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You know that sinking feeling that you tossed something really important into the garbage?

Apparently that dreaded goof came true for some names on the U.S. Treasury Department’s mailing list. They threw away a plain, white envelope that looked like junk mail but actually contained a prepaid debit card for their federal Economic Impact Payment – part of coronavirus relief.  The card is worth at least $1,200 to each person.

In mid-May, Treasury moved to speed up delivery of some payments by issuing prepaid debit cards. Until then, the payments had been issued as electronic bank deposits and paper checks.  Eventually, Treasury will issue debit cards to about 4 million recipients. The Internal Revenue Service said.

The confusion came because a management firm hired by Treasury mailed the cards in white envelopes without any government identification. Instead, the envelopes came from “Money Network Cardholder Services,” the IRS confirmed.  The debit card inside, named the “Economic Impact Payment Card,” is a Visa card issued by Treasury’s financial agent called MetaBank, NA.

The payment was explained inside the envelopes, but some people didn’t get that far. They  figured the letters were just throwaways, media outlets such as  the Washington Post reported.

The IRS, which is in charge of distributing the stimulus payments, announced late in the month that people who lost or destroyed their debit card can request a replacement through MetaBank without paying a fee. Call 1-800-240-8100 for more information.

When their cards do arrive, people can use them like other debit cards to purchase items, to get cash from in-network ATM machines or to transfer the money to their personal banking accounts. There are no fees charged for use, the IRS said.

For advice about stimulus payments, feel free to contact Eric Buechler, who is an enrolled agent recognized by the IRS and owner of tax preparation firm EricJohn Ltd.

The federal government recently added $600 a week to unemployment insurance benefits now being drawn by millions of workers.  The extra cash was among three new benefits in the Coronavirus Aid, Relief and Economic Security Act (CARES), which took effect late in March.

Generous as that is, though, workers might want to set aside some money for income taxes. The fact is, Congress has not exempted those $600-a-week payments or the regular unemployment benefits from federal taxes.

With several types of pandemic payments underway, taxpayers might be baffled about tax impacts. For example, the well-publicized stimulus payments of up to $1,200 per person and $2,400 for married couples effectively come tax-free. A May 6 article from Forbes online (www.forbes.com) noted that the payments are reported on the federal tax return, but then are offset by a special credit.

Unemployment compensation – including the new $600 benefit – is treated differently. It simply is figured into gross income, making it taxable.

The extra $600 payments began immediately after the bill was signed, and they last through July 31.  In general, any workers who are receiving unemployment compensation should automatically receive the boost.

How might workers set aside some money to pay taxes? One common way is by having state governments withhold money from unemployment benefits when they are paid. Taxpayers also can pay estimated taxes each quarter to federal and state governments.

The National Employment Law Project published a fact sheet that goes into much more detail about unemployment insurance provisions in the CARES Act. See it at https://www.nelp.org/publication/unemployment-insurance-provisions-coronavirus-aid-relief-economic-security-cares-act/

Of course, Eric Buechler, tax specialist and owner of EricJohn Ltd., can provide more specific advice for your personal tax situation.

The Internal Revenue Service has promoted electronic filing for years, to the point where more than 90 percent of taxpayers are sending federal tax returns and other reports directly to its computers.  But there’s been one big exception. The only way for taxpayers to change an individual income tax return after filing it has been by sending a paper Form 1040-X through the mail.

Commissioner Charles Reddig now has announced that, after years of trying, the IRS has “overcome the unique challenges related to the 1040-X” and succeeded in moving it online. Beginning this summer, taxpayers will be able to amend returns and send them to the IRS by computer using an electronic 1040-X. Commercial tax software packages also have been updated with the virtual form.

The electronic option doubtless will be more convenient for many taxpayers. It’s also a big deal for the IRS, which receives about 3 million copies of Form 1040-X each year Those amended returns will arrive more quickly and minimize errors typically found on the past paper filings, the agency said.

The IRS hasn’t announced exactly when the 1040-X will go online yet.  When it does, taxpayers at first will be able to use it only to change 1040 and 1040-SR returns filed for 2019. In other words, you’ll still have to file a 1040-X on paper to revise 2018 or earlier returns.

The IRS assures that taxpayers will be able to track the status of their electronically filed 1040-Xs through “Where’s My Amended Return?” just as in the past. Of course, they also have the option to stick with the paper version, the IRS notes.

Are you wondering how – or if – you should amend a past tax return? Contact EricJohn Ltd. principal Eric Buechler. He is a tax preparation specialist and enrolled agent recognized by the IRS.

The federal government has found another way deep in the nooks and crannies of tax codes to help taxpayers in financial pain from the coronavirus epidemic.

