You may be aware of the myriad of rules and deadlines that have been changed. I thought I would give you a brief list to peruse. If there’s a strategy or change you think we should pursue, call me.
Contribution Deadlines Postponed
The deadline has been postponed to July 15, 2020 for the following contributions:
- Tax deductible IRA & Roth contributions for 2019
- Tax deductible contributions to a Health Savings Account (HSA)
- Employer business contributions to qualified plans
- Employer set up and implementation of a Simplified Employee Pension Plan (SEP-IRA)
Reminder: Age And Income Limits For IRA Contributions
An individual must have been no older than age 70½ on December 31, 2019, to be eligible to make a regular traditional IRA contribution for 2019. Regular Roth IRA contributions are not subject to any age limit. However, they are subject to modified adjusted gross income (MAGI) limits based on the tax filing status of the Roth IRA owner.
Deadline For Paying The 10% Early Distribution Penalty
The deadline for paying the 10% early distribution penalty for 2019 has been postponed to July 15, 2020. This is because the deadline for paying the 10% early distribution penalty is the same as the deadline for paying any federal income tax due for the year.
All RMDs Are Suspended In 2020 (IRA, 401k, 403b)
People who have already taken their distribution for 2020 can potentially return the money to their account if they want. Even though these are suspended, it may be wise to take a distribution.
Waived: 10% Early Withdrawal Penalty For Retirement Accounts
Withdrawals will still be taxed, but spread over a three-year period. Under most circumstances, my advice is to leave your retirement savings where they are, but it’s nice to know that early withdrawals are an option if you need them. In a few cases this will be a very helpful strategy.
Increased: 401(K) And 403(B) Loan-Limit From $50,000 To $100,000
Deadline For Making Employer Contributions—Limited Availability
The deadline for making 2019 employer contributions to SEP IRAs and other employer-level retirement plans has been postponed to July 15, 2020, for entities that have a filing or payment deadline falling on or after April 1, 2020, and before July 15, 2020.
NOT POSTPONED: Roth Conversions. This strategy should be reviewed every year, especially in 2020.
NOT POSTPONED: Employer contribution deadline for S corporations.
NOT POSTPONED: Automatic 6-month extension for recharacterizations and return of excess contributions – An individual who requests an automatic extension by July 15, 2020, would still have an extended tax filing due date of October 15, 2020—an additional three-month extension instead of an additional six-month extension on the July 15, 2020 deadline. As a result, transactions that are permitted to be completed by the extended tax return date must still be completed by October 15, despite the deadline for filing the tax return being July 15, 2020.
Additional Guidance And Updates Could Mean Changes
The IRS updates the Q&A on an ongoing basis as well as issues additional related notices and other guidance. Updates might result in changes to the information provided above.
If you have any questions about these changes, let me know.
