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January 18, 2022 By LGH Consulting

Help safeguard your personal information by filing your 2021 tax return early

The IRS announced it is opening the 2021 individual income tax return filing season on January 24. (Business returns are already being accepted.) Even if you typically don’t file until much closer to the April deadline (or you file for an extension until October), consider filing earlier this year. Why? You can potentially protect yourself from tax identity theft — and there may be other benefits, too.

How tax identity theft occurs

In a tax identity theft scheme, a thief uses another individual’s personal information to file a bogus tax return early in the filing season and claim a fraudulent refund.

The actual taxpayer discovers the fraud when he or she files a return and is told by the IRS that it is being rejected because one with the same Social Security number has already been filed for the tax year. While the taxpayer should ultimately be able to prove that his or her return is the legitimate one, tax identity theft can be a hassle to straighten out and significantly delay a refund.

Filing early may be your best defense: If you file first, it will be the tax return filed by a potential thief that will be rejected — not yours.

Note: You can still get your individual tax return prepared by us before January 24 if you have all the required documents. But processing of the return will begin after IRS systems open on that date.

Your W-2s and 1099s

To file your tax return, you need all of your W-2s and 1099s. January 31 is the deadline for employers to issue 2021 W-2 forms to employees and, generally, for businesses to issue Form 1099s to recipients for any 2021 interest, dividend or reportable miscellaneous income payments (including those made to independent contractors).

If you haven’t received a W-2 or 1099 by February 1, first contact the entity that should have issued it. If that doesn’t work, you can contact the IRS for help.

Other benefits of filing early

In addition to protecting yourself from tax identity theft, another advantage of early filing is that, if you’re getting a refund, you’ll get it sooner. The IRS expects most refunds to be issued within 21 days. However, the IRS has been experiencing delays during the pandemic in processing some returns. Keep in mind that the time to receive a refund is typically shorter if you file electronically and receive a refund by direct deposit into a bank account.

Direct deposit also avoids the possibility that a refund check could be lost, stolen, returned to the IRS as undeliverable or caught in mail delays.

If you were eligible for an Economic Impact Payment (EIP) or advance Child Tax Credit (CTC) payments, and you didn’t receive them or you didn’t receive the full amount due, filing early will help you to receive the money sooner. In 2021, the third round of EIPs were paid by the federal government to eligible individuals to help mitigate the financial effects of COVID-19. Advance CTC payments were made monthly in 2021 to eligible families from July through December. EIP and CTC payments due that weren’t made to eligible taxpayers can be claimed on your 2021 return.

We can help

Contact us If you have questions or would like an appointment to prepare your tax return. We can help you ensure you file an accurate return that takes advantage of all of the breaks available to you.

© 2022

Filed Under: News Tagged With: 1099, covid-19, ctc, eip, IRS, tax return, w-2

September 22, 2021 By LGH Consulting

EIDL program retooled for still-struggling small businesses

For many small businesses, the grand reopening is still on hold. The rapid spread of the Delta variant of COVID-19 has mired a variety of companies in diminished revenue and serious staffing shortages. In response, the Small Business Administration (SBA) has retooled its Economic Injury Disaster Loan (EIDL) program to offer targeted relief to eligible employers.

A brief history

The EIDL program was in place well before 2020. However, the federal government has ramped up the initiative’s visibility while trying to help small businesses during the pandemic.

With the entire country essentially declared a disaster area, the CARES Act established an enhanced EIDL program for small businesses affected by COVID-19. It offered lower interest rates, longer repayment terms and a streamlined application process.

The American Rescue Plan Act upped the ante, offering eligible companies targeted EIDL advances that are excluded from the gross income of the person who receives the funds. The law stipulates that no deduction or basis increase will be denied, and no tax attribute will be reduced, because of this gross income exclusion.

Latest enhancements

The SBA’s most recent enhancements to the EIDL program offer “a lifeline to millions of small businesses who are still being impacted by the pandemic,” according to SBA Administrator Isabella Casillas Guzman. (Eligible employers include not only small businesses, but also qualifying nonprofits and agricultural companies in all U.S. states and territories.)

First and foremost, the loan cap has increased from $500,000 to $2 million. Eligible small businesses can use these funds for almost any operating expense, including payroll and equipment purchases. Funds can also be applied for certain debt payments. Specifically, the SBA has expanded the allowable use of EIDL funds to prepay commercial debt and pay down federal business debt.

In addition, the agency has implemented a new deferred payment period under which borrowers can wait until two years after loan origination to begin repaying their COVID-related EIDLs.

