Harless Tax Blog
Original article by Barbara E. Bel, Partner and Laura Rodriguez, Senior Associate for www.pkfod.com >
Not only has the Corona Aid, Relief, and Economic Security (CARES) Act passed last March injected trillions of dollars into the economy via the Paycheck Protection Program and the economic stimulus payments, it has also made an important, and very beneficial, change to the required mandatory distribution (RMD) law in 2020 for IRAs and defined contribution plans. In June, IRS Notice 2020-51 clarified some open issues.
New 2020 Rules
Under the CARES Act, any IRA owner who would normally be required to take an RMD in 2020, may choose to skip taking their RMD this year.
What happens to an individual who already took their RMD in 2020?
If an individual had already taken an RMD, the CARES Act reclassified those distributions as voluntary distributions, which typically can be rolled over within 60 days of distribution. The IRS notice extends the 60-day deadline to rollover or repay 2020 RMDs to August 31, 2020 and makes this relief available to all 2020 RMDs, including those taken as early as January 1, 2020.
In addition to expanding the ability to rollover or repay 2020 RMDs, the IRS issued the following guidance in relation the CARES Act and changes to the IRA rules for 2020:
- The RMD waiver does not change an individual’s RMD required beginning date.
- The 2020 RMD waiver applies to RMDs that would normally be treated as part of a series of substantially equal periodic payments.
- The 2020 RMD waiver applies to beneficiaries of inherited IRAs.
- A 2020 RMD is also waived for those individuals who turned 70½ in 2019 and whose first RMD was April 1, 2020.
- The “one rollover per 12 months” restriction on IRAs has been waived to allow 2020 RMDs to be rolled over even if there was prior rollover in the last 12 months.
IR-2020-109, June 2, 2020
WASHINGTON – The Internal Revenue Service today reminded people who live and work abroad that they have until Wednesday, July 15, 2020, to file their 2019 federal income tax return and pay any tax due. The usual deadline is June 15.
This extension was included in a wide range of Coronavirus-related relief announced in early April. The extension generally applies to all taxpayers who have an income tax filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020.
This means that anyone, including Americans who live and work abroad, nonresident aliens and foreign entities with a U.S. filing and payment requirement, have until July 15 to file their 2019 federal income tax return and pay any tax due. Visit IRS.gov/coronavirus for details.
Need more time beyond July 15?
Individual taxpayers who need additional time to file beyond the July 15 deadline can request a filing extension to Oct. 15 in one of two ways:
- Filing Form 4868 through their tax professional, tax software or using the Free File link on IRS.gov.
- Submitting an electronic payment with Direct Pay, Electronic Federal Tax Payment System or by debit, credit card or digital wallet options and selecting Form 4868 or extension as the payment type. The automatic extension of time to file will process when taxpayers pay all or part of their taxes, electronically, by the July 15 due date. An extension to file is not an extension to pay. Taxes are still due by July 15.
Businesses that need additional time to file income tax returns must file Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information, and Other Returns.
Combat zone extension
Members of the military qualify for an additional extension of at least 180 days to file and pay taxes if either of the following situations apply:
- They serve in a combat zone or they have qualifying service outside of a combat zone or
- They serve on deployment outside the United States away from their permanent duty station while participating in a contingency operation. This is a military operation that is designated by the Secretary of Defense or results in calling members of the uniformed services to active duty (or retains them on active duty) during a war or a national emergency declared by the President or Congress.
Deadlines are also extended for individuals serving in a combat zone or a contingency operation in support of the Armed Forces. This applies to Red Cross personnel, accredited correspondents, and civilian personnel acting under the direction of the Armed Forces in support of those forces.
Spouses of individuals who served in a combat zone or contingency operation are generally entitled to the same deadline extensions with some exceptions.
IRS.gov assistance 24/7
Tax help is available 24/7 on IRS.gov. The IRS website offers a variety of online tools to help taxpayers answer common tax questions. For example, taxpayers can search the Interactive Tax Assistant, Tax Topics, Frequently Asked Questions, and Tax Trails to get answers to common questions. Go to IRS.gov/payments for electronic payment options.
The IRS will post frequently asked questions on IRS.gov/coronavirus and will provide updates as soon as they are available.
By TOBY ECKERT Read original article on Politico >
05/29/2020 06:04 PM EDT
Updated: 05/29/2020 09:48 PM EDT
The IRS estimates that nearly 5 million unopened paper tax returns had piled up at the agency by mid-May amid the closure of its offices nationwide due to the coronavirus pandemic, according to a report that POLITICO has obtained.
