2020 Updates
2020 CARES Act
The recent federal "Coronavirus Aid, Relief, and Economic Security Act" or the "CARES Act" was signed into law on March 27, 2020. The relief bill includes many stimulus items and changes to tax law. Key provisions include:
- Direct refund payment to eligible individuals
- Charitable Deduction
- Unemployment benefits increases and eligibility expanded
- Expedited Small Business Loan process and funding
- Required Minimum Distributions Waived for 2020
- Business loans and grants
The new law contains many provisions. This page is only a select summary of provisions. To see the full text of the bill, visit Full CARES Act Bill.
The CARES Act is complex. This is a very brief summary of select provisions of the Act and is not comprehensive. The information contained is not intended as tax, legal, or accounting advice.
Contact your attorney, accountant, or tax advisor regarding your particular situation and eligibility for provisions of the CARES Act. Your situation may vary.
Tax Return, IRA and HSA Contribution Due Date Extended to July 15, 2020
The new deadline for filing and paying taxes for the 2019 year year has been extended to July 15, 2020.
The Internal Revenue Service has clarified that the deadline for making Individual Retirement Account (IRA) and Health Savings Account (HSA) contributions for the 2019 tax year has been extend to July 15, 2020.
Required Minimum Distributions Suspended for 2020
The law states that tax-qualified plans, like 401(k), 403(b), 457(b) and IRAs may suspend Required Minimum Distributions in 2020. The new CARES Act allows account owners to skip both their 2019 RMD if it was their first year and not yet been withdrawn by 4/1/2020, and also to skip their RMD for 2020.
If you have already taken your RMD for 2020, you may be able to reinvest the distribution in your IRA, if it was less than 60 days since you received the funds. There are strict rules about such rollovers, and only one indirect rollover may be made per 12 month period. Remember, RMDS are generally not allowed to be rolled over, this appears to be an exception for 2020 only.
Qualified Charitable Distributions Allowed
Qualified Charitable Distributions (QCD) allow someone at age 70.5 or older to send the lesser of their RMD amount or $100,000 from an IRA to a qualified charity and have that amount offset any Required Minimum Distributions (RMD) for the year and not be treated as a taxable distribution.
The SECURE Act changed the required beginning date for RMDs to age 72, however, QCDs are still allowed beginning at age 70.5.
An account owner may still do a QCD from their IRA if they are age 70.5 or older and send money directly to a qualified charity. Remember that no RMDs are required in 2020.
Exception to Early Withdrawal Penalty Tax
The CARES Act also created a new exception to the 10% early withdrawal penalty tax under code section 72(t) for those who take retirement plan distributions prior to age 59 1/2 for certain COVID-19 conditions.
The withdrawal will be considered taxable income. The distribution may be spread over three years, or can be treated as taxable income for the 2020 tax year if desired.
Consult with your tax advisor for details of this provision prior to initiating any withdrawal from a tax-qualified retirement account.
New Inherited "Beneficiary" IRAs May Delay RMDs for 2020
The SECURE Act, passed in late 2019, required inherited IRAs to be distributed over a 10 year period, instead of the prior lifetime stretch provisions. In other words, the recipient of an inherited IRA would have to distribute the funds over a 10 year period.
The CARES Act waives the distribution requirement for 2020. For example, if the IRA owner passed away in 2020, the 10 year period would start in 2021. The beneficiary has until the end of the 10th year to withdraw the entire account.
Above the Line Deductions for Charitable Contributions
Under the CARES Act, an eligible individual may take a qualified charitable contribution deduction of up to $300 against their adjusted gross income in 2020. An eligible individual is any individual taxpayer who does not itemize his or her deductions. A qualified charitable contribution is a charitable contribution (i) made in cash, (ii) for which charitable deductions are otherwise allowed, and (iii) that is made to certain publicly supported charities.
The CARES Act is complex. This is a very brief summary of select provisions of the Act and is not comprehensive. The information contained is not intended as tax, legal, or accounting advice.
Contact your attorney, accountant, or tax advisor regarding your particular situation and eligibility for provisions of the CARES Act. Your situation may vary.