Congress and the White House want to pass the next stimulus bill quickly.
They will do it, but it won’t be easy. Some of the major sticking points include additional funding for states and localities, unemployment benefits, and liability protection for businesses and others from coronavirus-related lawsuits.
Among tax items that have a good chance of making it into final legislation:
A second round of stimulus checks for individuals. Tax breaks for businesses to help cover part of the cost of making their premises safe for workers and customers. Expanded employee retention tax credits for employers who are affected by COVID-19 but keep paying workers. Funding and tweaks to Payroll Protection Program loans. Plus relief for workers with unused funds in their health flexible spending accounts.
Could the Schedule A medical expense deduction be expanded?
A House proposal would lower the current 7.5% AGI threshold to 5% for 2020 and 2021 in light of the COVID-19 pandemic. This idea has bipartisan support on Capitol Hill.
Leasing a vehicle to use in your business is a bit cheaper, tax-wise, in 2020.
If a car worth more than $50,000 is first leased for business during the year, the lessee must pay income tax each year on an amount spelled out in IRS tables. For example, on a three-year lease for a $60,000 car first put in service this year, you reduce the size of your tax deductions for the lease payments on the vehicle
by $22 in 2020, $49 the next year, and $72 in 2022. See Rev. Proc. 2020-37.
A man whose tax debt that is discharged in bankruptcy gets another win:
A private tax-debt collector owes him damages, a federal court decides.
IRS uses private companies to collect inactive tax receivables owed by individuals. In 2016, a bankruptcy court discharged the man’s liabilities, including taxes that he owed to IRS. Collection efforts should have ceased at that time. But instead, the IRS hired a private collector to collect the man’s taxes. The man sued, and the bankruptcy court has now ruled that the collector owes him $3,644 for attorneys’ fees and the emotional distress (in re Starling, D.C., N.Y.).
Can’t pay your taxes and worried about penalties?
File your return regardless. Ask IRS about penalty abatement if you owe late filing or payment penalties. Under its first-time abatement program, IRS will OK a waiver of the fines for filers who paid or arranged to pay the tax and who have been tax-compliant for three years.
Making an offer to settle your federal tax debt at less than what you owe?
There are two payment options: Lump sum cash, which requires 20% The total offer amount to be paid upfront, with the remaining balance to be paid in five or fewer installments within five months of the date your offer is accepted. Periodic payment requires that your first payment be made with the offer, with the remainder remitted in monthly installments over 6-24 months. Check out IRS’s Form 656 booklet for forms and eligibility requirements. IRS also has an online tool at https://irs.treasury.gov/oic_pre_qualifier.
Keep this rule in mind if the service accepts your offer in compromise:
You must timely file returns and pay taxes for five years, starting with the date of IRS’s acceptance of the request and ending through the fifth year, including extensions. Take this case involving a couple who entered into an offer-in-compromise agreement with IRS in 2013, paid off their offer in 2016, but then failed to pay their 2015 taxes. IRS revoked the compromise offer and ordered the couple to pay the full amount
they originally owed, less than they already paid in (Sadjadi, 5th Cir.).
Promises to settle your IRS tax debts for pennies on the dollar are just that: Promises.
Firms that hawk these types of tax-debt relief plans are referred to by the IRS as “offer in compromise mills.” IRS says these companies charge hefty up-front fees and churn out applications that most of their clients cannot qualify for the offer and compromise.
IRS is still behind on issuing tax refunds.
Tax refunds include direct-deposit refunds and paper checks owed to people who filed returns after the IRS shut its offices because of the coronavirus pandemic. IRS statistics bear this out. As of July 17, the service processed 6.8% fewer direct-deposit refunds and 5.1% fewer total refunds than last year. Refunds on paper returns take the longest. To check on your refund status, use “Where’s My Refund” on IRS’s website.