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The filing tax delay - news and update ● Stimulus rebate payments ● Unemployment ● Sick leave and Family leave details ● Other individual changes ● Coronavirus “disaster” loss reimbursements- ● §139 Retirement plan changes ● Executive Orders by Gavin Newsom ● 2
Filing due date automatically extended from April 15, 2020 to July 15, 2020 ● Tax payments are also extended to July 15, 2020 without penalties and interest ● 2019 IRA/HSA/Retirement are due July 15, 2020 ● 2019 Extensions to October 15th due July 15, 2020 ● 2020 Q1 estimated tax payments are due July 15, 2020 ● 2020 Q2 estimated tax payments UPDATE are due July 15, 2020 (Changed on April 9, 2020) ● 3
On March 13, 2020 a Federal Declared Disater was claimed related to the ● COVID 19 pandemic President Trump signed into law on March 27, 2020 the Coronavirus Aid, Relief, ● and Economic Security Act The CARES Act is a $2.2 trillion stimulus package to mitigate the impact of the ● COVID 19 pandemic 4
What is your AGI (Adjusted Gross Income)? ● Refer to your 2018 Individual Tax Filing ○ Line 7 is where the return reports your AGI ■ This amount is calculated after adjustments (retirement contributions, self employment ■ taxes, student loan interest, to name a few) But before your ■ standard deduction ($12,000 single/$24,000 MFJ) ● Or, itemized deduction (mortgage interest, state and local tax payments (SALT), ● donations, to name a few) 5
Individuals need a social security number, individuals with ITINs will not be eligibile ● CARES provides stimulus payments of $1,200 for each individual and $500 for each child ● Dependents over age 16 do not receive a rebate ○ Only independent college students will receive a rebate ○ Rebates will not offset existing debt such as payment plans, tax liens ● Single - Individuals with AGIs up to $75,000 a year are eligible for the full $1,200 payment ● The payment amount is entirely phased out at an AGI of $99,000 ○ 6
Single - Stimulus Rebate AGI AGI AMOUNT ABOVE POTENTIAL REBATE LESS PHASE-OUT STIMULUS REBATE $75,000 $75,000 $0 $1,200 $0 $1,200 $99,000 $24,000 $1,200 $1,200 $0 $24,000 / $100 = $240 X $5 = $1,200 7
MFJ - Couples with AGIs up to $150,000 a year are eligible for a $2,400 payment ● The payment is reduced by $5 for every $100 in income above $150,000 ○ Payment amount is entirely phased out at an AGI of $198,000 ○ Married couples also will receive additionally $500 for every dependent child ● under 17 Payment phase out is at a slightly higher AGI ○ 8
MFJ - no children - Stimulus Rebate AGI AGI AMOUNT ABOVE POTENTIAL REBATE LESS STIMULUS $75,000 PHASE-OUT REBATE $150,000 $0 $2,400 $0 $2,400 $198,000 $24,000 $2,400 $2,400 $0 $24,000 / $100 = $240 X $5 = $1,200 9
HOH - With AGIs up to $112,500 a year are eligible for the full $1,200 payment ● and an additional payment of $500 for each dependent The payment is reduced by $5 for every $100 in income above $112,500 ○ Head of household taxpayers will also receive an additional $500 per ○ qualified dependent under 17 10
With no eligible children, a head of household filer is phased out at AGI of ● $137,000 With one dependent a head of household filer is entirely phased out of the ● payment at AGI of $146,400 The phaseout can be easily calculated using the Washington Post calculator 11
What needs to be done to get the Stimulus Rebate? ● Nothing, the IRS will deposit the calculated amount directly into the individual’s bank account ○ IRS uses AGI and the bank information on the 2019 tax return. 2018 return if 2019 not filed ○ Direct deposits should be received in about three weeks, according to Secretary Mnuchin maybe April 13th ● payments will begin 12
No bank account on file? - The IRS will mail a check ● Checks should start arriving in about six weeks ○ IRS Webpage to enter payment info https://www.irs.gov/coronavirus/non-filers-enter-payment-info-here ○ Stimulus rebate is a 2020 refundable tax credit ● All reconciled on 2020 return ○ Before you file the 2019 tax return, due July 15 ● Check to see if the 2019 AGI includes extraordinary income (sale of stock, sale of real estate, etc.) ○ This might push the client’s income over the phaseout threshold ○ 13
Noticing Requirement ● Within 15 days of distributing a rebate payment ○ IRS must mail a notice to the taxpayer's last known address stating how the payment was made ○ Including the payment amount, and a phone number to report any delivery problems ○ This should help with wrong bank info if IRS is using the 2018 info, but expect phone calls ○ 14