Application details

If you believe your small business could qualify and benefit from these newly enhanced EIDLs, first identify how much money you need and how soon you need it. The SBA is offering a 30-day “exclusivity window” to approve and disburse loans of $500,000 or less. Approval and disbursement of loans of more than $500,000 will begin after this 30-day period.

The agency has also rolled out a streamlined application process that establishes “more simplified affiliation requirements” modeled after those of the Restaurant Revitalization Fund. The deadline for applications remains December 31, 2021. As is the case with any government loan, it’s better to apply earlier rather than later in case funds run out.

Help with the process

For further details about the new and improved COVID-related EIDL program, go to sba.gov/eidl. And don’t hesitate to contact us. We can help you determine whether your small business qualifies for one of these loans and, if so, assist with completing the application process.

© 2021

Filed Under: News Tagged With: CARES act, covid-19, eidl, eidl program, sba

June 21, 2021 By LGH Consulting

Traveling for business again? What can you deduct?

As we continue to come out of the COVID-19 pandemic, you may be traveling again for business. Under tax law, there are a number of rules for deducting the cost of your out-of-town business travel within the United States. These rules apply if the business conducted out of town reasonably requires an overnight stay.

Note that under the Tax Cuts and Jobs Act, employees can’t deduct their unreimbursed travel expenses through 2025 on their own tax returns. That’s because unreimbursed employee business expenses are “miscellaneous itemized deductions” that aren’t deductible through 2025.

However, self-employed individuals can continue to deduct business expenses, including away-from-home travel expenses.

Here are some of the rules that come into play.

Transportation and meals

The actual costs of travel (for example, plane fare and cabs to the airport) are deductible for out-of-town business trips. You’re also allowed to deduct the cost of meals and lodging. Your meals are deductible even if they’re not connected to a business conversation or other business function. The Consolidated Appropriations Act includes a provision that removes the 50% limit on deducting eligible business meals for 2021 and 2022. The law allows a 100% deduction for food and beverages provided by a restaurant. Takeout and delivery meals provided by a restaurant are also fully deductible.

Keep in mind that no deduction is allowed for meal or lodging expenses that are “lavish or extravagant,” a term that’s been interpreted to mean “unreasonable.”

Personal entertainment costs on the trip aren’t deductible, but business-related costs such as those for dry cleaning, phone calls, and computer rentals can be written off.

Combining business and pleasure

Some allocations may be required if the trip is a combined business/pleasure trip, for example, if you fly to a location for five days of business meetings and stay on for an additional period of vacation. Only the cost of meals, lodging, etc., incurred for the business days are deductible — not those incurred for the personal vacation days.

On the other hand, with respect to the cost of the travel itself (plane fare, etc.), if the trip is “primarily” business, the travel cost can be deducted in its entirety and no allocation is required. Conversely, if the trip is primarily personal, none of the travel costs are deductible. An important factor in determining if the trip is primarily business or personal is the amount of time spent on each (although this isn’t the sole factor).

If the trip doesn’t involve the actual conduct of business but is for the purpose of attending a convention, seminar, etc., the IRS may check the nature of the meetings carefully to make sure they aren’t vacations in disguise. Retain all material helpful in establishing the business or professional nature of this travel.

Other expenses

The rules for deducting the costs of a spouse who accompanies you on a business trip are very restrictive. No deduction is allowed unless the spouse is an employee of you or your company, and the spouse’s travel is also for a business purpose.

Finally, note that personal expenses you incur at home as a result of taking the trip aren’t deductible. For example, the cost of boarding a pet while you’re away isn’t deductible. Contact us if you have questions about your small business deductions.

© 2021

Filed Under: News Tagged With: business, covid-19, IRS, tax cuts and jobs act, traveling

May 11, 2021 By LGH Consulting

Working in the gig economy results in tax obligations

Before the COVID-19 pandemic hit, the number of people engaged in the “gig” or sharing economy had been growing, according to several reports. And reductions in working hours during the pandemic have caused even more people to turn to gig work to make up the lost income. There are tax consequences for the people who perform these jobs, which include providing car rides, delivering food, walking dogs, and providing other services.

Bottom line: If you receive income from freelancing or from one of the online platforms offering goods and services, it’s generally taxable. That’s true even if the income comes from a side job and even if you don’t receive an income statement reporting the amount of money you made.

Basics for gig workers

The IRS considers gig workers as those who are independent contractors and conduct their jobs through online platforms. Examples include Uber, Lyft, Airbnb, and DoorDash.

