There are a lot of changes with tax deadlines and taxpayer relief programs happening. It’s been like a flood this week. The Coronavirus Stimulus Package just passed both houses of Congress and the President signed it into law. We’ve put together a few key things that you should be aware of:
Tax Deadlines: The Federal deadline is July 15 for filing and paying taxes owed. Illinois followed suit this week. Not all states have, though, so be sure to check your state deadline.
Roth IRA deadline: The deadline for contributing to your Roth IRA for 2019 is now the same as the federal tax deadline, July 15. You can contribute up to $6000 for 2019, and another $6000 for 2020. Those 50 years and older can contribute an extra $1000 on top of that. However, not everyone can contribute. Roth contributions are limited to those with earned income (or spouses with earned income) whose income (MAGI on your tax form) does not exceed $137,000 for single filers and $203,000 for joint filers. If you are close to those limits for 2019, you will need to prepare you taxes before contributing. Please contact us with questions.
Retirement Account Distributions: The requirement to take a required minimum distribution (RMD) from your retirement account is waived for 2020. This also applies to inherited IRAs and 401(k)s. We encourage those who don’t need a distribution right now to use this opportunity to keep their money growing tax-deferred and to recover for any losses incurred.
Hardship Distributions from IRAs and 401(k)s: If you have been affected by coronavirus, meaning diagnosed with the virus or lost income/job etc. you can take up to $100,000 out of your retirement account, even if you are under age 59.5. You would still owe tax, but it could be paid over three years. There is no penalty. If you put the money back within three years, there is no tax. There is a similar loan provision that applies to 401(k)s.
Help for Small Business Owners: The CARES Act bill, a new SBA program will fund loans of up to $10 million for businesses with fewer than 500 employees. The loan amount would be 2.5 times the monthly payroll cost and can be used for payroll, rent, mortgage payments, and utilities. The loan would have an interest rate around 4%. The U.S. will forgive the debt used for payroll costs, mortgage interest, rent and utility payments, as long as businesses maintain the same number of employees it had before the coronavirus crisis and all employees receive at least 75% of their prior pay. For businesses that reduce their headcount or reduce wages more than 25%, the amount of the loan forgiven will be reduced in proportion to payroll cuts, but the companies can rehire employees in coming weeks without penalty. The SBA Administrator will issue guidance on specific details as to how these loans will be processed, documentation requirements and timelines. If you own a small business, you should look into this.
Help for Contract Employees: Contract employees are typically not eligible for unemployment benefits, but that has changed. The relief bill lets contract employees apply for benefits, including the additional $600 weekly benefit. The Labor Department has not yet published the specifics of how this will work.
There is a lot in this new bill and we are still processing it ourselves. Questions remain about how everything will work. We are happy to advise you on any of these matters and make recommendations for your individual situation.