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Important Upcoming Tax Deadlines for August 2020
There have been many changes, adjustments and deadline extensions in the tax and financial industry this year due to coronavirus. Individuals and companies have been able to take advantage of financial assistance options such as federal loan programs, tax credits, economic impact payments and other available financial relief options to try and stay afloat during this challenging time.
Here are a couple of benefits still available to people and businesses, but their August deadlines are fast approaching:
•Paycheck Protection Program Loan Application Deadline Extended to Aug. 8
Businesses now have more time to apply for a Paycheck Protection Program (PPP) loan. Congress has extended the application deadline from June 30 to Aug. 8. Additionally, lawmakers are expected to put more money into PPP loans in the next stimulus bill. Independent contractors, sole proprietors and self-employed individuals (Schedule C filers) are eligible for PPP loans, even if they don’t have employees.
•Deadline to Return Required Minimum Distribution and Not Pay Tax is Aug. 31
As a result of the Coronavirus Aid, Relief and Economic Security (CARES) Act, Required Minimum Distributions (RMDs) are not required for 2020 for individuals with IRAs and 401(k) accounts.
Generally, RMDs are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches age 72 (70.5 if you reached 70.5 before Jan. 1, 2020), according to IRS.gov.
This year, the CARES Act allowed everyone to skip the required RMD for 2020. If you already took your RMD this year, you have until Aug. 31 to return it to your account and not pay tax on the distribution under IRS Notice 2020-51 (even if you took your RMD more than 60 days ago). Additionally, RMDs from inherited IRAs are also allowed to be rolled over or re-contributed by the summer deadline.
Provided you return the funds by Aug. 31, it will be treated as a tax-free rollover. The IRS notice also waives the usual one rollover per 12-month period limitation.
The only exception—if you received your RMD in the form of stock and later sold the shares, it doesn’t appear you can recontribute the proceeds and treat it as a rollover. When doing an IRA rollover, you must roll over the same property that you originally received from the account.
For example, if you took an IRA RMD of 500 shares of stock, those 500 shares must be returned, whether they increased or dropped in value since the distribution.
Anthony Hoffmaster, CPA, CES, MST, is available by phone 919-435-4413 or email email@example.com to answer any questions related to PPP loans or RMDs.