Posts on this page reflect tax law change alerts & updates for new provisions passed by Congress that may impact you. We also periodically post reminders & updates that may impact our clients. While we try to be as detailed as possible, we ask that clients contact their BenderCPA advisor with any questions before taking action based on a post to ensure your intended outcome is achieved.
To Our Valued Clients:
In Part 2 of our two-part update on the recently passed CARES Act, we focus on changes and COVID-19 relief that focuses on individual taxpayers.
1. Recovery Checks for Individuals. Each US individual is eligible for a payment within the next few weeks of up to $1,200 per individual taxpayer plus $500 for every child. Eligibility for the payment is based on 2019 or 2018 Adjusted Gross Income (AGI) and is phased out as follows:
a. $75,000 to $99,000 for Single taxpayers
b. $112,000 to $146,500 for Heads of Household, and
c. $150,000 to $198,000 for Joint filers
If no 2018 return has been filed, IRS will use information from the individual's 2019 Form SSA-1099, Social Security Benefit Statement, or Form RRB-1099, Social Security Equivalent Benefit Statement. While the payment amounts will initially be based on 2018 or 2019 tax returns, the final eligibility is based on your 2020 tax returns to be filed next year. With all 2020 tax returns, taxpayers will need to report what Recovery Credit they are eligible for based on their 2020 AGI and then will either receive additional refundable credit or will owe back any advance payment received that they have phased-out of.
2. Early Retirement Distribution Penalties Waived for 2020. For retirement plan distributions by individuals under age 59 ½ made between 1/1/2020 and before 12/31/2020, the 10% additional tax (penalty for early withdrawal) does not apply to a qualified individual for any coronavirus-related distribution, up to $100,000. A qualified individual is an individual:
· (1) who is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved by the Centers for Disease Control and Prevention (CDC),
· (2) whose spouse or dependent is diagnosed with such virus or disease by such a test, or
· (3) who experiences adverse financial consequences as a result of being quarantined, being furloughed or laid off or having work hours reduced due to such virus or disease, being unable to work due to lack of child care due to such virus or disease, closing or reducing hours of a business owned or operated by the individual due to such virus or disease, or other factors as determined by the Secretary of the Treasury.
3. Required Minimum Distribution (RMD) Waived for 2020. For taxpayers over age 70 ½, RMD requirements do not apply for calendar year 2020 to most IRA and other retirement accounts which require an RMD. The RMD requirements also do not apply to any distribution which is required to be made in calendar year 2020 by reason of: (I) a required beginning date occurring in calendar year 2020, and, (II) such distribution not having been made before January 1, 2020.
Stay up to date on COVID-19 relief updates on our website at www.BenderCPA.com/COVID-19.
We continue to work on clients’ 2019 tax returns during the ‘Stay Home’ order and we appreciate your understanding and patience during these difficult times. Your Bender CPAs Principal will contact you upon completion of the returns.