Some important deadlines for your finances have changed in 2020. Here's what you need to know
In most years, only a few key dates stand out for income-tax planning, and most of them are familiar to taxpayers. But deadlines and strategies have changed a bit for 2020.
The coronavirus pandemic and economic-shutting efforts to slow the virus altered the norm. The most notable example involved the Internal Revenue Service and various state tax agencies, including the Arizona Department of Revenue, switching the usual April 15 filing deadline for 2019 returns to July 15.
And there are other examples. Here are some important dates that loom on the calendar for the remainder of 2020:
Aug. 31 for RMD repayments
This is a key date for a small number of older Americans who took money out of their traditional Individual Retirement Accounts (and possibly workplace 401(k) retirement plans) and want to repay it so they don’t incur taxes in 2020. Normally, investors over age 70 1/2 must withdraw a portion of their account balances and pay taxes on the proceeds, as required minimum distributions. But the IRS suspended these rules for 2020 because of the COVID-19 pandemic.
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Older investors who don’t need the money to live on have the option to roll over or repay anything they withdrew earlier in the year. If they put the money back by Aug. 31, they can avoid paying the tax in 2020, if they choose.
The money must be back in the account by that date — it’s not a matter of getting a check postmarked by then, as when filing income-tax returns by various due dates, said Ed Slott, a certified public accountant and founder of IRAhelp.com.
Sept. 15 for estimated payments
This was and remains the normal deadline for filing third-quarter estimated income-tax payments. It wasn’t moved or altered by any of the various coronavirus-relief measures, unlike the normal April 15 filing deadline, which was delayed three months, and the deadline for second-quarter estimated payments, which also was extended.
If you make estimated tax payments, you might want to devote some extra time deciding how much, if any, payments you should make, given all the changes this year, Slott said.
For example, people who lost their jobs and received unemployment compensation but didn’t have money withheld from these benefits might want to make their estimated quarterly payments a bit larger, Slott said, as jobless-insurance benefits are taxable.
Then again, if your jobless benefits were much lower than your regular pay, and you did have taxes withheld, you possibly could lower or skip an estimated payment.
Sept. 22 for higher 401(k) loans
The CARES Act legislation passed in response to the coronavirus pandemic provided flexibility for people wanting to borrow from their workplace 401(k)-style retirement plans.
offers more details on these and related provisions, including eligibility rules, at irs.gov. Not all employers allow higher loan amounts, as they’re optional.” data-reactid=”36″>One provision allows anyone affected by the pandemic to borrow up to $100,000 or 100% of their vested account balance, whichever is less, if done by Sept. 22. That’s above the $50,000/50% limits that normally apply. The IRS offers more details on these and related provisions, including eligibility rules, at irs.gov. Not all employers allow higher loan amounts, as they’re optional.
Borrowing money from a 401(k) plan isn’t normally a great idea, partly because you draw down your account (at least temporarily, in the case of a loan). And if you can’t repay the amount borrowed, the money becomes taxable, though the CARES Act does allow certain loan repayments to be delayed up to one year.
Oct. 15 for 2019 extensions
This is the normal deadline for filing an extended income-tax return. The date didn’t change, which means taxpayers who haven’t yet filed their 2019 returns generally need to do so by Oct. 15 or face a late-filing penalty.
This assumes you needed extra time to file your 2019 returns and already submitted IRS Form 4868, which granted delays to Oct. 15. Even if you did all that properly, you still were supposed to pay your 2019 tax bill by July 15. Otherwise, interest and a possible penalty could apply.
Arizona has two filing deadlines for 2019 returns: Oct. 15 if filing electronically, because of the link with the federal system, but Jan. 15, 2021, if filing a paper return.
Dec. 31 for year-end actions
The end of the calendar year normally is an important time for tax planning, and much of the usual guidance still applies. For example, you might want to delay accepting certain income, if you can, until January 2021 so you don’t recognize it this year. Conversely, if you itemize deductions, it might pay to incur certain deductible expenses by Dec. 31 so you can take them this year, such as paying property taxes or making charity donations.
In addition, you might want to delay locking in capital gains on investments until after Dec. 31, or you might wish to realize deductible losses soon so you can claim them in 2020.
Speaking of charities, cash donations to nonprofit groups, which are normally limited for deduction purposes to no more than 60% of your adjusted gross income, can be fully deducted this year thanks to COVID-19 changes, said Mike Finnegan, managing director at tax-firm CBIZ and MHM in Phoenix. “You can give more cash this year, up to 100% of AGI,” he said.
The CARES Act also created a special “above-the-line” deduction for cash donations to charities worth up to $300, meaning you can claim this one even if you don’t itemize.
There’s still plenty of time to act on some of these year-end planning items, and you might want to wait anyway until after the presidential, House and Senate elections to see what tax shifts, if any, seem likely.
“After the election, there will be some scrambling to figure that out,” said Finnegan.
Special COVID-19 year-end rules
Coronavirus-relief legislation also offered a few other tax-planning opportunities for 2020 only.
For example, if you must permanently withdraw money from IRAs or workplace plans like 401(k)s, you can do so this year and avoid the 10% penalty that normally applies if you’re under 59 1/2.
Also, withdrawals taken this year can be spread over three years for tax purposes, possibly easing the bite. Normally, withdrawals are taxable in the year taken.
explanation of the temporary rules that apply to people affected by the pandemic.” data-reactid=”57″>Not all employers offer these options, so inquire well before late December. The federal Consumer Financial Protection Bureau offers an explanation of the temporary rules that apply to people affected by the pandemic.
[email protected].” data-reactid=”58″>Reach the reporter at [email protected].
Some tax deadlines changed due to pandemic. What you need to know” data-reactid=”59″>This article originally appeared on Arizona Republic: Some tax deadlines changed due to pandemic. What you need to know