Unlike traditional employees, independent contractors don’t receive benefits associated with employment or employer-sponsored health insurance. They also aren’t covered by the minimum wage or other protections of federal laws and they aren’t part of states’ unemployment insurance systems. In addition, they’re on their own when it comes to retirement savings and taxes.

Pay taxes throughout the year

If you’re part of the gig or sharing economy, here are some tax considerations.

  • You may need to make quarterly estimated tax payments because your income isn’t subject to withholding. These payments are generally due on April 15, June 15, September 15, and January 15 of the following year. (If a due date falls on a Saturday or Sunday, the due date becomes the next business day.)
  • You should receive a Form 1099-NEC, Nonemployee Compensation, a Form 1099-K, or other income statements from the online platform.
  • Some or all of your business expenses may be deductible on your tax return, subject to the normal tax limitations and rules. For example, if you provide rides with your own car, you may be able to deduct depreciation for wear and tear and deterioration of the vehicle. Be aware that if you rent a room in your main home or vacation home, the rules for deducting expenses can be complex.

Keeping records

It’s important to keep good records tracking income and expenses in case you are audited by the IRS or state tax authorities. Contact us if you have questions about your tax obligations as a gig worker or the deductions you can claim. You don’t want to get an unwanted surprise when you file your tax return.

© 2021

Filed Under: News Tagged With: covid-19, form 1099-K, form 1099-nec, gig, sharing economy, tax

May 5, 2021 By LGH Consulting

Tax filing deadline is coming up: What to do if you need more time

“Tax day” is just around the corner. This year, the deadline for filing 2020 individual tax returns is Monday, May 17, 2021. The IRS postponed the usual April 15 due date due to the COVID-19 pandemic. If you still aren’t ready to file your return, you should request a tax-filing extension. Anyone can request one and in some special situations, people can receive more time without even asking.

Taxpayers can receive more time to file by submitting a request for an automatic extension on IRS Form 4868. This will extend the filing deadline until October 15, 2021. But be aware that an extension of time to file your return doesn’t grant you an extension of time to pay your taxes. You need to estimate and pay any taxes owed by your regular deadline to help avoid possible penalties. In other words, your 2020 tax payments are still due by May 17.

Victims of certain disasters

If you were a victim of the February winter storms in Texas, Oklahoma, and Louisiana, you have until June 15, 2021, to file your 2020 return and pay any tax due without submitting Form 4868. Victims of severe storms, flooding, landslides, and mudslides in parts of Alabama and Kentucky have also recently been granted extensions. For eligible Kentucky victims, the new deadline is June 30, 2021, and eligible Alabama victims have until August 2, 2021.

That’s because the IRS automatically provides filing and penalty relief to taxpayers with addresses in federally declared disaster areas. Disaster relief also includes more time for making 2020 contributions to IRAs and certain other retirement plans and making 2021 estimated tax payments. Relief is also generally available if you live outside a federally declared disaster area, but you have business or tax records located in the disaster area. Similarly, relief may be available if you’re a relief worker assisting in a covered disaster area.

Located in a combat zone

Military service members and eligible support personnel who are serving in a combat zone have at least 180 days after they leave the combat zone to file their tax returns and pay any tax due. This includes taxpayers serving in Iraq, Afghanistan, and other combat zones.

These extensions also give affected taxpayers in a combat zone more time for a variety of other tax-related actions, including contributing to an IRA. Various circumstances affect the exact length of time available to taxpayers.

Outside the United States

If you’re a U.S. citizen or resident alien who lives or works outside the U.S. (or Puerto Rico), you have until June 15, 2021, to file your 2020 tax return and pay any tax due.

The special June 15 deadline also applies to members of the military on duty outside the U.S. and Puerto Rico who don’t qualify for the longer combat zone extension described above.

While taxpayers who are abroad getting more time to pay, interest applies to any payment received after this year’s May 17 deadline. It’s currently charged at the rate of 3% per year, compounded daily.

We can help

If you need an appointment to get your tax return prepared, contact us. We can also answer any questions you may have about filing an extension.

© 2021

Filed Under: News Tagged With: covid-19, form 4868, ira, IRS, tax day, tax deadline, tax filing deadline, tax return

May 5, 2021 By LGH Consulting

The Restaurant Revitalization Fund is now live

The COVID-19 pandemic has affected various industries in very different ways. Widespread lockdowns and discouraging movement have led to increased profitability for some manufacturers and many big-box retailers. The restaurant industry, however, has had a much harder go of it — especially smaller, privately owned businesses in economically challenged areas.

