Submission of declarations, retirement accounts and deductions: key tax changes caused by the COVID-19 pandemic
The coronavirus infection pandemic has turned the entire economy and habitual life patterns. In particular, she changed the rules for filing declarations and other tax processes. Writes about it USA Today.
This year, several key changes should be noted, some of which are designed to ease the financial burden of the recession. These include changes affecting the deadlines for filing declarations, retirement accounts and charitable contributions.
New deadline for filing tax returns
Perhaps the most obvious change was the postponement of the regular deadline for filing tax returns and the tax payment date of 2019 from April 15 to July 15, 2020. Many taxpayers have already filed documents before the coronavirus pandemic in late February really began to affect the economy. For the rest, the delay provided more time for them to streamline the declarations and make payments. Settlements for the first and second quarters of 2019 were also deferred until mid-July.
To automatically renew, postpone the filing deadline for 2019 until October 15, you must send form 4868 to the Internal Revenue Service (IRS), but tax payments for the last year should be made before July 15.
Some deduction changes
After the tax reform in 2017, which entailed the adoption of a standard deduction, fewer people classify their deductions. This trend is likely to continue. But there are some notable changes.
One of the new rules for people receiving standard deductions is that they can deduct up to $ 300 in contributions to charities starting in 2020.
Also note: medical deductions will become a little easier to claim. Such expenses can be deducted for those who classify them if they exceed 7,5% of the adjusted gross income. It was assumed that this limit would increase to 10%, which would make it difficult to write off such costs, but a lighter threshold of 7,5% was maintained for 2019 and 2020.
The basic standard deduction has increased to $ 12 for one person and $ 400 for couples filing a joint declaration in 24. These amounts have grown by $ 800 and $ 2020, respectively, since 200.
IRA Contributions Still Available
A few weeks before the annual tax filing deadline, people invest in traditional or individual retirement accounts. Given that this year the application deadline for 2019 has been postponed to July 15, this is an important moment for the IRA contribution season.
That is, you can still contribute to the IRA and calculate it for 2019. The base annual limit is $ 6000, plus an additional $ 1000 in fees for people over 50. If you are financing a traditional deductible IRA, then this is one of the few remaining ways to retroactively cut your tax account for 2019.
The ability to make an IRA deductible contribution is affected by your income if you have a retirement account from an employer. Private entrepreneurs can also open an IRA account with higher premium limits for employees.
Retirement Credit Review
The rules affecting retirement were confusing even before the advent of the new coronavirus, and recent legislation has changed several key provisions, at least temporarily.
Previously, the general rule was that permanent exemptions from traditional IRA or 401 (k) accounts were taxed at ordinary income rates. Those who withdrew money from a pension account before they reached 59 years old were usually levied a 10 percent fine.
But now you can save these 10% if you are under 59 and the amount withdrawn from your pension account does not exceed $ 100. Another change will allow you to pay out the expenses associated with coronavirus for three years, while reducing tax consequences. Of course, it is best to put this money back into your retirement account, including for three years, and avoid fines.
Federal coronavirus financial assistance payments sent earlier this year will not be taxed, but still, when you file your 2020 tax return at the beginning of next year, pay attention to some details.
Most people don't need to do a lot of payment transactions when they file their 2020 returns. The payments will not “reduce your refund or increase the amount you must pay when you file your federal income tax return for 2020,” the IRS said in a statement.
However, the agency strongly recommends that taxpayers keep a notice indicating the size of the payment, the procedure for making it, and other details that may be useful. In particular, some taxpayers are entitled to apply for a loan that exceeds the size of their incentive payment (based on lower income or other factors), and thus demand the difference next year.
While incentive payments are not taxed, unemployment benefits are, on the contrary, taxed. Keep this in mind if you have recently joined the millions of Americans claiming unemployment benefits for the first time in many years.
Break for older investors
The IRS decided that any older investors who have already taken the required minimum allocation or RMD this year from certain retirement accounts can transfer money back to the same or similar accounts. This can lower a person’s current tax account and allow them to recover their investment portfolios, since such exemptions are usually taxed.
Under this new provision, RMD money can be returned to pension accounts without taxes until August 31.
This change mainly affects those who withdrew money at the beginning of the year - long before problems arose due to the new coronavirus. It updates a provision of the CARES Act allowing taxpayers to bypass their regular RMD payments this year if they have not yet made them. This is to alleviate the financial impact of the pandemic.
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