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Coronavirus: Financial strategies for the self-employed

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From Creditcards.com, Rebecca Lake discusses some of the benefits available to self-employed workers. Rebecca write:

Summary

The CARES Act extends some unemployment benefits to those who are self-employed – plus deferred tax, student loans and mortgage payments.

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The coronavirus pandemic has delivered a punch to many Americans’ wallets. And if you’re self-employed or do gig work, you may be wondering what it all means for your finances. Relief, however, is available in the form of the Coronavirus Aid, Relief and Economic Security (CARES) Act.

“The centerpiece of the government’s economic response to the pandemic is the CARES Act, which specifically includes sole proprietors, independent contractors and self-employed people,” says Jon Bacon, associate wealth advisor at Harris Financial Advisors in Torrance, California.

This act includes some wide-ranging provisions designed to protect business owners. These tips can help you manage your finances and credit wisely as you navigate the economic uncertainty surrounding COVID-19.

Unemployment benefits extended to include self-employment

Unemployment benefits can help cover living expenses when you’re out of work. Being self-employed would ordinarily disqualify you from receiving benefits, but that’s no longer the case, at least temporarily.

The CARES Act includes Pandemic Unemployment Assistance (PUA), which covers nontraditional workers. The program provides up to 50% of the average weekly benefit amount that unemployment pays to workers in your state. So, if your state’s average weekly benefit is $600, you could receive up to $300 per week in benefits, depending on your income.

To take advantage of these benefits, you’ll need to file for unemployment with your state’s unemployment agency. While it varies from state to state, here’s what you might need to complete your application:

  • Driver’s license or state ID number
  • Social Security or other tax identification number
  • Proof of self-employment income, including 1099s, your most recent tax return and bank statements
  • Bank account information if your state pays unemployment benefits via direct deposit

Claims can be filed online or by phone, but be prepared for delays, says Richard M. Prinzi, Jr. CEO of Professional Tax Alliance.

“The state computer systems are not capable of quick adjustments, so this is taking time if you have no W-2 in the last two quarters,” he says.

Plus, a record number of Americans are filing for unemployment in the wake of COVID-19, so you could be waiting several weeks to have your claim approved and for benefits to start flowing in.

Prinzi also says to keep in mind that while federal unemployment benefits are retroactive, states may adopt a different policy about backdated benefits. Even if you don’t need the benefits right now, it may still be helpful to review your state’s guidelines for eligibility and how to file a claim. That way, you’re prepared in case your self-employment income dries up completely.

Tax filing deadlines for quarterly taxes, income taxes pushed back

The government has also given Americans, including self-employed business owners, more time to prepare and file their tax returns. The new filing deadline for income tax is July 15, 2020. If you’re expecting a refund, don’t delay filing your taxes.

If you owe money, however, you will have more time to pay, since payment due dates for estimated quarterly taxes have also been adjusted.

Estimated quarterly taxes must be paid if you expect to owe more than $1,000 in taxes for the year if you’re self-employed. Ordinarily, these payments are due in April, June, September and January of the following year.

The schedule has been adjusted for 2020:

  • Payment 1: Due July 15, 2020
  • Payment 2: Due July 15, 2020
  • Payment 3: Due September 15, 2020
  • Payment 4: Due January 15, 2021

If your self-employment income is down because of COVID-19, you may be debating whether it makes sense to delay estimated quarterly tax payments and filing your income tax return if you haven’t yet.

Waiting could give you more time to set aside the money you need to cover your estimated tax liability for quarterly payments. It won’t affect your filing for 2019 return, either.

Read the full story at Coronavirus: Financial strategies for the self-employed – CreditCards.com

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