In response, the Small Business Administration (SBA) has launched the Restaurant Revitalization Fund (RRF). It was established under the American Rescue Plan Act (ARPA) signed into law in March. The RRF went live for applications on May 3, and the SBA is strongly urging interested, eligible businesses to apply as soon as possible.

Who’s eligible?

Funds are available for restaurants, of course, but also many other similar types of businesses. Food stands, trucks, and carts can apply, as well as bars, saloons, lounges, and taverns. Catering companies may also file an RRF application.

In addition, the program is available to snack and nonalcoholic beverage bars, as well as “licensed facilities or premises of a beverage alcohol producer where the public may taste, sample, or purchase products,” according to the SBA.

For some restaurant-like businesses, on-site sales to the public must comprise at least 33% of gross receipts. These include bakeries; inns; wineries and distilleries; breweries and/or microbreweries; and brewpubs, tasting rooms, and taprooms.

How much funding is available?

Under the ARPA, the RRF received a total of $28.6 billion in direct relief funds for restaurants and other similar establishments that have suffered economic hardship and substantial operational losses because of the COVID-19 pandemic.

The dollar amount an eligible business can receive under the RRF will equal its decrease in gross revenues during 2020 compared to gross revenues in 2019 — less the amount of any Paycheck Protection Program (PPP) loans received. Other amounts must be excluded from 2020 gross receipts as well, including:

  • SBA Section 1112 debt relief,
  • SBA Economic Injury Disaster Loans,
  • SBA advances (targeted and otherwise), and
  • Local small business grants.

Overall, the RFF may provide a qualifying establishment with funding equal to its pandemic-related revenue loss up to $10 million per business and not more than $5 million per physical location. Recipients must use funds for allowable expenses by March 11, 2023.

What will we need to apply?

A timely, properly completed application is critical to acquiring this funding. Applicant business must submit documentation of its 2020 and 2019 gross receipts, as well as at least one of the following:

  • A federal tax return,
  • A point of sale report, or
  • Externally or internally prepared financial statements.

Warning: Internally prepared financials could significantly delay the SBA review of your application.

You’ll also need to disclose the amount of any PPP loans you’ve received. However, the SBA’s online application system should provide this information automatically.

Get started now

To get started, register for an account at restaurants.sba.gov. The SBA advises applicants to first download a sample version of the application here. Our firm can help you identify necessary documentation and navigate the process.

© 2021

Filed Under: News Tagged With: arp, covid-19, ppp, Restaurant Revitalization Fund, rrf, sba

April 20, 2021 By LGH Consulting

Unemployed last year? Buying health insurance this year? You may benefit from favorable new changes

In recent months, there have been a number of tax changes that may affect your individual tax bill. Many of these changes were enacted to help mitigate the financial damage caused by COVID-19.

Here are two changes that may result in tax savings for you on your 2020 or 2021 tax returns. The 2020 return is due on May 17, 2021 (because the IRS extended many due dates from the usual April 15 this year). If you can’t file by that date, you can request an extra six months to file your 2020 tax return by October 15, 2021. Your 2021 return will be due in April of 2022.

1.Some unemployment compensation from last year is tax free. 

Many people lost their jobs last year due to pandemic shutdowns. Generally, unemployment compensation is included in gross income for federal tax purposes. But thanks to the American Rescue Plan Act (ARPA), enacted on March 11, 2021, up to $10,200 of unemployment compensation can be excluded from federal gross income on 2020 federal returns for taxpayers with an adjusted gross income (AGI) under $150,000. In the case of a joint return, the first $10,200 per spouse isn’t included in gross income. That means if both spouses lost their jobs and collected unemployment last year, they’re eligible for up to a $20,400 exclusion.

However, keep in mind that some states tax unemployment compensation that is exempt from federal income tax under the ARPA.

The IRS has announced that taxpayers who already filed their 2020 individual tax returns without taking advantage of the 2020 unemployment benefit exclusion, don’t need to file an amended return to take advantage of it. Any resulting overpayment of tax will be either refunded or applied to other outstanding taxes owed.

The IRS will take steps in the spring and summer to make the appropriate change to the returns, which may result in a refund. The first refunds are expected to be made in May and will continue into the summer.

2.More taxpayers may qualify for a tax credit for buying health insurance. 

