Tax Filing Adjustments, Coronavirus Stimulus, and More

A lot has changed with our world in just a few weeks.

We wanted to provide you the following updates as it relates to your taxes and the government stimulus package that was just signed last Friday.

How We’re Doing Our Part...
We’re well setup to handle your full tax needs remotely; no physical meetings required. And we’re also still available to take drop-offs at our office. Feel free to contact us with any questions about how we’re handling tax returns seamlessly in the midst of this crisis.

Tax Filing Updates
Filing and payment dates have been adjusted in response to the Coronavirus pandemic, as follows.

Date Changes
The IRS has pushed the filing deadline for tax returns, from the usual April 15th, back to July 15th. Most states, including CA, have conformed to this filing date adjustment.

The date for paying tax liabilities has also been pushed back by the IRS, as well as most states.

It’s assumed all states will be conforming to this new July 15th date for 2019 tax year filings.

The 1st quarterly estimated payments for those required to make estimated payments has also been pushed back to July 15th.

Why You Should Still File As Soon As You Can

• If you’re expecting a refund, you’ll want to file sooner rather than later, in case refunds get frozen, or significantly delayed with everything going on, which is quite likely. It wasn’t but a few years ago when the IRS was issuing “I-O-U’s” for refunds. It also helps to get your IRS refund early in order to pay your state liability, and vice versa.
• And if you know you’ll be owing to both the IRS and your state, it’s still wise to get your taxes in early and not procrastinate. Just because you owe and file your tax return now, doesn’t mean you have to pay right away. It’s better to know your exact situation so you have time to plan, than it is to wait until the last minute.
• Also, the tax return preparation process is often when we discover any shortages in withholdings and other items that are better handled as early in the year as possible.

CARES Act (The Coronavirus Aid, Relief, and Economic Security Act)
The CARES Act that was signed into law this past Friday provides several changes you’ll want to know about.

Recovery Rebates (stimulus payments)

• $1,200 for individual taxpayers
• $2,400 for joint filers
• $500 for each child
  • Phases out by $5 for every $100 income in excess of threshold amount
  • Phaseout begins at $75,000 for single filers, $112,500 for head of households, and $150,000 for joint filers
  • Threshold based on 2018 adjusted gross income (unless a 2019 return has already been filed)
  • Folks who receive social security benefits, but are not required to file a tax return will still receive the rebate (without needing to file a return)
  • Other restrictions may apply
• Funds will be direct deposited to taxpayer bank accounts (if taxpayer authorized electronic info on their tax return). Otherwise, checks will be mailed to taxpayers’ last known addresses.
• Rebates will be made as soon as possible (likely mid-April to end of April)

Retirement Plans

• Waives 10% penalty on early withdrawals up to $100,000 from qualified retirement plans for coronavirus-related distributions (must be diagnosed with COVID-19 or have adverse financial consequences as a result of quarantine)
• Distributions can be repaid within three years
• Amounts can be included ratably in income over three year period
• Plan loan limits have increased from $50,000 to $100,000 (and repayment can be delayed up to one year)
• RMD’s (required minimum distributions) are waived for tax year 2020
• We recommend this to be a last-case resort for folks, since there’s still ordinary income taxes due on distributions

 
Charitable Contributions

• Allows above-the-line deduction up to $300 for charitable contributions (means you don’t have to itemize to get this deduction)
• Individuals can claim unlimited deduction up to their full adjusted gross income, versus usual limit of deducting up to 50 percent of adjusted gross income.

The above is not an exhaustive list of changes, but the main items that would likely apply to most folks.
 
Also, click here to access the IRS.gov site that provides updated details as they’re unveiled.

Contact us any time with questions…we’re here to help!