Because of the emergency situation surrounding the current pandemic, the IRS and Congress have provided relief for taxpayers. In a normal year, we would be up against a deadline of April 15 to get last year’s taxes filed. But this year, tax filing deadlines have been changed along with some other tax provisions.
Tax filing deadline is July 15.
The tax filing deadline has been moved back three months to July 15 for all taxpayers. You do not need to have a hardship due to COVID-19, nor do you need to apply for an extension.
IRA contribution deadline is also July 15.
You have extra time to make your 2019 Traditional IRA and Roth IRA contributions. For business owners with a SEP IRA, you also are the beneficiary of the extended deadline. If you contributed too much to your Roth IRA last year and are scrambling to remove or recharacterize your contributions—relax. You too have an extra three months to figure this out!
Required Minimum Distributions have been waived for 2020.
Required minimum distributions, or RMDs, affect IRA and qualified employer plan owners above the age of 70 ½ and certain beneficiaries of “inherited IRAs.” RMDs require the IRA owners to withdraw a certain amount of money each year. RMDs for 2020 have been waived.
If you are older than 70 ½ and already took your RMD in 2020, you may be able to put the money back in your IRA as a 60-day rollover.
Charitable giving gets a tax boost.
Normally, taxpayers can take a charitable deduction of up to 60% of their incomes. For this year, that limit has been removed. Charitable contributions are fully deductible up to 100% of income. Furthermore, a special $300 tax deduction for charitable contributions is available for everyone, even if you take the standard deduction.
Early IRA withdrawals are given special relief.
Individuals with COVID-related hardships can have better access to their retirement funds. The CARES Act gives the following benefits:
- Removal of the 10% early withdrawal penalty
- The ability to spread the income over the next three years for tax purposes
- The option to “rollover” the distribution back into the retirement account over the next three years (rather than the normal 60 days)
- No mandatory 20% tax withholding on withdrawals from an employer-sponsored retirement plan
We understand there are many uncertainties during this time. We’re here to help as best as we can. Please share our blog to pass along this helpful understanding of the tax changes due to COVID-19.