Information Category: COVID

CARES ACT changes retirement plan and charitable contribution rules

Posted on April 13, 2020 by -

As we all try to keep ourselves, our loved ones, and our communities safe from the coronavirus (COVID-19) pandemic, you may be wondering about some of the recent tax changes that were part of a tax law passed on March 27. The Coronavirus Aid, Relief, and Economic Security (CARES) Act contains a variety of relief, notably the “economic impact payments” that will be made to people under a certain income threshold. But the law also makes some changes to retirement plan rules and provides a new tax break for some people who contribute to charity.

Waiver of 10% early distribution penalty IRAs and employer sponsored retirement plans are established to be long-term retirement planning accounts. As such, the IRS imposes a penalty tax of an additional 10% if funds are distributed before reaching age 59½. (However, there are some exceptions to this rule.) Under the CARES Act, the additional 10% tax on early distributions from IRAs and defined contribution plans (such as 401(k) plans) is waived for distributions made between January 1 and December 31, 2020 by a person who (or whose family) is infected with COVID-19 or is economically harmed by it.

Penalty-free distributions are limited to $100,000, and may, subject to guidelines, be re-contributed to the plan or IRA. Income arising from the distributions is spread out over three years unless the employee elects to turn down the spread-out. Employers may amend defined contribution plans to provide for these distributions. Additionally, defined contribution plans are permitted additional flexibility in the amount and repayment terms of loans to employees who are qualified individuals.

Waiver of required distribution rules

Depending on when you were born, you generally must begin taking annual required minimum distributions (RMDs) from tax-favored retirement accounts — including traditional IRAs, SEP accounts and 401(k)s — when you reach age 70½ or 72. These distributions also are subject to federal and state income taxes. (However, you don’t need to take RMDs from Roth IRAs.) Under the CARES Act, RMDs that otherwise would have to be made in 2020 from defined contribution plans and IRAs are waived. This includes distributions that would have been required by April 1, 2020, due to the account owner’s having turned age 70½ in 2019.

New charitable deduction tax breaks

The CARES Act makes significant liberalizations to the rules governing charitable deductions including: Individuals can claim a $300 “above-the-line” deduction for cash contributions made, generally, to public charities in 2020. This rule means that taxpayers claiming the standard deduction and not itemizing deductions can claim a limited charitable deduction. The limit on charitable deductions for individuals that is generally 60% of modified adjusted gross income (the contribution base) doesn’t apply to cash contributions made, generally, to public charities in 2020. Instead, an individual’s eligible contributions, reduced by other contributions, can be as much as 100% of the contribution base. No connection between the contributions and COVID-19 is required.

Far beyond

The CARES Act goes far beyond what is described here. The new law contains many different types of tax and financial relief meant to help individuals and businesses cope with the fallout.

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Individuals get coronavirus (COVID-19) tax and other relief

Posted on April 13, 2020 by -

Taxpayers now have more time to file their tax returns and pay any tax owed because of the coronavirus (COVID-19) pandemic. The Treasury Department and IRS announced that the federal income tax filing due date is automatically extended from April 15, 2020, to July 15, 2020.

Taxpayers can also defer making federal income tax payments, which are due on April 15, 2020, until July 15, 2020, without penalties and interest, regardless of the amount they owe. This deferment applies to all taxpayers, including individuals, trusts and estates, corporations and other non-corporate tax filers as well as those who pay self-employment tax. They can also defer their initial quarterly estimated federal income tax payments for the 2020 tax year (including any self-employment tax) from the normal April 15 deadline until July 15.

No forms to file

Taxpayers don’t need to file any additional forms to qualify for the automatic federal tax filing and payment relief to July 15. However, individual taxpayers who need additional time to file beyond the July 15 deadline, can request a filing extension by filing Form 4868. Businesses who need additional time must file Form 7004. Contact us if you need assistance filing these forms.

