The Trump administration has announced that individuals and businesses will be allowed to delay filing and paying their federal tax bills for 90 days as part of an emergency relief plan amid the coronavirus pandemic.
Some questions and answers about the delay and its potential impact on the U.S. economy.
DO I STILL NEED TO FILE?
Initially, only the payment due date was delayed past the traditional April 15 deadline. The Treasury later announced that it would also grant a 90-day extension for filing federal taxes as well. That means both the delayed filings and payments are due July 15.
Taxpayers who are facing difficulty filing by the new deadline still have the option to request an extension. Visit the IRS website for more details.
WHO GETS TO WAIT?
The IRS said that the deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax.
WILL I BE PENALIZED FOR WAITING TO MAKE PAYMENTS?
No. During this unprecedented delay, taxpayers will not be subject to interest or penalty payments, regardless of how much they owe.
WHAT IF I AM EXPECTING A REFUND?
If you are expecting a refund, file as usual. The IRS is still processing returns and issuing refunds; most refunds are issued within 21 days.
DOES THIS APPLY TO MY STATE TAXES TOO?
Not necessarily. Check with your state tax authority to see about any changes to due dates. Some are following the federal model, but some are not extending their deadline and others are setting up exceptions only for certain groups impacted by the virus.
HOW WILL THIS HELP THE ECONOMY?
Treasury Secretary Steven Mnuchin estimates that taxpayers will be able to keep $300 billion in the economy for now. And some tax and economic experts say any extra cash in the hands of Americans is helpful because many will be struggling to get by.
However, some say the tax delay will not provide widespread financial relief.
Howard Gleckman, a senior fellow at the nonpartisan Tax Policy Center, says he thinks it will have a limited impact. That is in part because about three-quarters of Americans get refunds in any year and won’t benefit from a delayed tax bill.
The IRS expected about 150 million individual tax returns, as of the most recent count, about 76 million taxpayers have already filed.
Those who file early tend to be low- and middle-income individuals who are getting a refund. Higher-income individuals, or those with complex taxes who owe money to the government, tend to file later, Gleckman said. This move will provide some relief for them, but Gleckman warns that higher income individuals have extra cash, and they tend to save it not spend it. That leaves lower income individuals, who need it most and are more likely to go out and spend it, without relief from this move.
Trump Changes Course, Shows Support For More Stimulus Checks
There’s some positive news for the tens of millions Americans who are still struggling to make ends meet as the coronavirus pandemic lingers for the third month.
It appears President Trump has changed his mind, and is now in favor of sending out an additional round of stimulus checks to help Americans get through the economic uncertainty created by the coronavirus pandemic.
When asked about the likelihood of additional checks, the President replied, “I think we will. I think we’re going to be helping people out. We’re gonna be getting some money for them during the artificial — cause it really is it’s an artificial closure — and now we’re gonna be able to open it up,” Trump told reporters while he was in Michigan touring a Ford factory.
“I would say there could be one more nice shot. One more nice dose,” Trump said about a potential stimulus bill as the country struggles to recover from historic job losses and businesses are faced with an uncertain future.
Trump’s comments were echoed by White House staff, including economic advisor Kevin Hassett, who said during a CNN interview that another round of checks is “pretty likely,” and says “it’s coming sooner rather than later” before adding that if there are indications the economy is recovering quickly as more states reopen, the White House may look at other relief options.
Also supporting Trump’s outlook is Treasury Secretary Steven Mnuchin, who said Thursday that there’s a “strong likelihood” the U.S. will send out another round of stimulus checks.
“I think there is a strong likelihood we will need another bill,” he said during an online event hosted by The Hill newspaper, but added that the stimulus may not be needed immediately.
“We’re going to step back for a few weeks and think very carefully if we need to spend more money and how we’re going to do that,” Mnuchin said.
The change in course comes after Republican lawmakers were originally hesitant to continue adding to the deficit while attempting to generate an economic recovery. But with job losses continuing to climb every week and estimates for the second quarter GDP to plunge as much as 40%, the Senate GOP leaders are warming to the idea of an additional stimulus package.
