Paycheck Protection Program Deadline Approaches
The deadline for businesses to apply for loans under the Paycheck Protection Program has been extended until August 8th. If you had decided not to apply for the loan previously, you have time to reconsider. The rules for forgiveness has been eased, so only 60% needs to be spent on payroll and the covered period ends on the earlier of 24 weeks from the loan disbursement date or December 31, 2020.
IRS Issues RMD Rollover Relief
The CARES Act provided a waiver which allowed taxpayers to skip taking their RMD for 2020. However, some taxpayers had already taken their 2020 RMD when the act was passed. After much confusion, the IRS issued Notice 2020-51 which allows all recipients of 2020 distributions that were intended to be RMDs until August 31st to complete their rollovers to avoid current federal tax. The distribution may go back to the same plan it came from. The IRS has temporarily waived the requirement that only one IRA rollover can be made in a 12 month period for these rollovers and also is allowing non-spouse beneficiaries of inherited IRAs to recontribute their distribution.
Should everyone skip their 2020 RMD? It depends upon each individual situation. Skipping the RMD will allow a longer period for earning tax-deferred income, but if the distribution is a large part of an individual's income, this may reduce income so much that the individual will not be taking advantage of low tax rate brackets. However, this may be an opportunity to sell appreciated securities and realize low tax rate long-term capital gains instead. Another option may be to convert some of a traditional IRA to a Roth IRA. Fortunately these decisions can be made later in the year and, with the rollover relief, taxpayers can recontribute any RMD they have already taken and still take an IRA distribution later.
A word of caution: this is a very brief summary and does not include all of the details that may impact your individual situation. Please contact us if you would like more information.
About Lewitz, Balosie, Wollack,
Rayner & Giroux, LLC
We provide accounting, tax, and financial services to individuals, businesses, nonprofit organizations, estates, and trusts. Our services include tax return preparation, software consulting, and compilations, reviews, and audits of financial statements. We have been located in the shoreline community of Old Saybrook, Connecticut for over 60 years. Feel free to contact us if we can be of service. We can be reached at 860-388-4451. Our website is www.saybrookcpas.com
IRS Circular 230 Disclosure
Tax advice contained in this communication, unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.