, the I.R.S. said. Each child with a Social Security number is also eligible for payments.

To determine if you qualify, use the Recovery Rebate Credit Worksheet or tax preparation software.

The latest relief package includes another stimulus payment of up to $1,400. The I.R.S. will calculate payments based on your most recent tax return.

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A Break for Working Families

The “lookback” also applies to the child tax credit, which is partly refundable. The credit is worth up to $2,000 for each child under 17.

The problem is that some people may not know about the option, Mr. Flacke said. He urged people to have their 2019 tax return handy when they do their taxes or meet with their preparer and to double check which year’s income would result in a bigger refund.

So how do you qualify for the earned-income tax credit? For 2020, the credit is available for families earning up to about $57,000. Individual filers earning up to about $16,000, with no children, can get a credit of up to $538. (There are also limits on investment income.)

You can see if you qualify by using the I.R.S.’s online assistant.

Because many people lost income last year, families who don’t usually claim the credit might qualify for it this year, the I.R.S. said.

Even in a normal year, millions of eligible people fail to claim the credit, according to the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution. Some people have income so low that they aren’t required to file a federal tax return and may not realize they can claim the credit by filing one.

Roxy Caines, director of the earned-income tax credit campaign at the Center on Budget and Policy Priorities, a research group, encouraged filers to check if they qualify since changes in family situations, as well as income, may affect eligibility. Plus, if you didn’t claim the credit in a previous year but think you would have qualified, you can file and claim it for up to three previous years, she said.

The I.R.S. began accepting tax year 2020 returns on Feb. 12. People expecting refunds usually file early. But because of fraud prevention steps, the I.R.S. must wait until after mid-February to issue refunds to most people claiming the earned-income credit. Early filers should start receiving their refunds this month. They can check the status of their refund using the I.R.S.’s refund tool.

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Some Changes That May Affect Next Year’s Tax Return

That means someone who was philanthropically minded could donate enough this year to “wipe out their entire tax bill,” said Cari Weston, director for tax practice and ethics at the American Association of Certified Public Accountants.

Medical deductions. The December law made permanent — again — a lower threshold for deducting medical expenses. Taxpayers can continue to deduct unreimbursed medical expenses that exceed 7.5 percent of their income, instead of 10 percent. To take the deduction, filers must itemize.

The floor had been 7.5 percent before the 2017 tax law raised it temporarily to 10 percent, Ms. Weston said. The latest change reverts to the earlier rule. Still, she said, the deduction is of limited help for most people.

For instance, if you have adjusted gross income of $100,000, you can now take a deduction for medical expenses that exceed $7,500 ($100,000 multiplied by 0.075). If you had expenses of $10,000 in 2021, your deduction would be $2,500 ($10,000 minus $7,500). Under the prior rule, your expenses wouldn’t have exceeded the $10,000 cutoff, so you wouldn’t have qualified for a deduction.

Deductions for business meals. This one is more helpful to businesses, but it could apply if you’re self-employed and take clients to lunch or dinner. Businesses can deduct 100 percent of business meals for 2021 and 2022 (but not for 2020), instead of the usual 50 percent. This is aimed at helping out beleaguered restaurants that have suffered from restrictions during the pandemic. The deduction applies to client meals as well as to employees on business travel and must be for food and drinks provided by a restaurant.

How Has the Pandemic Changed Your Taxes?

Nope. The so-called economic impact payments are not treated as income. In fact, they’re technically an advance on a tax credit, known as the Recovery Rebate Credit. The payments could indirectly affect what you pay in state income taxes in a handful of states, where federal tax is deductible against state taxable income, as our colleague Ann Carrns wrote. Read more.

Mostly.  Unemployment insurance is generally subject to federal as well as state income tax, though there are exceptions (Nine states don’t impose their own income taxes, and another six exempt unemployment payments from taxation, according to the Tax Foundation). But you won’t owe so-called payroll taxes, which pay for Social Security and Medicare. The new relief bill will make the first $10,200 of benefits tax-free if your income is less than $150,000. This applies to 2020 only. (If you’ve already filed your taxes, watch for I.R.S. guidance.) Unlike paychecks from an employer, taxes for unemployment aren’t automatically withheld. Recipients must opt in — and even when they do, federal taxes are withheld only at a flat rate of 10 percent of benefits. While the new tax break will provide a cushion, some people could still owe the I.R.S. or certain states money. Read more.