Technically the stimulus rebate is a 2020 refundable tax credit ● Many clients will have less income in 2020 than in 2019 ○ If payment was reduced by the 2019 AGI , they’ll receive a credit on their 2020 return ○ Received too much of an advanced payment? ○ Taxpayer does not have to pay back the advance payment on their 2020 return Taxpayer will not pay tax on the rebate payment ○ 15
The IRS does not have your direct deposit information. ● IRS is developing a web-based portal ○ Individuals provide their banking information to the IRS online ○ Payments will be received immediately as opposed to checks in the mail ○ You had a baby in 2019 but have not filed your tax return ● You will get your additional $500 rebate on your 2020 return ○ Individuals receiving Social Security that don’t file a tax return ● IRS will direct deposit the rebate using the SSA information. ○ 16
Unemployment from the state ranges from 30-50% of the standard wage ● CARES provides unemployed individuals an extra $600 per week for up to four months, on top of state unemployment ● benefits, to make up for 100% of lost wages CARES also extends unemployment insurance benefits for an additional 13 weeks ● Self-employed individuals may be entitled to unemployment benefits of $600 per week, plus half of the average state ● unemployment benefit (if no state coverage) for 39 weeks 17
Small businesses with less than 50 employees might qualify ● for an exemption Employer is reimbursed for the cost of the employee’s leave ● through a credit To get immediate repayment for costs, the employer can ● reduce payroll deposits through filing an IRS Form 7200 18
Requires certain employers to provide sick pay and family leave ● Credit repays the employer for the leave ● For period between April 1 to December 31, 2020 ● Includes 2 weeks paid leave at employee’s regular rate ● If unable to work because of quarantine, symptoms, medical care ○ Calculation of Pay $511/day in aggregate $5,110 if sick ○ 19
2 weeks paid leave at ⅔ of the employee’s regular rate ● If needing to take care of a child who has no school or childcare ○ There is an additional 10 weeks of paid family and medical leave at 2/3s of the employee’s regular rate ● Employee had to have been employed for at least 30 days and unable to work because of the need to care for ○ a child. Limited to $200/day for 10 weeks Limited to $12,000 in the aggregate per employee 20
$300 charity deduction $300 deduction allowed in arriving at AGI only for those not itemizing ● beginning in 2020 Qualified charitable contribution ● Made in cash ○ Allowable under §170 ○ Not for a donor advised fund ○ 21
Medical - HSAs and Flexible Spending Accounts Student Loans – Employer Payments §127 CARES allows an employer to reimburse up to $5,250 of student loan ○ interest and principal from Mar. 27, 2020 until Dec. 31, 2020 No double dipping - The employee cannot deduct student loan ■ interest paid by the employer Loan payments delayed until Sep. 30, 2020 ○ 22
What Tax Benefits Are Available for a Federally Declared Disaster? Any amount paid to or for the ● Benefit of an individual to reimburse or pay reasonable and necessary personal, family, living, or ○ Funeral expenses incurred as a result of a qualified disaster ○ EXAMPLE. Stanford Hospital reimbursement for medical workers ○ 23
For calendar year 2020, the RMD rules are waived, including the first post-age-70 ½ (now 72) RMD ● 80% of account owners take more than their RMD ○ If retiree turned 70 ½ in 2019 they still need to take their RMD by April 1, 2020 ○ Important for your client to know ● Client may take any amount, just not required to take a minimum amount in 2020 ○ 24
Waiver of 10% Penalty for Coronavirus-related Distribution ● Applies to a coronavirus-related distribution made to ○ a qualified Individual (or spouse or dependent) diagnosed with Coronavirus, ■ or account owner having experienced adverse financial consequences due to Coronavirus ■ Distribution is taxable - pay at any time over three years ● Can return the amount into the account within three years ● Repayment is treated as a repayment made within 60 days of the distribution (like a rollover) ○ 25
Pension Plan Loans ● The limit on retirement plan loans during the 180-day period from March ○ 27, 2020 is increased from $50,000 to $100,000 Payments are delayed ○ Letters are coming from pension admin ○ 26
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