Similar to other years, this year’s tax deadline was originally set by the IRS as April 15th. However, people and corporations alike are finding the deadline difficult to meet as they manage the unknowns and uncertainties surrounding the current coronavirus pandemic.
While the IRS is not historically known for its flexibility, they do have the authority under President Trump’s recent national emergency declaration to provide tax relief to impacted taxpayers.
The tax filing and payment deadline has been extended, and so has the deadline for making IRA contributions. Additionally, required minimum distributions have been waived.
The tax filing and payment deadline is now July 15th.
Individual taxpayers and corporations can defer filing their tax return up until July 15th—without interest or penalties.
There is no application necessary to receive this tax filing extension. Additionally, your clients are not required to actually have coronavirus to qualify.
This extension essentially provides an interest-free loan and extra time for your clients to prepare their tax returns for three months. It’s designed to provide a boost to the economy and allow taxpayers to prioritize other expenses during this time period.
Keep in mind that if your clients expect to get a refund, there is no benefit to delaying the filing of their tax returns. The faster they file, the faster you can get that cash into their bank accounts.
Other tax deadlines have also been extended.
On top of this valuable opportunity to delay income taxes interest-free, the deadlines to save for retirement have also been changed.
- The 2019 Traditional and Roth IRA contribution deadline is now July 15th, 2020.
- The 2019 SEP contribution deadline is now July 15th, 2020 (or October 15th, 2020 if filing for an extension).
- The 2019 IRA recharacterization deadline is now July 15th, 2020 (or October 15th, 2020 if filing for an extension or amending your tax return).
Because it takes us a few days to process your contributions and recharacterizations, our deadlines for the above actions are earlier than the IRS deadlines.
Required minimum distributions have been waived.
All required minimum distributions (RMDs) for 2020 have been waived for IRAs and qualified employer plans (401(k)s, 403(b)s, etc.). This waiver includes:
- RMDs for all retirement plans that you own or that you inherited
- RMDs that are due on both April 1, 2020, and December 31, 2020
Any RMDs that were already taken in 2020 (including 2019 RMDs that were withdrawn early in 2020) are eligible for a 60-day indirect rollover. If your clients deposit the funds back into their IRA as an indirect rollover, it’s essentially as if they never took the distribution.
Alternatively, they could potentially have three years to pay their distribution back under these special COVID-19 distribution rules.
For more information about coronavirus tax relief measures, check directly with the IRS. We also offer a tax filing guide to help your clients make filing your taxes as seamless for our customers as possible.
This article was published on April 13, 2020Leave a comment (0)