by MEA Tax Advisors | Jul 21, 2020 | Tax Tips and News
The Internal Revenue Service says seniors and retirees aren’t required to take money out of their IRAs and workplace retirement plans this year.
The Coronavirus Aid, Relief, and Economic Security Act—also known as the CARES Act—waives the required minimum distributions during 2020. The provision covers IRAs and retirement plans and includes beneficiaries with inherited accounts.
The waiver includes Required Minimum Distributions (RMDs) for those individuals who turned 70 ½ in 2019 and took their first RMD in 2020. Roth IRAs do not require withdrawals until after the death of the owner.
Already Taken a Required Minimum Distribution?
If a taxpayer has already taken an RMD in 2020—including someone who turned 70 ½ during 2019—they will have the option of returning the distribution to their account or some other qualified plan.
RMDs already taken in 2020 are considered eligible for rollover, so RMDs can be rolled over to another IRA, another qualified retirement plan, or simply returned to the original plan.
An IRA owner or beneficiary who has already received an RMD in 2020 can repay the distribution to the distributing IRA no later than Aug. 31, 2020, to avoid paying taxes on the distribution.
IRS Notice 2020-51 (PDF) also provides that the one rollover per 12-month period limitation and the restriction on rollovers to inherited IRAs do not apply to this repayment.
The IRS says CARES Act provisions apply to most retirement plans, including traditional IRAs, SEP IRAs, SIMPLE IRAs, 401(k) plans, 403(b) plans, profit sharing plans and other defined contribution plans.
The RMD suspension does not apply to qualified defined benefit plans.
For more information on the suspension of RMDs, the CARES Act and retirement plans, check out the IRS’ website for Coronavirus-related relief for retirement plans and IRAs.
– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Jul 8, 2020 | Tax Tips and News
The Internal Revenue Service says it has expanded its list of retail partners who accept cash payments for federal taxes. This cash payment option is available for individual and business taxpayers alike.
The IRS has a continuing partnership with ACI Worldwide’s OfficialPayments.com and the PayNearMe Company that allows taxpayers to make their tax payments without a bank account or credit card. They can do so at participating 7-Eleven stores, Ace Cash Express and Casey’s General Stores nationwide.
Taxpayers wishing to use the cash payment option should:
- Go online to the gov/payments webpage;
- Select the cash option in the “Other Ways You Can Pay” section;
- Follow the directions.
- NOTE: There is a $1,000 payment limit per day and a $3.99 fee for each payment.
The PayNearMe process involves three steps, so the IRS strongly recommends cash payers choosing this option to start the process well ahead of any tax deadline to avoid interest and penalty charges.
For taxpayers who do not have a need to pay in cash, there are other options to pay online, by phone or with a mobile device and the IRS2Go app.
IRS Direct Pay is a secure online payment option that allows taxpayers to pay directly from their bank accounts — and it’s free. The IRS has partnered with Official Payments since 1999 for taxpayers who want to use a credit card to pay their tax bill.
The IRS reminds all taxpayers to be aware of email schemes. Taxpayers will only get an email from OfficialPayments.com or PayNearMe if they have initiated the payment process.
– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Jul 7, 2020 | Tax Tips and News
The Internal Revenue Service has a little excess cash it would like to get rid of. It comes in the form of unclaimed income tax refunds for taxpayers who didn’t file a 2016 tax return.
The unclaimed refunds are worth some $1.5 billion and the IRS says about 1.4 million individual taxpayers could have a share in the haul if they file a 2016 return. But they need to do it quickly.
“The IRS wants to help taxpayers who are owed refunds but haven’t filed their 2016 tax returns yet,” said IRS Commissioner Chuck Rettig. “Time is quickly running out for these taxpayers. There’s only a three-year window to claim these refunds, and the window closes on July 15. To claim the refund, a return for tax year 2016 must be filed by July 15, 2020.”
IRS Notice 2020-23 extended the due date for filing tax year 2016 returns and claiming refunds for that year to July 15 because of the COVID-19 pandemic. To claim and collect a tax year 2016 refund, taxpayers must file their 2016 tax returns with the IRS no later than July 15.
