Relief for some is on the way. As during most times of economic stress, our elected officials are racing to roll out multiple programs to help reduce the financial impact to businesses and individuals. Here are a few provisions that have been put into action that may be of help.
Suspension of IRA Required Minimum Distributions (RMDs)
The CARES Act waives all RMDs for 2020 for account holders and beneficiaries. If your RMD has already been distributed, there are potential mechanisms to recontribute the proceeds. For most, taking at least some portion of the RMD will still make sense if you will be in a lower tax bracket in 2020 than in the future. It also creates a planning opportunity for Roth conversions.
Many taxpayers will receive a stimulus check. The amount will be based on your 2018 tax return info if you haven’t yet filed 2019. The base payment is $1,200 for single filers, $2,400 for joint filers, and $500 per qualifying child (16 years or younger). For single filers, this amount will be reduced by $5 for every $100 that your adjusted gross income (AGI) exceeds $75,000. For joint filers, the same benefit reduction starts at $150,000 of AGI. Single filers with AGI over $99,000 and joint filers above $198,000 will not receive any benefit. Technically, the stimulus payment is a 2020 tax credit you receiving in advance, so if your AGI in 2020 turns out to be lower than 2018 (or 2019 if filed), you will receive the benefit when you file your 2020 return. Interestingly, even if you receive a benefit based on 2018 or 2019 returns, but your 2020 return shows you are not eligible, you still get to keep the money. Timing seems to be the real question. The Treasury has indicated that payments will start going out within three weeks (mid-late April), but the last time the government sent stimulus checks it took about three months.
Tax Deadline Extension
By now you’ve probably heard of the 90-day extension for filing and payment of 2019 taxes to July 15th. The extension also covers your first quarter 2020 estimated tax payment. It does not, however, cover your second quarter 2020 (due June 15th) estimated payment, and does NOT wave the penalties for failure to make estimated payments. New York State has extended its 2019 filing and payments as well.
$300 Charitable Deduction
The CARES Act will allow taxpayers who donate to qualifying charities, but who don’t itemize and normally don’t receive a charitable tax benefit, to deduct up to $300 in a new above-the-line deduction for 2020. So, save your receipts for any charitable contributions this year.
Qualified Medical Expenses
If you have an HSA or FSA account, the CARES Act now allows you to use pre-tax dollars for over-the-counter medications.
REAL ID Delayed Deadline
Although most of us aren’t thinking about flying right now, the deadline to obtain a REAL ID, which will be required to board aircraft for domestic flights, has been extended until September 30, 2021 from September 30, 2020.
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