Probably not, unless you’re self-employed, an independent contractor or a gig worker. The tax law overhaul of late 2019 eliminated the home office deduction for employees from 2018 through 2025. “Employees who receive a paycheck or a W-2 exclusively from an employer are not eligible for the deduction, even if they are currently working from home,” the I.R.S. said. Read more.

Self-employed people can take paid caregiving leave if their child’s school is closed or their usual child care provider is unavailable because of the outbreak. This works similarly to the smaller sick leave credit — 67 percent of average daily earnings (for either 2020 or 2019), up to $200 a day. But the caregiving leave can be taken for 50 days. Read more.

Yes. This year, you can deduct up to $300 for charitable contributions, even if you use the standard deduction. Previously, only people who itemized could claim these deductions. Donations must be made in cash (for these purposes, this includes check, credit card or debit card), and can’t include securities, household items or other property. For 2021, the deduction limit will double to $600 for joint filers. Rules for itemizers became more generous as well. The limit on charitable donations has been suspended, so individuals can contribute up to 100 percent of their adjusted gross income, up from 60 percent. But these donations must be made to public charities in cash; the old rules apply to contributions made to donor-advised funds, for example. Both provisions are available through 2021. Read more.

“It helps boost the restaurant economy,” Ms. Weston said.

Changes to tax breaks for educational expenses. The December law also did away with the on-again, off-again deduction for tuition and related expenses, but expanded the income limits for the lifetime learning credit, a credit that covers many of the same costs, starting in 2021. The credit is worth up to $2,000 per tax return.

“This is a net positive for families,” said Mark Kantrowitz, publisher of Savingforcollege.com.

Often, he said, families were confused and took the deduction when they might have been better off taking educational credits. Tax credits are generally considered better than deductions because credits directly reduce the amount of tax owed.

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It May Be Time to Start Worrying About the Estate Tax

Elimination of the step-up rules could capture billions in taxes from the rich but hurt some people who do not have enormous wealth. Consider a hypothetical couple who bought their home 40 years ago for, say, $75,000, paid the mortgage, maintained the yard, made some upgrades and now find themselves with a house worth $300,000 or more. For many families, a house like that forms the basis of a modest estate to pass to heirs. Now, if heirs ever sell that house, they will be responsible only for gains above $300,000; if the step-up in basis were eliminated, they would owe taxes on any amount above the original $75,000.

The loss of a step-up in basis at death would change the calculus for real estate and any other highly appreciated asset. (Think of Apple stock bought in the 1980s, or Bitcoin from 10 years ago.)

“Most of America has their wealth concentrated in their home,” said Chris Bixby, senior wealth adviser at Mariner Wealth Advisors. “That would be subject to the step-up. I’m talking to people about gifting the house earlier to get it into their heir’s name, so the appreciation happens in their name, not yours.”

That may be a step too far for many people, who will want to retain ownership of their home.

There is also a broader equity issue.

Elimination of the step-up in basis could make it harder to bridge the racial wealth gap, said Calvin Williams Jr., chief executive and founder of Freeman Capital, a wealth management firm. He noted that the Brookings Institution has found that Black families, on average, have about one-tenth the wealth of white families — $17,150 versus $171,000. In addition, Brookings estimates that only 10 percent of Black families inherit any money, about $100,000 on average, compared with about 30 percent of white families, who receive about $200,000.

Elimination of the step-up rule would make it more difficult for Black families to pass on whatever wealth they have been able to accumulate, he said. “The fact that the inheritance gap has continued to grow, even as Black income is continuing to grow, shows just how much work needs to be done to close that gap,” he said.

It might be more equitable to create a cap on the step-up in basis that would exempt people below a certain amount of wealth, he said: A $500,000 exemption would provide relief to many middle-class families. This would be similar in spirit to another proposal under consideration by the Biden administration, an increase in capital gains taxes for people earning more than $1 million a year.

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