The Internal Revenue Service now is allowing mid-year changes to “cafeteria plans,” such as health Flexible Spending Arrangements (FSA), so that workers who use them can deal with losses of income, unexpected bills and, perhaps, postponements of health care appointments.

 Typically, the employees must tell employers which cafeteria plans they wish to use and how much of their wages to place in them during a firm enrollment period each year. The money goes into the plan free of federal income tax, and the employee can claim it for their spending on health care, child  care or other items covered by the plans.

Because of financial burdens due to coronavirus, the IRS effectively has allowed employers to reopen enrollment periods for the plans. Consequently, employees will be able redo their choices of health FSAs and dependent care programs and retain the tax exemption for wages in them.

In addition, taxpayers can use any unspent money left in their plans from last year through Dec. 31, 2020. Normally, the deadline might be in March, depending on the plan.

Employees also now can claim expenses for telehealth services back to Jan. 1 of this year. Another new rule also allows people with health plans that have high deductibles to avoid that cost-sharing for any coronavirus-related expenses after Jan. 1, 2020.

Of course, workers will need to check into the changes with their employers, who actually offer the cafeteria plans.

For more guidance on approaches to cafeteria plans, feel free to contact Eric Buechler, founder and owner of   EricJohn Ltd., for guidance in your specific situation.

We’ve written recently about ways to tap a retirement account for extra money during the coronavirus emergency.  But what about the flip side – holding in tax-deferred money that was scheduled to be withdrawn from an IRA or 401(k)?

It winds up that Congress temporarily suspended the rule on Required Minimum Distributions (RMD) in its coronavirus relief law.  In short, retired workers can just omit the withdrawals they would have to take from their retirement accounts this year. It’s a one-time offer, good just for tax year 2020.

Normally, when workers reach age 72 – it was 70½ until recently — they must start taking money out of many types of retirement accounts.  A Required Minimum Distribution (or RMD) is set using a federal formula. It is subject to income taxes at that point, after growing without taxation inside the account.  (One major exception is the popular Roth IRA, which does not require RMDs.)

To see how RMDs might affect retirement, workers might want to discuss the prospects with a finance professional. Call Eric Buechler, owner of EricJohn Ltd. and an enrolled agent recognized by the IRS, for guidance about your specific tax circumstances or finances.

American workers under the age of 59½ generally haven’t been able to reach into their IRAs without paying stiff penalties. But the federal government temporarily has changed that in the throes of the coronavirus epidemic.

In March, the CARES Act (Coronavirus Aid, Relief and Economic Security Act) opened retirement plans to as much as $100,000 worth of penalty-free withdrawals for coronavirus victims. That gives workers and their families another lifeline from their own funds to endure the emergency, even if many would view it as a last resort. By the way, the temporary change also is available from some other retirement vehicles offered by employers, such as 401(k)and 403(b) plans.

Who’s eligible?  Just about anyone who has suffered financially because of the virus. Specifically,

• Anyone who has been diagnosed with COVID-19 or whose spouse or dependent has been diagnosed.
• Anyone whose finances were disrupted because of being quarantined, furloughed or laid off, or had hours reduced at a job because of the virus.
• Parents or guardians who could not work because of lack of child care during this time.
• Business owners who suffered financially because of closings or reduced hours of their enterprises due to COVID-19.

If they need to tap their IRAs/retirement plans, those workers now can withdraw as much as $100,000 without paying a required 10 percent penalty for an early distribution.

If the distribution is repaid to the IRA within 3 years, the Internal Revenue Service treats it as a rollover. That means no federal income tax will be due.

If it is not repaid, the emergency distribution will trigger normal federal income taxes. However, the IRS is allowing workers to stretch the taxes over a three-year period from tax year 2020 through 2022. Basically, they can report a third of the distribution as income each year.

Workers can take advantage of the special coronavirus rules through Dec. 30 this year, the IRS says. For more specifics, see  https://www.irs.gov/newsroom/coronavirus-related-relief-for-retirement-plans-and-iras-questions-and-answers .

Eric Buechler, founder of EricJohn Ltd. and an IRS-recognized enrolled agent, also can guide workers wanting to take advantage of this special coronavirus provision.

First came “Where’s My Refund?”, a way for taxpayers to track refunds from  their federal tax returns.

Now, with more than 80 million Americans due for coronavirus relief dollars, the Internal Revenue Service is going online again with a tracking service for those Economic Impact Payments.

“Get My Payment,” which is located on the IRS Web site (www.irs.gov) , gives taxpayers a quick way to discover how much they will receive in payments and when the deposits might arrive. It tracks either electronic payments or paper checks. To use “Get My Payment,” taxpayers must provide a few identification details, including Social Security Account Number and date of birth.

The online tool also allows people to arrange for direct deposit to their bank accounts if they didn’t ask for direct deposit on recent income tax returns, the IRS said. The agency is taking its delivery information primarily from 2018 and 2019 (if filed) returns.