Overall, the IRS estimated it had a backlog of 10 million pieces of mail to open and process as thousands of workers begin returning to the offices on Monday.
In addition to tax returns, the unopened mail includes taxpayer correspondence, information returns and payments, according to the report.
Through May 22, the agency had processed 120 million returns, down 14 percent from the same point in 2019, when the filing deadline was April 15. The deadline was delayed by three months this year because of disruptions caused by the pandemic.
Nearly 90 percent of the 134 million returns filed so far were sent to the agency electronically, the report said. Filings were down 6.2 percent from 2019, but the average refund — nearly $2,900 — was similar to last year, the report said.
More than 10,000 IRS employees have been told to report to offices in Kentucky, Texas and Utah on Monday. They will focus on mail and return processing, taxpayer refund claims, depositing checks, income verification requests, customer service and telephone assistance, the report said.
Additional employees are expected to be recalled in coming weeks. More than half of the agency’s roughly 81,000 employees have been teleworking.
The report said the IRS “is taking a number of steps to ensure employee safety in our facilities, for example: enforcing social distancing; procuring 1.76 million disposable masks and 188,000 reusable masks; providing hand sanitizer at all facilities and limited quantities of disinfecting wipes (IRS is attempting to procure more); enhanced cleaning; and assessing the ability to modify HVAC operations to provide additional outside air and increase air exchange.”
Coronavirus stimulus prepaid cards mailed in plain envelopes are not junk mail, IRS cautions 'Please do not throw it away,' government pleads
The cards will arrive in a “plain envelope” from "Money Network Cardholder Services," the IRS said.
Unsuspecting individuals could mistake the envelope for junk mail or even a credit card promotion, especially since many people are likely not aware their payment will be arriving on a prepaid card instead of in the form of a check.
People cannot choose to have their payments sent this way. These 4 million individuals, who did not have direct deposit information on file with the tax agency, were selected by the Bureau of the Fiscal Service.
The Visa name appears on the front of the card, and MetaBank – the Treasury Department’s financial agent – appears on the bank. That may further confuse individuals who do not hold an account with Visa and who are unfamiliar with MetaBank.
“If you receive a card that looks like this, please do not throw it away,” the Consumer Financial Protection Bureau requested in an informational web video.
One sign you may have missed your card in the mail is if you receive a letter from the IRS, signed by President Trump, which details how much money you should have received.
These letters were expected to be sent two weeks after the economic impact payments.
So what should you do if you think you may have mistaken your prepaid card for junk mail?
One way you might want to address the issue is by calling the number at the bottom of the IRS letter, 800- 919-9835. The agency has recalled some staff who will be available to take phone calls.
Further, if you believe you threw the card away or misplaced it, you can also follow directions specifically for the prepaid cards, which will allow you to block unauthorized transactions as well.
The government provides information for people whose card is lost or stolen, which directs them to log in at EIPCard.com to block unauthorized transactions and call 1-800-240-8100 to report it.
A spokesperson for the IRS directed FOX Business to the aforementioned web page for the cards, adding that the agency had nothing further to add at this time regarding what taxpayers should do if they think they may have accidentally trashed their payment.
Economic Impact Payments being sent by prepaid debit cards, arrive in plain envelope; IRS.gov answers frequently asked questions
IR-2020-105, May 27, 2020 Article from IRS.gov >
WASHINGTON – As Economic Impact Payments continue to be successfully delivered, the Internal Revenue Service today reminds taxpayers that some payments are being sent by prepaid debit card. The debit cards arrive in a plain envelope from "Money Network Cardholder Services."
Nearly 4 million people are being sent their Economic Impact Payment by prepaid debit card, instead of paper check. The determination of which taxpayers received a debit card was made by the Bureau of the Fiscal Service, a part of the Treasury Department that works with the IRS to handle distribution of the payments.
Those who receive their Economic Impact Payment by prepaid debit card can do the following without any fees.
- Make purchases online and at any retail location where Visa is accepted
- Get cash from in-network ATMs
- Transfer funds to their personal bank account
- Check their card balance online, by mobile app or by phone
This free, prepaid card also provides consumer protections available to traditional bank account owners, including protection against fraud, loss and other errors.