If you expect a refund

Of course, not everybody will owe the IRS when they file their 2019 tax returns. If you’re due a refund, you should file as soon as possible. The IRS has stated that despite the COVID-19 outbreak, most tax refunds are still being issued within 21 days. New law passes, another on the way On March 18, 2020, President Trump signed the “Families First Coronavirus Response Act,” which provides a wide variety of relief related to COVID-19. It includes free testing, waivers and modifications of Federal nutrition programs, employment-related protections and benefits, health programs and insurance coverage requirements, and related employer tax credits and tax exemptions.

If you’re an employee, you may be eligible for paid sick leave for COVID-19 related reasons. Here are the specifics, according to the IRS: An employee who is unable to work because of a need to care for an individual subject to quarantine, to care for a child whose school is closed or whose child care provider is unavailable, and/or the employee is experiencing substantially similar conditions as specified by the U.S. Department of Health and Human Services can receive two weeks (up to 80 hours) of paid sick leave at 2/3 the employee’s pay. An employee who is unable to work due to a need to care for a child whose school is closed, or child care provider is unavailable for reasons related to COVID-19, may in some instances receive up to an additional ten weeks of expanded paid family and medical leave at 2/3 the employee’s pay. As of this writing, Congress was working on passing another bill that would provide additional relief, including checks that would be sent to Americans under certain income thresholds. We will keep you updated about any developments. In the meantime, please contact us with any questions or concerns about your tax or financial situation.

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Coronavirus (COVID-19): Tax relief for small businesses

Posted on March 23, 2020 by -

Businesses across the country are being affected by the coronavirus (COVID-19). Fortunately, Congress recently passed a law that provides at least some relief. In a separate development, the IRS has issued guidance allowing taxpayers to defer any amount of federal income tax payments due on April 15, 2020, until July 15, 2020, without penalties or interest.

New law

On March 18, the Senate passed the House’s coronavirus bill, the Families First Coronavirus Response Act. President Trump signed the bill that day. It includes: Paid leave benefits to employees, Tax credits for employers and self-employed taxpayers, and FICA tax relief for employers.

Tax filing and payment extension

In Notice 2020-18, the IRS provides relief for taxpayers with a federal income tax payment due April 15, 2020. The due date for making federal income tax payments usually due April 15, 2020 is postponed to July 15, 2020.

Important: The IRS announced that the 2019 income tax filing deadline will be moved to July 15, 2020 from April 15, 2020, because of COVID-19. Treasury Department Secretary Steven Mnuchin announced on Twitter, “we are moving Tax Day from April 15 to July 15. All taxpayers and businesses will have this additional time to file and make payments without interest or penalties.”

Previously, the U.S. Treasury Department and the IRS had announced that taxpayers could defer making income tax payments for 2019 and estimated income tax payments for 2020 due April 15 (up to certain amounts) until July 15, 2020. Later, the federal government stated that you also don’t have to file a return by April 15. Of course, if you’re due a tax refund, you probably want to file as soon as possible so you can receive the refund money. And you can still get an automatic filing extension, to October 15, by filing IRS Form 4868. Contact us with any questions you have about filing your return.

Any amount can be deferred In Notice 2020-18, the IRS stated: “There is no limitation on the amount of the payment that may be postponed.” (Previously, the IRS had announced dollar limits on the tax deferrals but then made a new announcement on March 21 that taxpayers can postpone payments “regardless of the amount owed.”) In Notice 2020-18, the due date is postponed only for federal income tax payments for 2019 normally due on April 15, 2020 and federal estimated income tax payments (including estimated payments on self-employment income) due on April 15, 2020 for the 2020 tax year.

As of this writing, the IRS hasn’t provided a payment extension for the payment or deposit of other types of federal tax (including payroll taxes and excise taxes).

Contact us

This only outlines the basics of the federal tax relief available at the time this was written. New details are coming out daily. Be aware that many states have also announced tax relief related to COVID-19. And Congress is working on more legislation that will provide additional relief, including sending checks to people under a certain income threshold and providing relief to various industries and small businesses. We’ll keep you updated. In the meantime, contact us with any questions you have about your situation.

