Recent legislation, such as the Families First Coronavirus
Response Act and the Coronavirus, Aid, Relief, and Economic
Security (CARES) Act has provided some financial
and tax relief for certain taxpayers. The following is a summary
of some of the provisions.
Filing and Payment Deadline
The April 15, 2020, due date for any person (individual,
trust, estate, or unincorporated business entity) who must
file a federal income tax return or has any amount of federal
income tax due, is automatically postponed to July 15,
2020. The postponed deadline is automatic, meaning no extension
is required to be filed. No interest or penalty will
accrue until July 16, 2020. You do not have to be sick or quarantined,
or have any other impact from COVID-19 to qualify
for the postponed deadline.
Estimated tax. First quarter estimated tax payments usually
due April 15 and second quarter estimated tax payments
due June 15 are postponed to July 15.
State tax returns. Most states have also extended filing
and payment deadlines, but some states have implemented
different due dates or not conformed. Be sure to confirm
with each state for the most updated information.
Contributions made by due date. Generally, contributions
made to an individual retirement arrangement (IRA)
or a health savings account (HSA) applicable for tax year
2019, must be made by April 15, 2020. Because the due date
has been postponed to July 15, you have until July 15 to
make 2019 contributions to an IRA or HSA.
2016 tax return. The postponed deadline also applies to
2016 tax returns. Any claim for refund for tax year 2016
must be filed by July 15, 2020.
Recovery Rebates (Stimulus Payment)
A one-time recovery rebate is an advance refundable credit
against your 2020 taxes and equal to $1,200 for individuals
($2,400 for joint filers), plus an additional $500 per child under
age 17 who qualifies for the Child Tax Credit.
Eligibility. All U.S. residents with adjusted gross income
(AGI) up to $75,000 ($112,500 for Head of Household, $150,000
Married Filing Jointly), who are not claimed as a dependent
of another taxpayer, and have a work-eligible Social Security
Number, are eligible for the full rebate amount. This is true
even if you have no income, or if your income comes entirely
from nontaxable means-tested benefit programs, such as SSI
benefits. The threshold amount is based on 2018 AGI (unless
a 2019 return has already been filed).
Phaseout. The rebate amount is reduced by $5 for each
$100 that your AGI exceeds the phaseout threshold. The rebate
is completely phased-out at $99,000 (Single), $136,500
(HOH), and $198,000 (MFJ).
How to receive. For most individuals, no action is required
in order to receive the recovery rebate. It will be direct deposited
if you have authorized a direct deposit or direct
debit for your most recently-filed tax return. Otherwise, a
check will be mailed to your last known address. The rebate
may be offset by past-due child support, but not any other
federal or state debt.
Go to www.irs.gov/coronavirus/economic-impact-payments
to update bank account or mailing address, or to enter payment
information for non-filers.
Retirement Plan Distributions
COVID-19-related distribution. The 10% early-withdrawal
penalty is waived for COVID-19-related distributions
up to $100,000 from qualified retirement plans or
IRAs. A COVID-19-related distribution is one made during
the 2020 calendar year to an individual who is diagnosed
with COVID-19 by a CDC-approved test, whose spouse or
dependent is diagnosed with COVID-19, or who experiences
adverse financial consequences as a result of being quarantined,
furloughed, laid off, having work hours reduced,
being unable to work due to lack of childcare due to COVID-
19, or closing or reducing hours of a business owned or
operated by the individual. Any income from an early withdrawal
can be included in income ratably over a 3-year period.
The withdrawn amount can also be recontributed over
three years without regard to annual contribution limits.
Retirement plan loans. Plan loan limits are increased
from $50,000 to $100,000 and loan repayment may be delayed
up to one year.
Required minimum distribution (RMD). RMDs are
waived for calendar year 2020. If you are currently taking
RMDs, you are not required to do so for 2020. This also includes
your first RMD, which you may have delayed from
2019 until April 1, 2020.
Charitable Contributions
New deduction. Beginning in 2020, a new above-the-line
deduction up to $300 is available for individuals who do not
itemize deductions.
Limitations. For 2020 only, the 50% AGI limit for cash donations
by individuals is suspended. If you itemize, you
may deduct cash contributions up to your AGI. Any excess
contribution amount may be carried forward.
Health Savings Account (HSA)
COVID-19 health benefits. A high-deductible health plan
(HDHP) may pay for COVID-19 health benefits before the
minimum deductible requirements are satisfied. Health
benefits provided by an HDHP may include medical care
services and items purchased related to testing and treatment.
Vaccinations, once available, are treated as preventive
care.
Over-the-counter (OTC) medicines. Beginning in 2020,
OTC medications may be purchased using HSAs, flex spending
arrangements (FSAs), and Archers MSAs. This includes
pain and allergy relief medications without a prescription.
In addition, menstrual care products have been added to
qualified medical expenses.
Unemployment
A temporary new program provides unemployment benefits
for those individuals not traditionally eligible (self-employed,
independent contractors, limited work history), who
are unable to work as a direct result of COVID-19 public
health emergency.
Student Loans
Some relief is available for federal student loan borrowers.
Most provisions apply only to Direct Loans and Federal
Family Education Loans (FFEL) that are currently owned by
the U.S. Department of Education. FFELs owned by commercial
lenders and Perkins loans owned by your educational
institution are not eligible.
Payment suspension. All payments due for eligible federal
student loans are suspended until September 30, 2020.
Each month of suspension will count toward a loan payment
for the purpose of any loan forgiveness program or
loan rehabilitation program. This means suspended payments
are considered qualifying payments for income based
repayment, Public Service Loan Forgiveness, or defaulted
loans enrolled in a rehabilitation program.
Interest waiver. During the period of payment suspension,
no interest will accrue. For eligible federal student
loans, the interest rate is 0% until September 30, 2020.
Collections. During the period of payment suspension,
wage garnishments, refund offsets, federal benefit reductions,
or any other involuntary collection activity are also
suspended.
Employer educational assistance. If your employer provides
educational assistance fringe benefits, up to $5,250
may be excluded from taxable income for employer payments
to your student loan from March 27, 2020 through December
31, 2020. The $5,250 limit applies to student loan payments
and tuition assistance payments combined. You cannot
claim a student loan interest deduction for employer paid
interest.