Funding for COVID Healthcare Staffing

Arizona, Connecticut, Georgia, Hawaii, Missouri, Nebraska and Texas are some of the states that have provided funding for COVID staffing. This is due to the increase in COVID cases and how this affects local healthcare staff. This will definitely impact the travel industry significantly!

Read this Healthcare Staffing Report by Staffing Industry Analysts (SIA) that delves into this announcement!

Christmas in July??!

Child Tax Credit Payments

Last week, a lot of people might have woken up to a surprise deposit(s) in their bank account. If you weren’t aware the Child Tax Credit is being distributed now to parents that have children 17 years and younger. Qualified individuals will expect to receive between $250 and $300 monthly per child! The IRS will be making these payments on the 15th every month (except if the 15th falls on a holiday or a weekend).

Read more regarding the child tax credit here!

Unemployment Benefit Recalculation Refunds

Another deposit you might see in your bank account is from Unemployment department. The IRS has been amending returns of individuals that had filed early on and did not receive the unemployment exemption that President Biden approved mid March. Be on the lookout for this deposit as well if you had unemployment income last year and have not received this unemployment refund yet!

Read more about unemployment benefit recalculation here!

Have you Already Created your IRS Account?

Creating an IRS account is one of the most convenient ways to stay up to date about anything with your US taxes. Whether it’s balance owed, refund due, stimulus checks (economic impact payments), it is vital to have an IRS account. Click here for more information and to create your online IRS account!

Understanding How This Tax Season is Different from All Others!

TravelTax as well as thousands of other tax offices have been facing challenges this tax season with all the retroactive tax law changes thrown in mid March, deadline extensions, and extreme delays in IRS processing returns, refunds and debits. We appreciate your patience, and below is an article describing the difficulties that tax offices have encountered this tax season all over the US.

Check out CNN Business article regarding this tax season!

Amendments Needed due to American Rescue Plan

Unemployment and healthcare credits

The recent passage of the American Rescue Plan made two significant, retroactive changes to the 2020 tax returns that we are currently filing.

First, the law exempts unemployment compensation of up to $10,200 per spouse so long as the total income on the tax return does not exceed $150,000 when the unemployment compensation is included in the total. The second provision exempts any payback of healthcare premium tax credits that one received during the 2020 tax year.

For those that have already filed the returns with healthcare credit paybacks, the IRS has not come up with a correction as of March 23, 2021, the date that we have posted this. They have specifically stated that they do not want an amended return until further guidance is issued.

Unemployment compensation is a bit trickier. The IRS has announced that they will handle the processing of amended returns and send the deposit or check. However, there are many states that tax unemployment compensation that have not decided if they will follow the Federal changes, But even if the state does not tax unemployment compensation, this presents another problem. Most states compute a nonresidents tax liability based on a percentage of the total income that the individual earned all year (everywhere income). If the everywhere income is reduced by the exempt and unemployment compensation, this will skew the ratio of in-state to out-of-state income. So even these states have to decide whether their ratios include unemployment compensation or exempt. Every tax software product has to be retooled and it has to be done in conjunction with the states and how they want to process it.

What we are doing at TravelTax

Those Affected by Unemployment Compensation Changes

For those returns that have already been filed, we have made a list and as of the date of this post are waiting for the individual states to issue guidance as to how to report the data on those returns. Most likely this will require an amended return and we will be notifying the clients affected by this via email. For those returns that have not been filed, we are holding the files until this guidance is issued and then will upload the forms to the client.

Those Affected by Health Insurance Credit Paybacks:

For clients who had to pay back healthcare premium tax credits, we have already identified those returns and will be contacting the client once the IRS issues guidance as to how to handle any amendments that are necessary.

For Both

If the client has both unemployment compensation and a payback of their healthcare premium tax credits, we will be contacting them as the IRS as well as the state revenue agencies issue appropriate guidance.

For now, this is just another example of how Congress should not be waiting to tinker with the tax code after tax season has started. We will just have to wait this out until it’s resolved unfortunately.

Double reporting of income on the state portion of the W2

Many of our clients work in more than one state. If your home state is one of those that have a tax rate higher than your work state, you are often left to make up the difference either by making estimated payments during the year or when you file your tax return after the year ends. If you wait to pay the difference when you file your return you could potentially be subject to underpayment interest or even a late payment penalty.

And as our workforce becomes more mobile, and as more states began to tax remote work for firms in their state, this will become a more common problem for taxpayers whose income span more than one state.

One of the easiest ways to solve this is for the employer to report and withhold the earnings not only for the work state but also for the individual’s home state. This allows the employer to withhold taxes for both the home state and work state to help alleviate this difference. Some states like Michigan already mandate this, most all of the other states do not have a problem with this arrangement, but others like Illinois and Alabama are not set up to handle this kind of reporting. Illinois, especially, needs legislative approval to allow this and Alabama has a rule that frowns upon this practice. This doesn’t mean that your tax return cannot be filed in the states when there is reporting for both the home and the work state that overlaps on the W2.

If your preparer has a problem with this, it’s not because the employer that gave you the W-2 is at fault, it is the tax preparer who is not used to dealing with multistate returns that doesn’t know how to tweak their software to make this work. To process the Illinois returns that have this kind of reporting, you will need to get a letter from their payroll stating that the income was not earned within Illinois but that it was earned outside of Illinois. Unfortunately, the Illinois return will have to be mailed but it doesn’t require the employer to restate the W-2. For Alabama, it’s just a matter of knowing how to work the tax software and if Alabama wants to reject the out of state tax credits, a letter from the employer will be all that’s needed to solve in a reply.

TravelTax been handling multistate and cross-border tax returns since its inception and this has never been an issue in our practice. We receive many calls from tax professionals asking for help or even insisting that we have the agency fix the W2. While it’s flattering to think we have that much power in the industry, the fact of the matter is that are simply a tax office and not a staffing agency :-).

We are more than willing to handle returns with this kind of reporting and accept referrals from other tax offices that seek assistance.

Returns Affected by COVID Legislation!

Due to retroactive tax changes affecting unemployment and healthcare premium tax credits, your return will potentially require an amendment if you have already filed. It might be best to file an extension right now if you have not filed, due to all software programs get updated to reflect these retroactive tax changes. Watch below for more info!

New COVID Tax Changes!! (American Rescue Plan)

For updates about recent COVID tax law changes regarding unemployment, healthcare credits, child tax credit, dependent care, student loan debt forgiveness, stimulus checks and extensions, watch this video!