While Democrats have pushed a $3 trillion plan through the House, Senate Majority Leader Mitch McConnell reportedly told President Trump last week any stimulus bill should not cost more than $1 trillion.
McConnell has also openly opposed the Democratic plan to extend the $600 per week additional unemployment benefit by six months when it expires in July.
Republicans have also shown little interest in the Democrat’s proposal of nearly $1 trillion in aid for state and local governments to offset increased costs and lower revenues due to the pandemic, mainly citing that the budget issues the cities and states are facing pre-date the pandemic and relief funds shouldn’t be used to fix old problems.
The White House and Republican leaders would also like to pass liability protection for businesses that reopen, shielding owners from lawsuits should an employee claim they contracted the virus while on the job. Democrats, however, have opposed the idea.
36 Million Have Sought US Unemployment Aid Since COVID-19 Hit
WASHINGTON: Nearly 3 million laid-off workers applied for US unemployment benefits last week as the viral outbreak led more companies to slash jobs even though most states have begun to let some businesses reopen under certain restrictions.
The wave of layoffs has heightened concerns that more government aid is needed to sustain the economy through the deep recession caused by the viral outbreak.
Republicans in Congress are locked in a standoff with Democrats, who have proposed trillions more in aid, including for struggling states and localities, beyond the nearly $3 trillion already given to individuals and businesses.
Republican leaders say they want to first see how previous aid affects the economy and have expressed skepticism about approving much more spending now.
Roughly 36 million people have now filed for jobless aid in the two months since the coronavirus first forced millions of businesses to close their doors and shrink their workforces, the Labor Department said Thursday.
An additional 842,000 people applied for aid last week through a separate federal program set up for the self-employed and gig workers.
All told, the figures point to a job market gripped by its worst crisis in decades and an economy that is sinking into a severe downturn. The report suggests the tentative reopening of some businesses in many states has done little to reverse the flow of mass layoffs. Last week’s pace of new applications for aid is four times the record high that prevailed before the coronavirus struck hard in March.
Jobless workers in some states are still reporting difficulty applying for or receiving benefits. These include free-lance, gig and self-employed workers, who became newly eligible for jobless aid this year.
In Georgia, one of the first states to partially reopen its economy, the number of unemployment claims rose last week to 241,000. In Florida, which has allowed restaurants to reopen at one-quarter capacity, claims jumped to nearly 222,000, though that state’s unemployment agency has struggled to process claims. Other states that have lifted some restrictions, such as South Carolina and Texas, reported large declines in claims.
President Donald Trump appeared to respond to the report by tweeting, “Good numbers coming out of States that are opening. America is getting its life back!”
The latest jobless claims follow a devastating jobs report last week. The government said the unemployment rate soared to 14.7% in April, the highest rate since the Great Depression, and employers shed a stunning 20.5 million jobs. A decade’s worth of job growth was wiped out in a single month.
Even those figures failed to capture the full scale of the damage. The government said many workers in April were counted as employed but absent from work but should have been counted as temporarily unemployed.
Millions of other laid-off workers didn’t look for a new job in April, likely discouraged by their prospects in a mostly shuttered economy, and weren’t included, either. If all those people had been counted as unemployed, the jobless rate would have reached nearly 24%.
Most economists have forecast that the official unemployment rate could hit 18% or higher in May before potentially declining by summer.
The job market’s collapse has occurred with dizzying speed. As recently as February, the unemployment rate was 3.5%, a half-century low. Employers had added jobs for a record 9½ years. Even in March, unemployment was just 4.4%.
Now, with few Americans shopping, traveling, eating out or otherwise spending normally, economists are projecting that the gross domestic product — the broadest gauge of economic activity — is shrinking in the April-June quarter at a roughly 40% annual rate. That would be the deepest quarterly contraction on record.
The states that are now easing lockdowns are doing so in varied ways. Ohio has permitted warehouses, most offices, factories, and construction companies to reopen, but restaurants and bars remain closed for indoor sit-down service.
A handful of states have gone further, including Georgia, which has opened barber shops, bowling alleys, tattoo parlors and gyms. South Carolina has reopened beach hotels, and Texas has reopened shopping malls.