Frequently asked questions continually updated on IRS.gov
The IRS has two sets of frequently asked questions to help Americans get answers about their Economic Impact Payments, including those arriving on prepaid debit card. These FAQs include answers to eligibility and other many common questions, including help to use two Economic Impact Payment tools.
Get My Payment, an IRS online tool, shows the projected date when a direct deposit has been scheduled or date when the payment will be mailed by check or prepaid debit card. The Non-Filers Enter Payment Info Here tool helps taxpayers successfully submit basic information to receive Economic Impact Payments quickly.
The IRS regularly updates the Economic Impact Payment and the Get My Payment frequently asked questions pages on IRS.gov as more information becomes available. Taxpayers should check the FAQs often for the latest additions.
Here are answers to some of the top questions people are asking about the prepaid debit cards:
Maybe. It depends on your prepaid card and whether your payment has already been scheduled. Many reloadable prepaid cards have account and routing numbers that you could provide to the IRS through the Get My Payment application or Non-Filers: Enter Payment Info Here tool. You would need to check with the financial institution to ensure your card can be re-used and to obtain the routing number and account number, which may be different from the card number. If you obtained your prepaid debit card through the filing of a federal tax return, you must contact the financial institution that issued your prepaid debit card to get the correct routing number and account number. Do not use the routing number and account number shown on your copy of the tax return filed. When providing this information to the IRS, you should indicate that the account and routing number provided are for a checking account unless your financial institution indicates otherwise.
Some payments may be sent on a prepaid debit card known as The Economic Impact Payment Card The Economic Impact Payment Card is sponsored by the Treasury Department's Bureau of the Fiscal Service, managed by Money Network Financial, LLC and issued by Treasury's financial agent, MetaBank®, N.A.
If you receive an Economic Impact Payment Card, it will arrive in a plain envelope from "Money Network Cardholder Services." The Visa name will appear on the front of the Card; the back of the Card has the name of the issuing bank, MetaBank®, N.A. Information included with the Card will explain that the card is your Economic Impact Payment Card. Please go to EIPcard.com for more information.
Not at this time. For those who don't receive their Economic Impact Payment by direct deposit, they will receive their payment by paper check, and, in a few cases, by debit card. The determination of which taxpayers receive a debit card will be made by the Bureau of the Fiscal Service (BFS), another part of the Treasury Department that works with the IRS to handle distribution of the payments. BFS is sending nearly 4 million debit cards to taxpayers starting in mid-May. At this time, taxpayers cannot make a selection to receive a debit card. Please go to EIPcard.com for more information.
Watch out for scams related to Economic Impact Payments
The IRS urges taxpayers to be on the lookout for scams related to the Economic Impact Payments. To use the new app or get information, taxpayers should visit IRS.gov. People should watch out for scams using email, phone calls or texts related to the payments. Be careful and cautious: The IRS will not send unsolicited electronic communications asking people to open attachments, visit a website or share personal or financial information. Remember, go directly and solely to IRS.gov for official information.
Quick links to the Frequently Asked Questions on IRS.gov:
- While most states have yet to comment on whether taxpayers can deduct ordinary business expenses paid with Paycheck Protection Program (PPP) loan proceeds that are forgiven by the IRS, taxpayers should monitor state conformity to the CARES Act (P.L. 116-136) and the Internal Revenue Code.
- Rolling conformity states that conform to the CARES Act will not tax or include as gross income any forgiveness amount associated with the PPP. As such, it is likely that these states will also follow the federal treatment that disallows expense deductions associated with any forgiven PPP loan amount.
- Taxpayers should also be aware of the introduction of measure S.3612, which seeks to establish that coronavirus assistance, whether forgiven or repayable, will not affect the treatment of ordinary business expenses.
PPP Expense Deductions
As a part of the CARES Act (Sec. 1102), the Small Business Administration (SBA) made available PPP loans, for the purpose of helping businesses keep their workforce employed during the COVID-19 pandemic. The SBA would not require repayment of the loan if a business kept employees on its payroll for eight weeks and used the loan money for payroll, rent, mortgage interest, or utilities, with 75% of the loan amount forgiven being used for payroll. While loans that are forgiven would normally be considered cancellation of debt income, the CARES Act specifically states in Sec. 1106(i) that any forgiven loan amount will be excluded from gross income.
