(AGI) beginning at $75,000 per individual and $150,000 per couple. Qualification was based on the individual's or couple's most recently filed income tax return. If the cash was not needed for immediate short‐term expenses, it could be used to pay down debt, invest in the stock market, or donate to a charity, local business, or a family member who “may need it during this challenging time.”
Extension of Filing Due Dates. The deadline for individuals to file 2019 income tax returns and pay balance of income tax due on April 15 was separately delayed by executive order until July 15. The CARES Act extended the deadline to make an IRA contribution to July 15. This delay plus the CARES Act grants provided immediate cash flow relief for some to take advantage of the extended IRA due date.
The Required Minimum age after which Distributions (RMD) are required was raised.
The first required minimum distribution is now required for the year in which one turns age 72 (70½ if you reach 70½ before January 1, 2020). The first payment deadline was delayed until April 1 of 2020 for anyone who turned 70½ in 2019. If you reach 70½ in 2020, you have to take your first RMD by April 1 of the year after you reach the age of 72. For all subsequent years, including the year in which you were paid the first RMD by April 1, you must take the RMD by December 31 of the year.
Mandatory withdrawals were suspended for 2020. Those who had already taken a 2020 RMD from a retirement account had 60+ days to return the money. The original withdrawal was treated as a rollover to an IRA and not to be treated as a taxable distribution.
SECURE Act. The age requirements were similarly amended by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) effective on December 20, 2019. For defined contribution plan participants, or Individual Retirement Account (IRA) owners, who die after December 31, 2019, the SECURE Act requires the entire balance of the participant's account be distributed within 10 years. There is an exception for a surviving spouse, a child who has not reached the age of majority, a disabled or chronically ill person, or a person not more than 10 years younger than the employee or IRA account owner. The new 10‐year rule applies regardless of whether the participant dies before, on, or after, the required beginning date, now age 72. Roth IRAs do not require withdrawals until after the death of the owner.
While there is no provision that allows individuals to retroactively put a distribution back into their IRA account, an opportunity to do so was provided. Those who had already taken their 2020 RMD from an IRA had 60 days to return the money. The original withdrawal was treated as a rollover to an IRA and not to be treated as a taxable distribution.
Charitable Contributions. To incentivize additional charitable contributions to those organizations supporting and aiding those most affected by the virus, enhanced donation limitations were included:
Up to $300 of charitable cash contributions can be taken as a deduction against adjusted gross income (AGI), regardless of whether or not the individual itemizes.
For 2020, the 50 percent AGI limitation was eliminated, and individuals got a charitable contribution deduction for up to 100 percent of a person's AGI, for cash (not appreciated property) contributions.
Small Businesses. Small businesses have been some of the hardest hit as a result of the coronavirus pandemic. The CARES Act introduced many provisions to assist these small businesses, including:
Employers receive a credit for their portion of the payroll tax (7.65 percent) up to $10,000 of wages per employee if the business has been impacted by COVID‐19 or if revenue is 50 percent lower than the same quarter in 2019.
Payment of the 2020 payroll tax can be delayed; with 50 percent of the payroll tax due paid in 2021 and 50 percent in 2022.
Economic Injury Disaster Loans (EIDL): business loans for up to $2 million at an annual interest rate of 3.75 percent, with the first payment not due for one full year. If you apply for an EIDL loan, you can also apply for a $10,000 grant toward working capital. These loans can be used to pay and retain employees, make lease payments, pay operating costs, and so forth.
Small business owners may qualify for tax‐free loan forgiveness for the portion of the loan between March 1 and June 30. It could be forgiven if the funds are used to maintain payroll.
The Act suspends all rules that relate to the Net Operating Losses (NOL) created under the 2017 Tax Cuts and Jobs Act (TCJA). Under the TCJA, NOLs were limited to 80 percent of taxable income and could not be carried back. NOLs can now be carried back up to five tax years with no income limit.
Loss limitations that were imposed under the TCJA have been suspended: $250,000 for single and $500,000 for joint filings. These losses can offset nonbusiness income.
Business interest deductibility has been increased from 30 percent of adjusted taxable income to 50 percent.
On its website, IRS has posted frequently asked questions (FAQs) on the effect of COVID‐19 on liens, levies, and other IRS collection activities.
The IRS joined the Treasure Department's efforts to ease suffering with its People First Initiative shown below. The initiative provided significant delays in tax payment due dates and IRS examination and taxpayer settlement work as described below:
IRS unveils new People First Initiative; COVID‐19 effort temporarily adjusts, suspends key compliance program
On March 25, 2020, the IRS wrote, “To help people facing the challenges of COVID‐19 issues, the Internal Revenue Service announced today a sweeping series of steps to assist taxpayers by providing relief on a variety of issues ranging from easing payment guidelines to postponing compliance actions.”
“The IRS is taking extraordinary steps to help the people of our country,” said IRS Commissioner Chuck Rettig. “In addition to extending tax deadlines and working on new legislation, the IRS is pursuing unprecedented actions to ease the burden on people facing tax issues. During this difficult time, we want people working together, focused on their well‐being, helping each other and others less fortunate.”
“The new IRS People First Initiative provides immediate relief to help people facing uncertainty over taxes,” Rettig added: “We are temporarily adjusting our processes to help people and businesses during these uncertain times. We are facing this together, and we want to be part of the solution to improve the lives of all people in our country.”
These new changes include issues ranging from postponing certain payments related to Installment Agreements and Offers in Compromise to collection and limiting certain enforcement actions. The IRS will be temporarily modifying the following activities as soon as possible: the projected start date will be April 1, and the effort will initially run through July 15. During this period, to the maximum extent possible, the IRS will avoid in‐person contacts. However, the IRS will continue to take steps where necessary to protect all applicable statutes of limitations.
“IRS employees care about our people and our country, and they have a strong desire to help improve this situation,” Rettig said. “These new actions reflect just one of many ways our employees are working hard every day to assist the nation. We care, a lot. IRS employees are actively engaged, and they have always delivered for their communities and our country. The People First Initiative is designed to help people take care of themselves and is a key part of our ongoing response to the coronavirus effort.”
More specifics about the implementation of these provisions will be shared soon. Highlights of the key
