We hope you and your loved ones are safe, healthy and stay that way.
As you hunker down, we want to give you some simple explanations of the new tax related rules and ideas for individuals, some changing minute by minute. Yes, some seem illogical, we are just the messenger.
Your 1040 individual return, and any tax payment due with the return, is now due 7/15/2020 with no penalty or interest on the amount due. No extension is required. If your return is completed, you can still file before 7/15/2020 and just delay making your payment.
You still may want to file before 7/15/2020 if you are due a refund or might be eligible for a potential stimulus payment, below.
IRA (traditional, non-deductible or ROTH) and HSA contributions are now due by 7/15/2020.
First quarter estimates are also due 7/15/2020.
However, second quarter estimates are still due June 15 as of right now.
Your IL-1040 individual return, and any tax payment, is due 7/15/2020 with no penalty or interest on the amount due. No extension is required.
As of this moment, your first and second quarter estimates are still due on 4/15/2020 and 6/15/2020, respectively.
Other states and various local
There are too many to list and not all have finalized their plans. Please ask us regarding your individual situation. The state and local tax filing information is changing daily. California has postponed individual return and estimates for qtrs. 1 & 2 until 7/15/20. New York has only postponed the individual return until 7/15/2020, nothing on qtrs. 1 & 2 estimates yet.
Other Items for Individuals
These are planning ideas:
1) The CARES Act is now law. The stimulus payment provision ($1,200 single/$2,400 joint) is:
– The eligibility is based on 2019 returns (2018 if 2019 is not filed)
– Single AGI with phase out between $75,000 and $99,000
– Married joint AGI with phase out between $150,000 and $198,000
– Head of household AGI wit phase out $112,500 and $136,500
– 500 for each a child under 17
This might ultimately treat some working college students, not claimed as dependents, as single.
– The payment is an advance of a 2020 tax credit. If calculated based on 2018 or 2019 there is no repayment if 2020 income is higher. If 2020 income is lower than the 2019 (or 2018) base there will be an extra credit available.
There is no requirement of a tax liability to get the payment. Payments, although delayed, will be mailed to those who have no return filing requirement when their only income is social security benefits.
2) We are also stressing use of direct deposit of refunds or direct debit of balances due on 2019 tax returns for taxpayers who may be eligible. This bank information is the preferred method of direct deposit for any stimulus payment under the proposal.
3) Required minimum distribution (RMD) requirements for 2020 are waived for all required distributions from almost any qualified plan. A pre-2020 inherited IRA does not qualify for this relief. Also, if you took your RMD in 2020 already you may be able to do a tax-free rollover within 60 days of receipt.
4) A penalty-free early withdrawal from a qualified retirement plan of up to $100,000 may be allowed in 2020 with a ratable 3-year spread of income inclusion. Alternatively, prepayments during the 3 years are treated as tax-free rollovers. There are requirements to qualify but reasonably generous. There are no restrictions on use of the funds.
5) 401(k) loan limit is raised to $100,000 until mid-September.
6) 401(k) loans repayments due in 2020 are delayed for 1 year.
7) Charitable contributions to public charities of up to $300 in cash during 2020 may be deductible for non-itemizers.
8) For those with a large charitable commitment to public charities the annual deduction limit in 2020 is significantly increased but only for cash, not appreciated securities.
The new changes, the technical corrections and, yes, the opportunities are changing quickly. We are working towards guiding you though this.
Again, please be safe.