IRA ACCOUNTS: TEMPORARY WAIVER OF REQUIRED MINIMUM DISTRIBUTION (RMD) RULES
With the CARES Act, IRA participants who are required to take an RMD in 2020 based on the value of their IRA account as of December 31, 2019 now have the option to suspend their distribution for 2020. If you already took an RMD for 2020, you have 60 days, from the withdrawal date, to redeposit the withdrawal.
Tax planners: This could be a year to take advantage of some tax planning by converting Traditional IRA accounts into Roth IRAs. If you would like more information on this or how it could affect you, call your accountant to discuss this strategy. There are important considerations that your accountant and financial planner should review with you, before such a decision is made.
Also in the CARES Act, taxpayers impacted by the coronavirus and needing to access cash and savings can take a distribution from a retirement plan or IRA, up to $100,000 without the mandatory 20% withholding. In addition, if you are under 59 ½ , the 10% early withdrawal penalty will not apply to these withdrawals. Impacted taxpayers include individuals, spouses and dependents that have been diagnosed with the virus, or who experience adverse consequences as a result of the crisis, including being quarantined, furloughed, laid off or unable to work due to lack of child care due to Covid-19.
Another important benefit for impacted taxpayers is the CARES act option to pay the federal income taxes due on this 2020 distribution over a three-year period. Alternatively, taxpayers also have the option to treat the distribution as a loan, and repay it to an eligible retirement plan or IRA within three years of taking the distribution. Please talk to your accountant or financial planner about these options.
STATE TAX DUE DATES
Most state and local first and second quarter 2020 estimated tax payments have not been extended. For more information, check the department of revenue website for your state or local government. Oregon is here. City of Portland/Multnomah County is here. The first payments are due April 15, 2020.
IRS EXTENDS MORE DEADLINES
Federal income tax filing and payments that are normally due April 15th, including 2019 income tax returns and 2020 Quarter 1 estimated income tax payments, have been extended to July 15th. In addition to this extension of filing and payment, 2020 Quarter 2 estimated income tax payments with a normal due date of June 15th are now also extended to July 15th.
Any individual or corporation that has federal income tax due for 2019 and/or federal estimated income tax payments for both Quarters 1 and 2 for 2020 can now wait until July 15th to pay without incurring penalty.
See IRS Notice 2020-23 for more details on additional extended due dates.
2016 UNCLAIMED REFUNDS
The IRS has also extended the three-year statute of claiming a refund for the 2016 tax year. Claims for refunds related to a 2016 federal income tax return would normally have been due by April 15th but are now extended through July 15th.
IRS IS URGING TAXPAYERS TO USE ELECTRONIC FILING AND PAYMENT OPTIONS
Currently, the IRS is unable to process paper filed income tax returns and will not process them until processing centers are able to reopen.
Taxpayers can make tax payments through Direct Pay instead of mailing a check.
Visit the IRS website to locate refunds and request tax transcripts. Taxpayers can check their refund status at Where’s My Refund? or obtain a tax transcript at Get Transcript Online. Tax transcripts are only available online at this time.
EXPECT DELAYED RESPONSES WITH IRS CORRESPONDENCE
Taxpayers who mail correspondence to the IRS during this period should expect to wait longer than usual for a response. Once normal operations resume it will take the IRS time to work through any correspondence backlog. Correspondence sent to IRS offices may be returned to the taxpayer if that office is closed and no one is available to accept it.
CHECK IRS WEBSITE FOR UPDATES
The IRS is going to provide a web site for taxpayer who need to add or change their banking information so that the economic impact payment is not delayed. If you need to update this information, please check their website at www.irs.gov regularly.
Please call our office to speak with any of our accountants if you have any questions on how these changes affect you! We are here to assist you.