Required Minimum Distributions waved for 2020

 

The CARES Act did more for us than give us a stimulus payment.  It also waives required minimum distributions (RMDs) during 2020 for IRAs and defined contribution retirement plans. RMDs are also waived for beneficiaries with inherited IRAs and accounts inherited in a retirement plan. You’re not required to have been affected by the coronavirus to waive your RMD for 2020.

Distributions of an amount that would have been an RMD in 2020 can generally be rolled over to another workplace retirement plan or IRA within 60 days of the distribution. RMDs rolled over by August 31, 2020, have special relief.

Distributions from inherited IRAs are not required in 2020. If you were required to take a distribution within 5 years following the year of the account holder’s death, 2020 does not count toward the 5 years. So, you would essentially have six years, instead of five, to distribute the inherited IRA.

Also, if the account holder died in 2019, you would normally be required to begin taking distributions by the end of 2020 to be able to take distributions over your lifetime. Since 2020 does not count, you have until the end of 2021 to begin taking distributions over your lifetime.

 

Why is this good news not to take a distribution?  If you pay federal income tax on your distributions, not taking a distribution will lower your taxable income for 2020.  

 

If you have questions about this topic, please feel free to contact me at 702-469-9426 or cstevens@numbercruncherllc.tax

 

Candace Stevens, CEO/President of

Number Cruncher LLC

cstevens@numbercruncherllc.tax

 

www.numbercruncherllc.tax

Coronavirus-related withdrawals from IRA

 If you had to dip into your IRA during 2020 to help you get through tough times, you may be able to repay your IRA over a 3-year period or have the taxes due on the distribution spread over three years if you are a qualified individual.  

To be eligible for COVID-19 relief, coronavirus-related withdrawals or loans can only be made to an individual if:

• The individual (or the individual’s spouse or dependent) is diagnosed with the virus SARS-CoV-2 or with coronavirus disease 2019 (collectively, COVID-19) by a test approved by the Centers for Disease Control and Prevention (including a test authorized under the Federal Food, Drug, and Cosmetics Act);
• The individual experiences adverse financial consequences as a result of:
  • The individual being quarantined, being furloughed or laid off, having work hours reduced, being unable to work due to lack of childcare, having a reduction in pay (or self-employment income), or having a job offer rescinded or start date for a job delayed, due to COVID-19;
  • The individual’s spouse or a member of the individual’s household (that is, someone who shares the individual’s principal residence) being quarantined, being furloughed or laid off, having work hours reduced, being unable to work due to lack of childcare, having a reduction in pay (or self-employment income), or having a job offer rescinded or start date for a job delayed, due to COVID-19; or
  • Closing or reducing hours of a business owned or operated by the individual, the individual’s spouse, or a member of the individual’s household, due to COVID-19.

If you have questions concerning withdrawals made from your IRA during 2020, please contact me at 702-469-9426 or cstevens@numbercruncherllc.tax.

 

Candace Stevens, CEO/President of

Number Cruncher LLC

cstevens@numbercruncherllc.tax

 

www.numbercruncherllc.tax

Another Awesome Benefit of the CARES Act.

There is a benefit of the CARES Act which has not been given much attention.  This will help most people who donate to charity.  Usually, when a taxpayer takes the standard deduction they cannot claim a deduction for charitable contributions.  The CARES Act will allow individuals to claim a limited deduction on the 2020 federal income tax returns for cash contributions made to certain qualifying charitable organizations AND still claim the standard deduction.  

This is an "above-the-line" deduction that individuals can claim of up to $300 for cash contributions made to qualifying charities during 2020.  The maximum above-the-line deduction is $150 for married couples who file separately.

Cash contributions include those made by check, credit card, or debit card as well as amounts incurred by an individual for unreimbursed out-of-pocket expenses in connection with the individual’s volunteer services to a qualifying charitable organization. Cash contributions don’t include the value of volunteer services, securities, household items, or other property.

 

If you or someone you know is in need of a tax preparer, please feel free to contact me at 702-469-9426 of cstevens@numbercruncherllc.tax.

Candace Stevens, CEO/President of

Number Cruncher LLC

cstevens@numbercruncherllc.tax

www.numbercruncherllc.tax

What the heck is form 1099-NEC???

 What is Form 1099-NEC?  This form will be used to report Nonemployee Compensation ONLY starting in January 2021.  Nonemployee Compensation will no longer be reported on 1099-MISC.

1099-MISC will still be used for:

• At least $10 in royalties (see the instructions for box 2) or broker payments in lieu of dividends or tax-exempt interest (see the instructions for box 8).

• At least $600 in:

  1. Rents (box 1);

  2. Prizes and awards (box 3);

  3. Other income payments (box 3);

  4. Generally, the cash paid from a notional principal contract to an individual, partnership, or estate (box 3);

  5. Any fishing boat proceeds (box 5);

  6. Medical and health care payments (box 6);

  7. Crop insurance proceeds (box 9);

  8. Payments to an attorney (box 10) (see Payments to attorneys, later);

  9. Section 409A deferrals (box 12); or

  10. Nonqualified deferred compensation (box 14).

You must also file Form 1099-MISC for each person from whom you have withheld any federal income tax (report in box 4) under the backup withholding rules regardless of the amount of the payment.

If you need help filing your 1099-NEC and 1099-MISC, please feel free to contact me 

at 702-469-9426 or cstevens@numbercruncherllc.tax

 

Candace Stevens, CEO/President of

Number Cruncher LLC

cstevens@numbercruncherllc.tax

www.numbercruncherllc.tax