Data from private firms suggest that some previously laid-off workers have started to return to small businesses in those states, though the number of applications for unemployment benefits remains high.
Few analysts expect a quick rebound. Federal Reserve Chair Jerome Powell warned Wednesday that the virus-induced recession could turn into a prolonged downturn that would erode workers’ skills and employment connections while bankrupting many small businesses. Powell urged Congress and the White House to consider additional spending and tax measures to help small businesses and households avoid bankruptcy.
Powell spoke a day after House Speaker Nancy Pelosi, a California Democrat, proposed a $3 trillion aid package that would direct money to state and local governments, households and health-care workers.
Trump is applauding the moves to reopen states’ economies in hopes of reducing unemployment. So far, there is limited evidence on how that is working.
Homebase, a software company that provides time-clock technology to small businesses, has tracked how many employees have clocked in and for how many hours since the pandemic struck. Though Homebase’s data suggests that some people have returned to work in states that have partially reopened, it’s unclear how sustainable that trend can be unless many more customers return. All states remain far below their pre-virus employment levels.
In Georgia, which began reopening in late April, the number of people working at small businesses on Tuesday was down 37% compared with the beginning of March, according to Homebase’s data. That is an improvement from mid-April, when the number of employees working had fallen by half.
In New York, which remains mostly shut down, employment at small businesses is down 63% as of Tuesday, only slightly better than in mid-April.
Democrats Release “Wish List” Disguised As $3 Trillion Stimulus Bill
House Democrats released their latest stimulus bill yesterday aimed at helping the country cope with the coronavirus pandemic, and it has a lot of asks, and a price tag to match.
Clocking in at 1,800 pages, the plan will be voted on this Friday and would cost more than $3 trillion.
House Speaker Nancy Pelosi said Congress had a “momentous opportunity” to help the country, and that “not acting is the most expensive course.”
Republicans have already said the bill, called the HEROES Act, is just a “liberal wish list.”
A preview of the bill included:
- Nearly $1 trillion in relief for state and local governments
- A second round of direct payments of $1,200 per person, and up to $6,000 for a household
- About $200 billion for hazard pay for essential workers who face heightened health risks during the crisis
- $75 billion for coronavirus testing and contact tracing — a key effort to restart businesses
- An extension of the $600 per week federal unemployment insurance benefit through January (the provision approved in March is set to expire after July)
- $175 billion in rent, mortgage and utility assistance
- Subsidies and a special Affordable Care Act enrollment period to people who lose their employer-sponsored health coverage
- More money for the Supplemental Nutrition Assistance Program, including a 15% increase in the maximum benefit
- Measures designed to buoy small businesses and help them keep employees on payroll, such as $10 billion in emergency disaster assistance grants and a strengthened employee retention tax credit
- Money for election safety during the pandemic and provisions to make voting by mail easier
- Relief for the U.S. Postal Service
The bill not only includes another round of stimulus checks, which “people are craving,” as Pelosi contends. However, it also boosts the amount for each dependent up to $1,200.
Amazingly, some Democratic lawmakers want to go even further.
Ohio Rep. Tim Ryan wants Pelosi to ask for checks for “multiple months moving forward,” not just another single round like the CARES Act. Ryan also previously suggested that all Americans should get $2,000 per month until the unemployment rate returns to pre-coronavirus levels.
In response to the proposed bill, Senate Majority Leader Mitch McConnell said, “But what you’ve seen in the House is not something designed to deal with reality, but designed to deal with aspirations.”
Other Republicans like Sen. Lindsey Graham from South Carolina believe the government should take a wait and see approach before issuing more checks. Graham says “I doubt there will be another payment,” and adds, “hopefully in the coming weeks here, the economy will reopen and people will get back to their livelihoods.”
Even if the Democrats can get the bill passed through the House this Friday, the bill will likely languish for quite some time. The Senate will be in no hurry to vote on the bill, and next week is the last week for votes before lawmakers leave for the Memorial Day recess. They aren’t due back in Washington until June, and only then can they begin contentious negotiations.
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