Updates to the 2020 tax law and additional helpful information
There have been multiple changes in tax policy that have been implemented thus far in 2020.
The SECURE Act (2020) was passed on January 1st 2020 with the intention of strengthening the retirement system across the country.
There have also been emergency actions taken by the Federal government through the CARES Act (2020) to help support the economy during the Coronavirus pandemic.
The following will provide a brief overview of how these changes affect individuals, and how they will impact your financial situation going forward.
The US government is issuing $1,200 economic stimulus checks/ debit cards directly to US citizens. Single filers with adjusted gross income up to $75,000 will receive a $1,200 payment. Married Filing Joint with income up to $150,000 will receive a $2,400 payment.
Parents also receive $500 for each qualifying child under age 17. For taxpayers with income above those amounts, the payment amount is gradually phased out by $5 for each $100 above the $75,000/$150,000 thresholds.
There will be no payments issued to Single filers making over $99,000, and Married Joint filers making over $198,000.
To Check the Status of Your Stimulus Payment visit the IRS Website Here. https://www.irs.gov/coronavirus/get-my-payment
Taxpayers should also be aware that the IRS is sending economic impact payments both by check and prepaid debit card. The cards will be issued by Money Network Cardholder Services and will arrive in a plain envelope.
Under the previous law, individuals were required to start taking funds from their IRA accounts when they turned 70 ½. The SECURE Act raised the minimum age to 72.
In response to the Coronavirus pandemic, individuals over the age of 72 who are required to take a distribution from an IRA will not be required to do so for 2020.
Those who are under age 59 ½ will not owe a 10% penalty if their IRA distribution is related to financial distress from the coronavirus (up to $100,000 maximum).
You can spread out income taxes from the distributions and/ or repay them to your account across 3 years, not subject to annual contribution limits.
It is important to keep in mind that you will still pay income tax on the amount taken out of an IRA. This distribution could end up bumping you up to higher tax bracket and it is essential to know the tax implications before taking out of your IRA account.
For IRAs that have been inherited from account owners who have passed away after January 1st 2020, the beneficiaries are required to withdraw the assets from the account within 10 years.
There are exceptions to the 10-year rule if you inherited the IRA from your spouse or if you are chronically ill or disabled. If you are a minor or child, you will have 10 years to withdraw the money from the date you turn 18.
The new CARES Act has provided a new charitable deduction of up to $300 if you do not itemize your tax deductions on Schedule A for tax year 2020.
The due date for 2019 tax returns has been extended to July 15th, 2020. The due date to pay your 2019 tax liability has also been extended to July 15th, 2020.
The dates for the first and second quarter estimated tax payments for 2020 have both been extended to July 15th. The 3rd quarter payment date remains the same at September 15th, and the 4th quarter is due January 15th, 2021.
Please feel free to reach out to a CFM advisor for any of your questions regarding the changes to the 2020 tax law.
Written By: Joe Canty, Tax & Investment Advisor
Bill Canty, CPA, CFP
Maureen Walsh, EA, Investment Advisor Rep.
Tina Alteri, CPA, Tax Advisor
Ed Canty, Investment Advisor Rep.
Joe Canty, Investment Advisor Rep.