People who did not file income tax returns for those years still are eligible to receive the payments. They can use another program called ’The Non-filers: Enter Payment Info tool.”  It was designed for people who aren’t required to submit tax returns — perhaps because of too little income, the IRS said.

Last week, the tax agency also announced that people receiving Social Security retirement, disability or survivor benefits can expect their Economic Impact Payments to be paid  automatically “in the near future,” even if they did not file recent tax returns.

The Economic Impact Payments range to $1,200 per individual and to $2,400 for a married couple filing jointly. Parents also receive another $500 for each child under the age of 17. Payments phase out at $75,000 of adjusted gross income (on tax returns) for individuals and $150,000 for joint returns.

Find “Get My Payment” at https://www.irs.gov/coronavirus/get-my-payment and more information about the payments at https://www.irs.gov/coronavirus/economic-impact-payment-information-center .

As might be expected, the “Get My Payment” site is under heavy use now, as the first payments are going out. Sometimes, it also can’t track one because the data for it is not yet available, The IRS says it is updating the site once a day, usually in the early morning hours.

Here is a late-breaking update about estimated payments of Minnesota income taxes.

As noted in our previous post, the Minnesota Department of Revenue is requiring individual taxpayers to submit estimated taxes for the first quarter of the 2020 tax year by April 15. Those payments were not postponed by the emergency actions involving coronavirus.

On Friday (April 10), Minnesota Revenue announced three formulas that will avoid penalties, interest or extra taxes. Taxpayers will be safe if they base the payments on:

• 90 percent of their estimated tax liability for 2020 or
• 100 percent of the taxes they paid for the 2019 tax year.  (Exception:  It’s 110 percent for those with state adjusted gross incomes over $150,000.)
• 75 percent of Minnesota income tax paid for tax year 2018.

The guidance applies to taxpayers who are individuals, partnerships, fiduciaries and S-corporations reporting on a calendar year basis. They may or may not need to pay estimated taxes in Minnesota, depending upon their individual tax situations.

By now, everyone knows that Tax Day has been pushed back to July 15. That’s the new deadline for individual taxpayers to file 2019 returns and to pay their taxes.

Both federal and Minnesota governments gave us some more time because of the severe disruptions caused nationwide by the coronavirus disease emergency.  So, original due date, April 15, now looks like just another day in tax season for many of us.

 Here are a few details Minnesotans will appreciate about the three-month delay:

·   It’s automatic. There are no applications or extension forms required. File and pay by July 15, and you’re square with both Minnesota’s Department of Revenue and the Internal Revenue Service.

·   The longer filing time also comes with no penalties or interest from either government.

·   There is one important note for Minnesotans who use estimated tax payments. They still must make their first quarter payments for tax year 2020 by April 15. That is different than the IRS extension, which postpones those Q1 payments to July 15.

·  If you still can’t file by July 15, the normal extensions will delay the return until Oct. 15. But, as always, tax payments will be due on the new Tax Day, July 15.

Both state and federal tax agencies are urging taxpayers to file as soon as they can – especially if they expect refunds. The IRS announced that most refunds are being paid within 21 days.

 Minnesota Revenue also asks taxpayers to send in their returns and taxes as soon as possible to help fund the state’s battle against coronavirus. For more about the state’s extension, see https://www.revenue.state.mn.us/our-response-covid-19.

Of course, to discuss your personal taxes, feel free to contact Eric Buechler, owner of EricJohn Ltd. and an enrolled agent recognized by the Internal Revenue Service.

The Internal Revenue Service is streamlining again for the 2019 tax filing season. Its basic form for individual taxpayers, the IRS Form 1040, is a bit shorter and has some convenient changes.  Among them, the tax agency has trimmed the paperwork by dropping three numbered schedules from its main package.  The 1040 for 2018 included six of those related schedules.

The IRS did help senior citizens with a new, optional twist. Taxpayers who are 65 and older – born before Jan. 2, 1955 – can choose a customized version named. the “1040-SR.”  One convenience is a handy chart showing standard deduction amounts with age and blindness conditions included. Otherwise, it’s pretty much the new 1040 with bigger print.  

Which version should you senior taxpayers use?  Take your pick. The IRS says it will accept either the new 1040 or the 1040-SR.

The IRS did add a new report aimed at investors in its new 1040 package.  The first question on Schedule 1 asks about any investments in “virtual currency,” also known as cryptocurrency. The IRS has been focusing on those digital deals recently. 

The 2019 model of the 1040 can be more convenient for some taxpayers. Others will need to delve deep into underlying tax issues to fill out their 1040s.  Feel free to contact EricJohn Ltd. owner Eric Buechler for guidance or for full preparation of your 2019 tax return.