Wishing everyone a great summer! Although our office hours are now limited, we are always here for you you; please call or text if there is anything we may help you with, and we will get back to you promptly.
Holyoke Tax Service would like to remind everyone of two important upcoming dates:
June 14, 2023:
1. Unless you requested a filing extension by April 18, and owe tax for 2022, this is the last day to file a return without being subject to a $435 (or 100% of the tax, if less) minimum late filing penalty. Interest and late payment penalty will in any case apply, so please don't allow inability to pay currently deter you from avoiding this much larger penalty simply for filing the return late. (If you are due a refund for 2022 not to worry, you still have until 2026 to claim it.)
2. The next day (6/15) is the due date for second quarter 2023 estimated tax payments; please remember that we have a pay-as-you-go income tax system, and there are potential penalties if it is not paid on that basis, even if all in full on the return filing date.
July 17, 2023:
This is the last day to claim a refund for 2019. Nationwide there are an estimated $1.5 billion of refunds still outstanding for that year, with about $38,400,900 of them here in Massachusetts, shared among some 35,700 people, and averaging $966 each. Please note that this date applies only if you have not filed an original return; if you need to amend a return for a refund you may also do so, but only if the original was not filed before April 15, 2020. (Of course if you did request a filing extension for 2019 by July 15, 2020 you still have until this October 16.) Please further note that if you do not have all your tax records, and will need to request transcripts, it is highly advisable to do so at least several weeks prior to the deadline.
Chapter 62F Refunds
The news media has created some confusion by conflating these refunds with the COVID-19 Essential Employee Premium Pay Program.
The Chapter 62F refunds, which were issued late last fall in the same manner used on the original return (either direct deposit or check), were a refund of 14% of a taxpayer's original 2021 tax liability (provided there was one), due to the Commonwealth having collected excess revenue for the year, according to that law. These refunds are clearly not taxable, unless, rather than taking the standard deduction on the federal return as most do, a taxpayer itemized (Schedule A) and took a deduction for that same tax.
What the IRS has actually cautioned people to perhaps delay filing on, however, is the latter program. While there is certainly ambiguity, at Holyoke Tax Service we believe that it is entirely reasonable to take the position that these payments were qualified disaster relief under Section 131 of the Internal Revenue Code, and hence not taxable.
The Only Constant in Taxes is Change
At Holyoke Tax Service we are always upfront with our customers. In keeping with that philosophy, we regret that some of you are going to be disappointed this year because the beneficial provisions of 2021, most notably the fully-refundable and increased Child Tax Credit, the expanded Earned Income Credit for people without qualifying children, and Recovery Rebate Credit (a/k/a "fourth stimulus") were all only one-time, and we have reverted to the prior rules for 2022 (although, of course, if you haven't yet filed, or need to amend, 2021, we can still do that). Nonetheless, please be assured that, no matter how much the rules change, we will always obtain the best possible results for you.
COVID-19 Essential Employee Premium Pay Program - Round 3
Some of us may have been a little surprised to receive a $250 check from the Commonwealth of Massachusetts this month for a program we did not believe we qualified for. This is because, while like the first two rounds of $500 checks for Massachusetts residents during 2021 who earned at least $13,500 of income from employment (determined separately for each spouse in the case of a joint return), and had total household income below 300% of the federal poverty level, in the third and final round the requirement that an individual had not received any unemployment compensation was dropped.
The government press release helpfully notes that, while these payments are specifically excluded from Massachusetts tax, and that since they are below the $600 filing threshold 1099-G's will not be issued, they "may" be federally taxable. Obviously these payments are, in reality, not at all compensation for services performed, as there is no correlation to hours worked, nor even that they were "essential" (could have been all remote). However, it remains an open question whether they may be construed as qualified disaster relief payments, perhaps in this case to promote the general welfare by mitigating the negative impact of the pandemic on low-to-moderate income families. Stay tuned.