Tax Regulations

Are you or a loved one adversely impacted by Covid-19? The CARES Act 2020 provides some tax relief related to Covid-19 withdrawals and loans from IRA accounts and certain retirement accounts that you might consider.

Generally, IRA and retirement accounts allow you to take distributions which are to be included in your gross income in the year of withdrawal (with some exceptions) and subject to additional 10% tax if withdrawn before you attain the age of 59 1/2 years.

Covid-19 Withdrawals

The special treatment for Coronavirus related distributions, lets you withdraw up to $100,000 from your IRA, 401(k) or 403(b) plan before 12/31/2020 without being subject to the additional 10% penalty, irrespective of your age at the time of the withdrawal, and without being subject to mandatory tax withholding. In addition, these Covid-19 withdrawals are allowed to be included in your taxable income over a 3 years period, one third being included each year.

Covid-19 Loans

You may also consider taking a loan of up to $100,000 before 09/22/2020 from your workplace retirement plan, if your plan allows it. The plan administrators can suspend, for up to one year, loan repayments due on or after March 27, 2020, and before January 1, 2021.

How To Qualify

This special tax treatment for Covid-19 withdrawals or loans is available if you satisfy the below conditions:

• You, your spouse or dependent are diagnosed with Covid-19 by a test approved by CDC or
• You experience adverse financial consequences because of you, your spouse or any other member of your household being quarantined, furloughed, laid off, having reduced pay/hours or being unable to work due to lack of childcare, having a job offer rescinded or start date for a job delayed or
• Closing or reducing hours of a business owned or operated by  you, your spouse or a member of the household, due to Covid-19 and
• You certify to the Retirement Plan administrator that you are a qualified eligible individual for this special tax treatment.

To find out more information about this Covid-19 tax relief click here.

If you need help with your taxes, give us a call!

As it does every year, the IRS recently unveiled the list of current scams to be aware of especially considering the current crisis situation. You are encouraged to be on guard against these threats, especially schemes related to Corona virus tax relief, including Economic impact payments.

Look out for the following threats designed to steal not just your money, but your sensitive personal financial information as well.

Phishing

These schemes disguise as an official email from the IRS using keywords like Covid relief and Stimulus Pay in various ways to trick you to reveal confidential information. Be cautious about all such communication and do not click on any links or open any attachments contained in a suspicious email.

Fake Charities

Many fake charities have arisen to exploit the current pandemic situation and steal your money. Before donating to any charity, you can verify its legitimacy by asking for its Employer Identification Number (EIN) and using the search tool on IRS.gov to find qualified and legitimate charities.

Threatening Impersonator Phone Calls, Also Known As “Vishing” (Phone Phishing)

These bogus phone calls pose a major threat these days. Remember IRS will never threaten or ask for financial information over the phone or call about an unexpected refund or about economic impact payments. You should call the IRS to verify and see if there is any tax problem.

Social Media Scams

The social media scammers would impersonate as your family or friends and convince you to trust them. They may email you a link of something of your interest which could contain malware intended to infiltrate and steal sensitive personal information.

Senior Fraud

If you are a senior citizen you are more likely to be victimized with fake emails, text messages, websites and social media attempts. However, you can protect yourself against these threats by having a trusted family member or friend to take interest in your affairs.

Non-English Speakers

These scams mostly take form of robocalls, although they can also be phone calls made by real persons. They are often threatening in nature, targeted towards people with limited English proficiency. If you are a recent immigrant you are more vulnerable to such scams. Make sure you ignore such phone calls and do not engage the scammers.

Unscrupulous Return Preparers

Selecting the right return preparer is very important for your financial security, as you entrust them with sensitive personal data. Be sure to avoid preparers who ask you to sign a blank return or promise a big refund even before looking at your records.

Offer In Compromise Mills

You need to be aware of companies exaggerating your chances of settling your tax debt. Offers in compromise are available only if you meet specific criteria under the law. To safeguard yourself against this threat you can use a simple Pre-Qualifier tool available on IRS.gov.

Fake Payments with Repayment Demands

If you are a victim of this threat you will see a fake refund in your bank account as a result of a bogus tax return filed by the scammer, after stealing your personal information. The scammer, posing as an IRS employee, will then ask you to pay back the money. You might be told that the IRS made an error and that you should return the money immediately in a specific manner like buying gift cards of certain denominations for the amount of the refund.

Payroll & HR Scams

The common types of such scams are gift card and direct deposit scams, which are done through compromised email accounts.

For the gift card scams, the scammer impersonates to be your employer and asks you to purchase a gift card and mail it to a specific address, to be reimbursed later.

For the direct deposit scam, the scammer, poses as the employee and asks the employer to change  the employee’s direct deposit information to reroute their deposit to an account the scammer controls.

If you think you are targeted or are a victim of such threat you can file a complaint with the Federal Bureau of Investigation Internet Crime Center (IC3)

Ransomware

Last but not the least on the IRS list is invasive software that you might download. The malware is targeted to infect your computer, network or server and look for critical data that can be used to steal your personal information and money.

A few simple measures like using two step authentications for your accounts, getting an IRS Identity Protection PIN, using antivirus software, freezing your credit can help protect you from many of the above threats and misuse of your sensitive personal information.

 If you need more information on how to obtain an IRS IP PIN or need help with your taxes, give us a call.

Required Minimum Distribution Requirement

After a certain age, the beneficiaries of certain retirement accounts are required to withdraw  money from their retirement accounts. That is because the IRS wants to collect tax on the income accumulated tax-free in these accounts. Before 2020, the required minimum distribution (RMD) applied to anyone over 70^1/2. Starting with 2020 the RMD beginning age is 72. If in 2019 you turned 70^1/2  you had until April 1^st, 2020 to withdraw from your retirement account the 2019 distributions and normally you would have had until December 31^st, 2020 to take out the 2020 RMD.