The IRS has issued Notice 2020-32 to provide guidance regarding the deductibility for federal income tax purposes of certain otherwise deductible expenses incurred in a taxpayer’s business when the taxpayer receives a PPP loan. Notice 2020-32 states that “no deduction is allowed under the Internal Revenue Code (Code) for an expense that is otherwise deductible if the payment of the expense results in forgiveness of a covered loan pursuant to section 1106(b) of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), Public Law 116-136, 134 Stat. 281, 286-93 (March 27, 2020) and the income associated with the forgiveness is excluded from gross income for purposes of the Code pursuant to section 1106(i) of the CARES Act.”
Therefore, currently, to the extent that any PPP loan is forgiven and excluded from a taxpayer’s gross income, the taxpayer will not be entitled to deduct ordinary and business expenses that were paid by the forgiven loan proceeds.
Most states have been silent in regards to whether they conform to the CARES Act and follow the federal treatment of excluding forgiven loan proceeds as gross income and disallowing expense deductions associated with PPP loan proceeds. However, it is likely that rolling conformity states that automatically conform to the IRC, such as Massachusetts or New Jersey, will conform to the CARES Act and will also follow the federal treatment of excluding forgiven PPP loans from gross income and disallowing expense deductions associated with any forgiven PPP loan amount.
However, states that have static conformity provisions that do not conform to the CARES Act, such as California (conforms to the IRC as of January 1, 2015), will likely not follow the federal treatment regarding forgiven PPP loan proceeds and related expenses. In these non-conforming states, any forgiven loan proceeds will likely be included as income for state purposes. States that do include forgiven PPP loan proceeds as income will likely allow expense deductions for ordinary expenses funded by the PPP loans.
Small Business Expense Protection Act of 2020 (S. 3612)
On May 5, 2020, the Small Business Expense Protection Act of 2020 (S. 3612) was introduced to the Senate. This bipartisan legislation clarifies that ordinary expenses that are backed by PPP loan proceeds will be deductible as normal ordinary expenses. This bill, if passed, will reverse the federal treatment of disallowing ordinary expense deductions that are funded by PPP amounts as stated in Notice 2020-32.
The lawmakers that introduced S.3612 believe its passage is necessary to achieve the PPP’s true goal of providing relief to small businesses affected by the COVID-19 pandemic. Specifically, the lawmakers stated that, “Providing assistance to small businesses, only to disallow their business deductions as provided in Notice 2020-32, reverses the benefit that Congress specifically granted by exempting PPP loan forgiveness from income.”
If S.3612 is to become law, a rolling conformity analysis will likely not need to be conducted in order to determine if states will allow expense deductions funded by PPP loan proceeds, as federal preemption will require states to allow for the deduction. Currently S.3612 has been introduced to the Senate and assigned to the Senate Committee on Finance. The next step is for the Committee to send the bill to the Senate floor for debate or a subcommittee for further research. If it does go to the Senate floor and receives a majority vote, the bill will move to the House of Representatives for a similar process of committees, debate and voting. Once both houses approve the final bill, it will go to the President for signature or veto.
For specific guidance regarding state-specific treatment pertaining to the PPP and related expenses, see Armanino’s COVID-19 Relief Matrix.
Taxpayers who have received PPP loans and satisfied the conditions necessary to result in partial or full forgiveness of the loan amount must determine whether they are able to deduct the ordinary business expenses that they paid with their PPP loan proceeds. Absent any specific comment from the states regarding these expense deductions, a conformity analysis should be done to determine whether a state conforms to the CARES Act and the IRC generally.
If a state conforms to the CARES Act, the states will follow the current federal treatment to exclude any forgiven PPP amount from gross income and disallow any deduction for any associated expenses. While the federal treatment currently disallows PPP expense deductions associated with forgiven loan amounts, new measures and proposals will likely result in expense deductions associated with PPP being allowed at a later time.
Also keep an eye on S. 3612 to see whether it becomes law and thereby allows taxpayers to take the ordinary expense deductions paid for by PPP loans. This bill is just in the first stage of the legislative process – so stay tuned!
Millions of Americans who have filed for unemployment in recent weeks may be wondering if their benefits will be taxed.
The answer is yes.
However, there’s a difference that could cause Americans to pay less tax relative to levies on a typical paycheck.
“Unemployment benefits are taxed just like income,” said Michele Evermore, senior policy analyst at the National Employment Law Project.