The midpoint for the unclaimed 2016 refunds, the IRS notes, is $861 — that means half of the refunds are more; half are less. As the commissioner mentioned, there is a three-year period where the refunds can be claimed. After the July 15 tax deadline, any refunds that remain unclaimed become property of the Treasury.
No Penalty to File Late
If a refund is involved, there’s no penalty for filing late. But there are a few things to keep in mind. Taxpayers seeking a 2016 tax refund should know that their checks may be held if they have not filed tax returns for 2017 and 2018. In addition, the refund will be applied to any amounts owed to the IRS or a state tax agency and may be used to offset unpaid child support or past due federal debts, such as student loans.
There is another potential loss to consider for those who don’t make the July 15 filing deadline. Besides the potential loss of the waiting refund, the taxpayer who doesn’t file for 2016 may miss out on the Earned Income Tax Credit (EITC). For 2016, the EITC was worth as much as $6,269.
The EITC helps individuals and families whose incomes are below certain thresholds. The thresholds for 2016 were:
- $47,955 ($53,505 if married filing jointly) for those with three or more qualifying children;
- $44,648 ($50,198 if married filing jointly) for people with two qualifying children;
- $39,296 ($44,846 if married filing jointly) for those with one qualifying child, and;
- $14,880 ($20,430 if married filing jointly) for people without qualifying children.
The IRS says you should get paperwork in order now.
Taxpayers who are missing Forms W-2, 1098, 1099, or 5498 for the years 2016, 2017 or 2018 should get copies from their employer, bank or other payer. If they can’t get copies, taxpayers can order a free wage and income transcript at IRS.gov using the Get Transcript Online tool.
As an alternative, taxpayers can mail Form 4506-T to request a wage and income transcript, which shows data from information returns filed with the IRS such as Forms W-2, 1098, 1099, Form 5498 and even IRA contribution information. The information on the transcript can be used to file the corresponding tax return.
IRS figures show Texas with the largest estimated number of taxpayers with possible 2016 refunds at 143,400 taxpayers. Vermont has the smallest number with 2,800. Alaska leads with the largest median refund amount at $979. Idaho has the lowest median refund: $727.
– Story provided by TaxingSubjects.com
by MEA Tax Advisors | Jul 1, 2020 | Tax Tips and News
The Internal Revenue Service has some bad news for taxpayers hoping that the tax filing and payment deadlines would get pushed back again. In a recent IRS Newswire press release, the agency said taxpayers should either file their tax return or an extension by July 15.
What is the deadline for taxpayers who request an extension?
There are three important deadlines for taxpayers who want to get an extension:
- Request the extension by July 15, 2020
- Pay tax owed by July 15, 2020
- File the now-extended tax return by October 15, 2020
The IRS explained that there are two ways to secure an extension: file Form 4868 or pay tax owed. They also said that paying can “save a step” on July 15: “When getting an extension by making a payment, taxpayers do not have to file a separate extension form and will receive a confirmation number for their records.” Besides, missing the payment deadline can add penalties and interest to your tax bill.
How do I pay my tax bill?
The IRS suggested five ways to pay taxes: IRS Direct Pay, the Electronic Federal Tax Payment System (EFTPS), third-party payment processors for debit and credit cards, a check or money order, or even a loan. Those who can’t pay all of what they owe can request a payment agreement—like an Online Payment Agreement, Installment Agreement Request, temporarily delayed collection, or an Offer in Compromise—which the agency said can mitigate potential penalties and interest.
“Though interest and late-payment penalties continue to accrue on any unpaid taxes after July 15, the failure to pay tax penalty rate is cut in half while an installment agreement is in effect,” the IRS explained. “The usual penalty rate of 0.5% per month is reduced to 0.25% for the calendar quarter beginning July 1, 2020, the interest rate for underpayment is 3%.”
What about state tax filing deadlines?
The IRS also noted that state tax filing deadlines could be different from the July 15 filing deadline. Check out our “Did COVID-19 Change My State Individual Income Tax Deadline” blog to double check your state deadline.
Source: IR-2020-134
– Story provided by TaxingSubjects.com
MEA Tax Advisors