How to save on taxes during the coronavirus crisis
Feeling tight financially, and wondering how to save on taxes during the coronavirus crisis?
Here’s a few things you should know.
First, the IRS has extended the deadline for filing your 2019 taxes until July 15th. You’re able to delay paying your taxes for 90 days this year (typically taxes are due April 15th).
“As part of its coronavirus response, the federal government will give filers 90 days to pay on up to $1 million in tax owed,” CNBC reported. “Interest and penalties on those amounts will not apply during that delay.”
Second, if you’re receiving unemployment benefits, you should know that you’ll owe federal taxes on the income you receive. Accountants recommend that you ask to have 10% of your payments withheld to cover federal income taxes.
“If you have the ability to do so, get the withholding in there as you’re signing up,” Oscar Vives Ortiz, a certified public accountant, told CNBC.
“If you’re already receiving benefits, you can fill out an IRS Form W-4V, Voluntary Withholding Request, to adjust your withholding,” the network adds. “You may also make changes to this on a biweekly basis when you’re asked to recertify your unemployment claim. Check with your state’s unemployment insurance program to make sure you follow the appropriate steps. The U.S. Department of Labor’s CareerOneStop website has links to every state’s program.”
Many tax programs under the CARES Act, the U.S. coronavirus relief law, were targeted at businesses with the goal of keeping more people employed. Thus, there are fewer ways to save on taxes if you’re still employed, other than delaying paying your 2019 taxes.
However, you can reduce the amount withheld from your paycheck each week by tweaking your W-4, the form you give your employer that indicates how much extra should be withheld. If you received a large refund last year and would rather receive the money paid out during the year, you may be able to adjust your withholding to do so. (You can read more about this here.)
And as always, contributions you make to your 401k are tax deductible, up to $19,500 for individuals under 50 and (almost always) $26,000 for individuals over 50. You will owe taxes when you take money out of your 401k, but typically your tax bracket is lower after you retire. If you don’t have access to a 401k, you can contribute to an IRA. The limits for tax deductibility are $6,000 for those under 50 and $7,000 for individuals
Nerdwallet has a fuller list of twelve tax saving strategies for all seasons here.
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