Tax Break

Most years, this is the evening when I'm pulling together the final documents needed for my taxes and rushing to hit send in TurboTax -- just in time to meet the April 15 deadline.

If you tend to procrastinate too, don't fret: We've all gotten a filing reprieve from Congress' Covid-19 rescue package. The Cares Act has brought many changes to this year's taxes. Barron's Beverly Goodman put together a useful explainer on the pressing questions that are likely to arise once you finally grapple with your tax bill. No surprise, it's not going away.

Here are some highlights from the Q&A: 

I’ve heard about a stimulus relief check. In the words of Homer Simpson, “I just have two questions: How much? And give it to me.”

The Cares Act offers a one-time “relief” payment to help some people with a little extra cash. The payment is actually a refundable tax credit for the 2020 tax year. How much? Single people earning up to $75,000 will get $1,200, married couples earning up to $150,000 will get $2,400. Single filers earning up to $99,000 and couples earning up to $198,000 will get a portion of that; there is no payment for people beyond those income levels. People with children will get another $500 per child. Head of Household filers can claim the full credit if their income is up to $112,500, and phases out completely at $136,500.

Give it to me: You don’t need to do anything to claim this money. The IRS will base the amount on your 2019 return; if you haven’t filed yet, it will base it on your 2018 return. If you’ve given the Internal Revenue Service your bank account information to deposit prior years’ refunds, you’re in luck: The IRS will direct-deposit the relief payments to 80 million people this week—it will show up in your account with a label like “Treas 310.” Checks will be sent via the United States Postal Service soon.

Will I owe tax on that ‘relief’ payment?

No. Nothing. Nada. No one will owe any tax on this payment.

OK, back to this year’s tax filing season. When are my taxes due? Do I need to file an extension?

The deadline to file and pay your 2019 taxes is now July 15. The extension is automatic; you don’t need to do anything.

I expect to get a refund. Should I wait to file?

No—there is no benefit to filing later if you expect a refund. If you already filed, you can check on your refund status here.

There is one exception: If you are eligible for the Cares relief check based on your 2018 return, but won’t on your 2019, then it pays to hold off a bit, collect your relief payment, and then file.

Beverly has much more on what the tax-changes mean for 401(k) and IRA accounts and for anyone required to take required minimum distributions this year. Read the full story here.