The premium tax credit (PTC) is a refundable credit that assists individuals and families in paying for health insurance obtained through a Marketplace established under the Affordable Care Act. The ARPA made several significant enhancements to this credit.

For example, under pre-ARPA law, individuals with household income above 400% of the federal poverty line (FPL) weren’t eligible for the PTC. But under the new law, for 2021 and 2022, the premium tax credit is available to taxpayers with household incomes that exceed 400% of the FPL. This change increases the number of people who are eligible for the credit.

Let’s say a 45-year-old unmarried man has an income of $58,000 (450% of FPL) in 2021. He wouldn’t have been eligible for the PTC before ARPA was enacted. But under the ARPA, he’s eligible for a premium tax credit of about $1,250.

Other favorable changes were also made to the premium tax credit.

Many more changes

The 2020 unemployment benefit exclusion and the enhanced premium tax credit are just two of the many recent tax changes that may be beneficial to you. Contact us if you have questions about your situation.

© 2021

Filed Under: News Tagged With: affordable care act, american rescue plan act, arpa, covid-19, federal poverty line, health insurance, IRS, premium tax credit, tax, unemployment, unemployment compensation

March 17, 2021 By LGH Consulting

New law: Parents and other eligible Americans to receive direct payments

The American Rescue Plan Act, signed into law on March 11, provides a variety of tax and financial relief to help mitigate the effects of the COVID-19 pandemic. Among the many initiatives are direct payments that will be made to eligible individuals. And parents under certain income thresholds will also receive additional payments in the coming months through a greatly revised Child Tax Credit.

Here are some answers to questions about these payments.

What are the two types of payments? 

Under the new law, eligible individuals will receive advance direct payments of a tax credit. The law calls these payments “recovery rebates.” The law also includes advance Child Tax Credit payments to eligible parents later this year.

How much are the recovery rebates?

An eligible individual is allowed a 2021 income tax credit, which will generally be paid in advance through a direct bank deposit or a paper check. The full amount is $1,400 ($2,800 for eligible married joint filers) plus $1,400 for each dependent.

Who is eligible? 

There are several requirements but the most important is income on your most recently filed tax return. Full payments are available to those with adjusted gross incomes (AGIs) of less than $75,000 ($150,000 for married joint filers and $112,500 for heads of households). Your AGI can be found on page 1 of Form 1040.

The credit phases out and is no longer available to taxpayers with AGIs of more than $80,000 ($160,000 for married joint filers and $120,000 for heads of households).

Who isn’t eligible?

Among those who aren’t eligible are nonresident aliens, individuals who are the dependents of other taxpayers, estates, and trusts.

How has the Child Tax Credit changed?

Before the new law, the Child Tax Credit was $2,000 per “qualifying child.” Under the new law, the credit is increased to $3,000 per child ($3,600 for children under age 6 as of the end of the year). But the increased 2021 credit amounts are phased out at modified AGIs of over $75,000 for singles ($150,000 for joint filers and $112,500 for heads of households).

A qualifying child before the new law was defined as an under-age-17 child, whom the taxpayer could claim as a dependent. The $2,000 Child Tax Credit was phased out for taxpayers with modified AGIs of over $400,000 for joint filers, and $200,000 for other filers.

Under the new law, for 2021, the definition of a qualifying child for purposes of the Child Tax Credit includes one who hasn’t turned 18 by the end of this year. So 17-year-olds qualify for the credit for 2021 only.

How are parents going to receive direct payments of the Child Tax Credit this year?

Unlike in the past, you don’t have to wait to file your tax return to fully benefit from the credit. The new law directs the IRS to establish a program to make monthly advance payments equal to 50% of eligible taxpayers’ 2021 Child Tax Credits. These payments will be made from July through December 2021.

What if my income is above the amounts listed above?

Taxpayers who aren’t eligible to claim an increased Child Tax Credit, because their incomes are too high, may be able to claim a regular credit of up to $2,000 on their 2021 tax returns, subject to the existing phaseout rules.

Much more

There are other rules and requirements involving these payments. This article only describes the basics. Stay tuned for additional details about other tax breaks in the new law. Contact us for more info.

© 2021

Filed Under: News Tagged With: AGI, child tax credit, covid-19

March 10, 2021 By LGH Consulting

Launching a small business? Here are some tax considerations

While many businesses have been forced to close due to the COVID-19 pandemic, some entrepreneurs have started new small businesses. Many of these people start out operating as sole proprietors. Here are some tax rules and considerations involved in operating with that entity.