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Ritz Holman CPAs Updated Response to COVID-19

Posted on March 21, 2020 by -

Ritz Holman CPAs Updated Response to COVID-19

To our valued clients,

Our world has seemingly changed overnight. With this in mind, first and foremost, we need to consider the health and safety of our family, co-workers, clients, friends and the community at-large. As a result, we have decided to close our physical office. This decision was based on recommendations from the CDC to limit person-to-person contact.

Thanks to technology, all of our team members are now working remotely from their homes. This will allow us to be fully operational with the ability to maintain social distance.

Although many of our operational procedures will need to be altered, our staff is fully committed to providing you with outstanding service. For your safety as well as those of our team, we are requesting that interactions be limited to emails, texts, telephone and fax (414-271-7464), along with video and teleconferencing options.

Beyond our office procedures, the Secretary of the Treasury Steven Mnuchin announced that taxpayers can delay filing their tax returns and delay paying their income tax until July 15, 2020. The state of Wisconsin has also extended the filing and payment deadlines to July 15, 2020. We will keep you updated as other changes become available.

Since we are all working remotely, we do not have the same printing capabilities, as you are accustomed to. For the time being, all completed tax returns, tax payment and estimate vouchers, authorization forms, financial statements, etc. will be emailed either through our secure web portal along with filing instructions, or through our tax software, where you will be able to sign your return electronically. We also realize that not all of our clients have printing capabilities. If you are unable to print, please contact your Partner directly via email or phone.  Each Partner’s individual contact information is on our firm’s website www.ritzholman.com.

Finally, we do have one request. Our goal is to continue to work and take care of each and every one of you; furthermore, we are requesting that you continue to forward your documents. Even though returns and payments are not due until July 15th, we are committed to taking care of your needs now. This will help us navigate rapidly changing guidance.

Thank you for your loyalty.  We are grateful for all our clients. Be well and stay healthy!

Ritz Holman CPAs

Ritz Holman CPAs Continued Response to COVID-19

Posted on March 19, 2020 by -

Ritz Holman CPAs Continued Response to COVID-19

Ritz Holman CPAs continues to carefully monitor and safeguard the health and safety of our employees, clients, and the community in light of the COVID-19 virus. We are dedicated to providing our clients and the community with the highest level of service during this time and have systems in place to provide assurances that your service remain in place.

Effective March 19, 2020, we have closed our office to the public and our employees are all working remotely from home.

We encourage you to reach out to us via email; our individual contact information is on the “Our People” tab on our firm’s website.

We will continue to monitor this ever changing situation, communicate updates, and dedicate our resources to best serve our clients and the community.

Please refer to our website: www.ritzholman.com for the ability to securely upload your documents and get up-to-date information.

 

Ritz Holman CPAs Response to COVID-19

Posted on March 16, 2020 by -

Ritz Holman CPAs Response to COVID-19

Ritz Holman CPAs is taking precautions to carefully monitor and safeguard the health and safety of our employees, clients, and the community in light of the COVID-19 virus; furthermore, we recognize that these safeguards are evolving rapidly.

We will continue to provide our clients and the community with the highest level of service during this time and have systems in place to provide assurances that your service needs will be met.

Although many of our staff members will be working remotely from their homes we are open for business.

Due to the nature of this unprecedented event we are actively monitoring all recommendations from the Center of Disease Control and World Health Organization. As of this time our main office is open; however, if at all possible we are recommending, that in-person client meetings be limited. Our firm is up-to-date with the latest technology and we are available by phone, teleconference, fax, email, text, etc.

We will continue to monitor this ever-changing situation, communicate updates, and dedicate our resources to best serve our clients and the community.

Please refer to our website: www.ritzholman.com for the ability to securely upload your documents and get up-to-date information.

Do not hesitate to contact our office with questions and concerns.

Be smart and be healthy!