CARES Act Relief – 2020 RMDs Suspended

As part of the COVID-19 relief, the CARES Act suspended the 2020 RMD requirement. Thus anyone required to take RMDs in 2020 can skip them. The waiver applies to defined-contribution retirement accounts, such as: IRAs, SEP IRAs, 401(k), 403(b). The waiver does not apply to defined benefit plans. Roth IRAs are not subject to RMD rules and are unaffected by the waiver.

RMD Rollover Relief

What if you already took RMDs in 2020, prior to the enactment of the CARES act?

On June 23^rd 2020 IRS announced rollover relief for RMDs from retirement accounts that were waived under the CARES Act.

Normally taxpayers are allowed to roll over only one distribution in a 12-month period and no later than 60^th day following the day of receipt. In addition, an RMD can not to be rolled over.

But Notice 2020-51 extends the 60-day rollover period for any RMD already taken this year to August 31, 2020.

Retirement account owners who have already received distributions in 2020 now get an extended period until August 31^st 2020 to repay such amounts back, without being subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

In addition, because the CARES Act allows you to skip RMDs for 2020, you might consider converting assets from a traditional IRA to a Roth IRA this year without first satisfying the typically required RMD.

If you need help with your taxes, give us a call or schedule an online appointment here.

Even small companies can find themselves with employees who have to commute across state borders to work. This can make payroll difficult. Click through for an introduction to the complex tax rules.

Do you have employees who live in one state and work in another?

You may run into this if:

• Your company is located near a state border.
• Your employees travel to job sites in other states.
• You have employees who work remotely.
• You business is expanding into new states.

Having some basic understanding of what happens will help you make the right decisions about classifying wages and avoiding penalties or amended filings later.

Both state unemployment and withholding taxes should generally be paid to the employee’s work state, but there are exceptions; the twist is that state laws are quite literally all over the map. You may want to be familiar with the state legislation that applies to your team. Here are the basics.

Reciprocity agreements

Some states that border each other have entered into agreements related to allowing employees who live in one state but work in another, to have their withholding tax paid to the work state.

For example, an employee who lives in Maryland but commutes to northern Virginia or D.C. for a job can have withholding tax paid to Maryland rather than the work state. This is also known as courtesy withholding, and it means the employee can file one tax return each year, which helps simplify things. Have your employee complete a nonresidency certificate to excuse him/her from tax withholding in the work state. Let your payroll provider know that your employee has an agreement in place.

If there’s no reciprocal agreement, your employee will most likely have to pay both nonresident and resident state income tax. But luckily, most states grant a tax credit to cover the cost of being taxed twice.

Each state may have its own twist on taxation, so it’s best to check the local situation and not make any assumptions.

The unemployment tax situation is usually straightforward. When an employee is working in multiple states or working remotely for a company based in another state, you withhold state unemployment tax only in the state in which the employee is working.

When it gets complicated

Today’s remote-work world means situations that were rare or unheard of a generation ago are now commonplace. That means more tax complexity.

For example, consider an employee who works from his log cabin in upstate New York, but your company is located in Atlanta — you’ll have to pay all state taxes to New York because that’s where the work is actually being completed.

Or at that same Atlanta company, you have an employee who needs to work in Maine temporarily for three months. For nine months, you pay taxes in Georgia, and for three months, you pay taxes in the Pine Tree State.

Most of this information is general. It can get complicated, and there are exceptions and special circumstances. Be sure to let us know if you have a cross-border workforce, and we’ll help you organize your tax system accordingly.

On May 28th 2020 the IRS announced that later this summer for the first-time taxpayers will be able to electronically file amended individual income tax returns.
This new process is a major milestone for the IRS. Although businesses had the option to file amended tax returns electronically, up until now, individual taxpayers could only file the amended individual income tax returns in paper format only, leading sometimes to errors, delays and frustration. Starting late this summer, you will have the option to file the amended return form 1040X electronically.
This new service is available starting only for tax year 2019 for the amendment of Form 1040 (US Individual Income tax Return) and form 1040SR (US Individual income tax return for senior citizens). The IRS has plans to have additional enhancements in future.
Electronic filing of amended individual income tax returns will not only eliminate errors associated with manual data entry, but will also help the IRS in receiving the returns faster, enabling the IRS to process the
refunds faster.
You can continue to use the online tool “Where’s My Amended Return” available on the IRS website to check the status of the amended return form 1040X, irrespective of paper or electronic filing.

If you need help with amending a prior year tax return, give us a call.

On March 21st, 2020 the IRS announced an extension of the April 15th deadline. The IRS announced that individual taxpayers have until July 15, 2020, to file and pay federal income taxes originally due on April 15 without any late penalties or interest.

Today, April 9th, 2020, the IRS announced in its IR-2020-66 notice that it expands this relief and now this extension applies to all taxpayers that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020. Individuals, including the ones living abroad, trusts, estates, corporations and other non-corporate tax filers qualify for the extra time.

If you have payments that are due within this time frame, like the June 15th second estimated tax payment, they also benefit from this extension and you can make them by July 15th without incurring any penalties or interest. The IRS also applies this extension to the claim for refund period for the 2016 returns. You now have until July 15th to file or amend your 2016 return to claim a refund.

You can find more information about the Coronavirus tax relief and economic impact payments by clicking here.

If you need help with your taxes, schedule an online appointment by going on our website.