Now that the stimulus checks have all been sent out, many Americans are hesitant on using the funds. They aren't sure if the rumors they're hearing about the strings attached to them are accurate or not.
Now that we have all received our stimulus checks, we are now facing a slew of rumors and myths about the money we have received. This money was welcomed with open arms, helping pay bills, and keeping food on the table for many. Thanks to Social Media and other media outlets, and just the sheer amount of information (correct or not) that's available, rumors and misinformation have been spread about the realities of our stimulus checks. We are here to set the truth straight, calm your worries, and get rid of these myths once and for all.
According to AARP, once the CARES act went into action, the IRS sent out over 140 million stimulus checks. As this relief arrived and people started spending it, some hesitation did arise. The question if we will need to pay back the IRS and if these funds will be counted as part of our income in our 2020 taxes are at the forefront of this hesitation. With income and employment being so unstable, these are very understandable questions. Yes, this money is a blessing now. But, will it turn into a curse later?
First and foremost it is very important to know that you will not be paying back your stimulus checks. The IRS has even come out and said on multiple occasions that this will not be something that you will have to pay back. The stimulus check, according to CNBC, did get the nickname "recovery rebate" which is one of the main reasons why this concern began. Why won't you have to repay the IRS? That is due to the nature of tax credit the IRS is considering our stimulus checks. There is a certain type of tax credit, says Wealth Hacker Report Jeff Rose, called an Earned Income Tax Credit. These credits are completely refundable. Even if you don't owe any taxes at the end of the year, if you have any earned income tax credits, you will still be receiving a tax refund. This is how the IRS is treating your stimulus checks. It is something you're owed, not something you will have to repay. This is how those who don't file for taxes, like those who receive social security, disability, and railroad retirement benefits were eligible for a stimulus check. As long as you have a social security number and you meet the income requirements to receive a single or joint filing stimulus check, you will receive a stimulus check, with no strings attached.
Since the IRS is treating your stimulus check like earned income tax credit, it also will not be counted as part of your income when you file your 2020 tax return. You've received this money and it is taken care of, nothing else is required for you to do about it. Ironically, there is an opportunity for you to receive more money if your stimulus check wasn't calculated correctly by the IRS. These mistakes will most likely be caught when filing your 2020 tax return, or if you didn't claim a dependent child on your tax forms, or alert the IRS to a dependent child. You won't, on the other hand, be receiving any extra stimulus money when you file your 2020 tax return if you received the proper amount. The only way that will happen is if there is another stimulus check released, which for now is just a myth and rumor.
Also, know that the stimulus check will not reduce your refund that you're owed on your 2020 taxes. You will receive every penny that you're owed, and your stimulus check will not be deducted from it or even affect it. The stimulus check will also not lower the amount you owe in taxes, either. That can be confusing since other tax credits can reduce how much you owe. But, the stimulus check will not be one of them. At the end of the day, your stimulus check will not be affecting your 2020 taxes at all.
There have been some situations, according to CNBC, that some individuals have been overpaid and given more stimulus money than they should have received. If this happens, you will not have to pay that back either. This is incredibly rare though, and more often than not, is actually a scam. As we have mentioned in recent blogs, scams regarding the stimulus checks have become rampant since they were first released. If you receive a very official-looking check in the mail for more than your stimulus amount, and it is requested of you to pay back the difference in cash, certified check, money order, or in gift cards, that is without a doubt a scam. The IRS will not contact you via phone, social media, email, or texting. If you receive any messages about your stimulus checks through these platforms make sure to report them and then delete them right away.
We hope this insight helps you better understand your stimulus check, and what you are expected to do with them now that you've received them. If you have any further questions about them, or about the 2019 tax date that just passed us on July 15th, please don't hesitate to reach out. We will be very busy over the next couple of weeks, as we have been leading up to the 15th, but we will try and get back to you as quickly as possible. Don't forget! If you're looking for the best tax accountant in Summerville, the best tax services in Summerville, the best Quickbooks services in Summerville, and the best payroll services in Summerville, we are still here for you. Tax season may be over for some and just starting for others, and we will be here for you no matter what!
To survive the pandemic, many brick and mortar shops have added or have switched to online selling only. That has come with many new hurdles to jump, including dealing with sales tax in a whole new way.
The pandemic has impacted every part of our personal and professional lives, there is no doubt about that. Many local restaurants and businesses right here in the Lowcountry have sadly had to close their doors due to lack of sales through the shutdown and the slow resurgence of opening back up. One of the many challenges businesses have had to face, to keep their doors open and to survive, is switching from brick and mortar sales to adding online sales or going to online-only sales. Restaurants who have never done takeout or delivery have added those options to their customer, and have had some serious adjustments to make.
For these companies who have decided to move online, they were facing more than just learning how to run their business online and how to promote themselves on this new platform. They are now adapting to a change in sales tax. Thankfully, here in South Carolina, this isn't a huge shock as the state already collects sales tax from most online retailers. Since 2018, a new ruling was made that said each state can make online shoppers pay for sales tax, even if they aren't buying products from their home state. Those who went into the pandemic with this knowledge and were successfully working online had already planned for this. Making the transition to an online business and adding on this extra layer can be difficult. This new ruling decided even if a business didn't have a physical presence in the state they were selling to, they now have to collect taxes from any state that has given the company more than 200 sales transactions or if the company made $100,000 in sales within a particular state.
What makes matters worse is that not every state or jurisdiction of states has the same guidelines when it comes to this ruling. A business here in SC might get a ton of orders from Florida or Texas, but each state will come with its own set of stipulations when it comes to collecting sales tax. The company in question is then responsible for collecting both percentages of sales tax and for reporting them correctly. It's a lot to know and understand. For a company to be successful in this and to not get stuck owing tons of money in back taxes, is to understand and know what each jurisdiction's guidelines are. What else can be helpful is to have someone on staff or working with a company like ours that knows and understands how to deal with each particular state that you are selling your product to.
How does this affect your business beyond just your taxes? You need to look at your product and how you track your sales and how you keep up with your bookkeeping. Can you keep track of all your sales to every state? It's not just where you're selling to, this is also affected if you're storing your products outside of your state or not. Remember, just like any tax law or rulings, they can change and fluctuate often and you need to stay on top of these changes.
In any big transition that a company goes through like this situation, working with us at Pathways can make it a much less painful experience. We understand these tax rulings and know when they change and fluctuate. Once you've made the decision to move your business online and you understand each jurisdiction's sales tax, you will need to register through your state to become compliant. If you are a business new to online sales or would like to build your online presence, don't stress too much. With the world as it is, the trend for online shopping is predicted to only become more popular. Even more so than it is now. It will be a challenge to make this transition, but it will be worth it. Your clientele will appreciate it, and so will your bank account. Don't forget! If you're looking for the best tax accountant in Summerville, the best tax services in Summerville, the best Quickbooks services in Summerville, and the best payroll services in Summerville, we are still here for you. Tax season may be over for some and just starting for others, and we will be here for you no matter what!
The Pathways Team