Act by Wednesday for chance to get quicker Economic Impact Payment; timeline for payments continues to accelerate
May 8, 2020 From IRS.gov >
WASHINGTON – With a variety of steps underway to speed Economic Impact Payments, the Treasury Department and the Internal Revenue Service urged people to use Get My Payment by noon Wednesday, May 13, for a chance to get a quicker delivery.
The IRS, working in partnership with Treasury Department and the Bureau of Fiscal Services (BFS), continues to accelerate work to get Economic Impact Payments to even more people as soon as possible. Approximately 130 million individuals have already received payments worth more than $200 billion in the program's first four weeks.
Starting later this month, the number of paper checks being delivered to taxpayers will sharply increase. For many taxpayers, the last chance to obtain a direct deposit of their Economic Impact Payment rather than receive a paper check is coming soon. People should visit Get My Payment on IRS.gov by noon Wednesday, May 13, to check on their payment status and, when available, provide their direct deposit information.
"We're working hard to get more payments quickly to taxpayers," said IRS Commissioner Chuck Rettig. "We want people to visit Get My Payment before the noon Wednesday deadline so they can provide their direct deposit information. Time is running out for a chance to get these payments several weeks earlier through direct deposit."
After noon Wednesday, the IRS will begin preparing millions of files to send to BFS for paper checks that will begin arriving through late May and into June. Taxpayers who use Get My Payment before that cut-off can still take advantage of entering direct deposit information.
How Get My Payment works
The Get My Payment tool provides eligible taxpayers with a projected Economic Impact Payment deposit date. The information is updated once daily, usually overnight. There is no need to check more than once a day. Taxpayers who did not choose direct deposit on their last tax return can use this tool to input bank account information to receive their payment by direct deposit, expediting receipt.
Non-Filers portal remains available
For those not required to file a federal tax return, the Non-Filers: Enter Payment Info Here tool helps them submit basic information to receive an Economic Impact Payment quickly to their bank account. Developed in partnership between the IRS and the Free File Alliance, this tool provides a free and easy option for those who don't receive Social Security retirement, survivor or disability benefits (SSDI), Railroad Retirement benefits, Supplemental Security Income (SSI) and VA Compensation and Pension (C&P) benefits. The Non-Filers tool is also available in Spanish.
Eligible taxpayers who filed tax returns for 2019 or 2018 will receive the payments automatically. Automatic payments will also be sent to those receiving Social Security retirement, disability benefits, Railroad Retirement benefits, Veterans Affairs benefits or Supplemental Security Income soon.
Watch out for scams related to Economic Impact Payments
The IRS urges taxpayers to be on the lookout for scams related to the Economic Impact Payments. To use the new app or get information, taxpayers should visit IRS.gov. People should watch out for scams using email, phone calls or texts related to the payments. Be careful and cautious: The IRS will not send unsolicited electronic communications asking people to open attachments, visit a website or share personal or financial information.
Stay informed with Economic Impact Payment FAQs; Social Media platforms
Taxpayers should check the Frequently Asked Questions (FAQs) for more information.
COVID Tax Tip 2020-53, May 7, 2020 From IRS.gov >
Small and midsize employers can claim two new refundable payroll tax credits. The paid sick leave credit and the paid family leave credit are designed to immediately and fully reimburse eligible employers for the cost of providing COVID-19 related leave to their employees.
Here are some key things to know about these credits.
Paid sick and family leave
For COVID-19 related reasons, employees receive up to 80 hours of paid sick leave when they are sick or caring for someone else who is, and up to 10 weeks of paid family leave when their children's schools or place of care are closed, or child care providers are unavailable due to COVID-19.
- Employers receive 100% reimbursement for required paid leave.
- Health insurance costs are also included in the credit.
- Employers do not owe their share of social security tax on the paid leave and get a credit for their share of Medicare tax on the paid leave.
- Self-employed individuals receive an equivalent credit.
- Reimbursement will be quick and easy.
- The credit provides a dollar-for-dollar tax offset against the employer's payroll taxes
- The IRS will send any refunds owed as quickly as possible.
To take immediate advantage of the paid leave credits, businesses should use funds they would otherwise pay to the IRS in payroll taxes. If those amounts are not enough to cover the cost of paid leave, employers can request an expedited advance from the IRS by submitting Form 7200, Advance Payment of Employer Credits Due to COVID-19.
For details about these credits and other relief, visit Coronavirus Tax Relief on IRS.gov.
PDF download of a comprehensive 15 page FAQ regarding questions about the PPP program. Download the below document to read.