On Friday, March 25 the $2 trillion “Coronavirus Aid, Relief, and Economic Security Act” (H.R. 748) also known as the CARES Act was signed into law. Below is a summary of what it and other recent government actions mean to our clients.
2019 tax filing extension (separate from the CARES act)
- The filing deadline for 2019 Federal income tax returns has been extended to July 15, 2020. Arizona has also extended it’s deadline to July 15.
- The extension of the federal tax filing deadline also applies to tax payments. Taxpayers that owe money can defer federal tax payments, interest free and penalty free until July 15. This covers final payment for 2019 and first quarter 2020 estimated payment. However, second quarter 2020 estimated income tax payments are still due on June 15, 2020.
- The IRS will not automatically delay automatic payments that taxpayers already set up for April 15. But taxpayers can take steps to cancel them.
- The IRS has pushed back the deadline for 2019 IRA and Roth IRA contributions to July 15 as well.
- Returns with automatic six-month filing extensions (from the normal April 15 tax deadline) are still due Oct. 15.
- These are direct payments to taxpayers – the government will either direct-deposit or send a check for $1,200 for every adult and $500 for each child a taxpayer has under the age of 17.
- Retirees as well as workers qualify for this rebate.
- If your AGI is under $75,000 for Single or $150,000 for MFJ, you get the full amount. After that it phases out until it’s gone completely at $100,000/$200,000.
- The mechanics of AGI calculation are a bit complicated – checks will go out based on 2019 AGI if filed, if you haven’t filed yet than 2018 AGI. However, it will ultimately be ‘trued up’ if a taxpayer is owed money based on their actual 2020 income.
Required Minimum Distributions (RMDs)
- RMDs are waived for 2020 and if you have already taken the RMD for 2020, you can “return” it. We will analyze our clients’ specific situations and will address it with you on an individual basis before year-end.
- If you normally do Qualified Charitable Distributions (QCDs), you can still do them if you wish. However, it might make more sense to write a direct check from a taxable account – let’s discuss.
- People who have inherited IRA or other retirement accounts can also suspend distributions in 2020. Make sure to check with your custodian if you have automatic RMD withdrawals set up.
Other CARES benefits
- Coronavirus-Related Distributions of up to $100,000, made from IRAs or other retirement plans, which are made in 2020 by an individual who has been impacted by the Coronavirus will be exempt from the 10% penalty for individuals under the age of 59 ½. These distributions allow the income to be spread over 3 tax years and are eligible to be repaid over the next 3 years.
- CARES suspends required payments on Federal student loans through September 30, 2020. During this time, no interest will accrue on this debt. However, automatic payments will continue unless individuals take proactive measures to contact their loan provider and pause payments.
- There are a slew of many other measures for unemployment benefits, small and large business relief and so on but the highlights above cover the most relevant ones for our clients.
Many of the other provisions apply to very specific circumstances and businesses. As always, let us know if you have questions or if you want to discuss any of these measures and how they apply to your situation.