The pass-through deduction

To the extent your business generates qualified business income (QBI), you’re eligible to claim the pass-through or QBI deduction, subject to limitations. For tax years through 2025, the deduction can be up to 20% of a pass-through entity owner’s QBI. You can take the deduction even if you don’t itemize deductions on your tax return and instead claim the standard deduction.

Reporting responsibilities

As a sole proprietor, you’ll file Schedule C with your Form 1040. Your business expenses are deductible against gross income. If you have losses, they’ll generally be deductible against your other income, subject to special rules related to hobby losses, passive activity losses, and losses in activities in which you weren’t “at risk.”

If you hire employees, you need to get a taxpayer identification number and withhold and pay employment taxes.

Self-employment taxes

For 2021, you pay Social Security on your net self-employment earnings up to $142,800, and Medicare tax on all earnings. An additional 0.9% Medicare tax is imposed on self-employment income in excess of $250,000 on joint returns; $125,000 for married taxpayers filing separate returns, and $200,000 in all other cases. Self-employment tax is imposed in addition to income tax, but you can deduct half of your self-employment tax as an adjustment to income.

Quarterly estimated payments

As a sole proprietor, you generally have to make estimated tax payments. For 2021, these are due on April 15, June 15, September 15, and January 17, 2022.

Home office deductions

If you work from a home office, perform management or administrative tasks there, or store product samples or inventory at home, you may be entitled to deduct an allocable portion of some costs of maintaining your home.

Health insurance expenses

You can deduct 100% of your health insurance costs as a business expense. This means your deduction for medical care insurance won’t be subject to the rule that limits medical expense deductions.

Keeping records

Retain complete records of your income and expenses so you can claim all the tax breaks to which you’re entitled. Certain expenses, such as automobile, travel, meals, and office-at-home expenses, require special attention because they’re subject to special recordkeeping rules or deductibility limits.

Saving for retirement

Consider establishing a qualified retirement plan. The advantage is that amounts contributed to the plan are deductible at the time of the contribution and aren’t taken into income until they’re withdrawn. A SEP plan requires less paperwork than many qualified plans. A SIMPLE plan is also available to sole proprietors and offers tax advantages with fewer restrictions and administrative requirements. If you don’t establish a retirement plan, you may still be able to contribute to an IRA.

We can help

Contact us if you want additional information about the tax aspects of your new business, or if you have questions about reporting or recordkeeping requirements

© 2021

Filed Under: News Tagged With: covid-19, form 1040, ira, medicare, qbi, schedule c, Small Business

January 26, 2021 By LGH Consulting

Don’t forget to take required minimum distributions this year

If you have a traditional IRA or tax-deferred retirement plan account, you probably know that you must take required minimum distributions (RMDs) when you reach a certain age — or you’ll be penalized. The CARES Act, which passed last March, allowed people to skip taking these withdrawals in 2020 but now that we’re in 2021, RMDs must be taken again.

The basics

Once you attain age 72 (or age 70½ before 2020), you must begin taking RMDs from your traditional IRAs and certain retirement accounts, including 401(k) plans. In general, RMDs are calculated using life expectancy tables published by the IRS. If you don’t withdraw the minimum amount each year, you may have to pay a 50% penalty tax on what you should have taken out — but didn’t. (Roth IRAs don’t require withdrawals until after the death of the owner.)

You can always take out more than the required amount. In planning for distributions, your income needs must be weighed against the desirable goal of keeping the tax shelter of the IRA going for as long as possible for both yourself and your beneficiaries.

In order to provide tax relief due to COVID-19, the CARES Act suspended RMDs for the calendar year 2020 — but only for that one year. That meant that taxpayers could put off RMDs, not have to pay tax on them and allow their retirement accounts to keep growing tax-deferred.

Begin taking RMDs again

Many people hoped that the RMD suspension would be extended into 2021. However, the Consolidated Appropriations Act, which was enacted on December 27, 2020, to provide more COVID-19 relief, didn’t extend the RMD relief. That means if you’re required to take RMDs, you need to take them this year or face a penalty.

Note: The IRS may waive part or all of the penalty if you can prove that you didn’t take RMDs due to reasonable error and you’re taking steps to remedy the shortfall. In these cases, the IRS reviews the information a taxpayer provides and decides whether to grant a request for a waiver.

Keep more of your money

Feel free to contact us if have questions about calculating RMDs or avoiding the penalty for not taking them. We can help make sure you keep more of your money.

© 2021

Filed Under: News Tagged With: CARES act, covid-19, ira, IRS, required minimum distributions, rmd

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