Here are five things to know about tax matters in 2020:
1. IRS Extension for Filing and Paying TaxesThe April 15 deadline for the filing of federal income tax returns and payment of the taxes has been extended to July 15, 2020. Taxpayers can defer federal income tax payments until July 15, 2020, without penalties and interest. This applies to all taxpayers, including individuals, trusts and estates, corporation and other non-corporate tax filers, as well as those who pay self-employment tax.
- What do you need to do right now?
Nothing, if you file your tax return and make your payment by July 15, 2020. This extension has been granted to everyone, and there is no need to file any form to claim the extension. However, if you need additional time to file after July 15, 2020, you will need to submit a form to let the IRS know. This process will give individuals until October 15 to file. (Other taxpayers can be extended until September 15.) This is the normal “automatic extension” that is available each year to taxpayers.
More information from the IRS about extensions can be found here.
2. Tennessee Extensions for Business Tax, F&E Tax, Hall Income Tax
The filing deadline for Business Tax returns originally due April 15, 2020, has been extended to June 15, 2020. The Business Tax is a tax on gross receipts and applies to most business that sell goods or services.
The April 15, 2020 filing deadline for Franchise and Excise Tax and Hall income Tax returns has been extended to July 15, 2020.
- What do you need to do right now?
Nothing, so long as you file and pay by the new deadlines. More information can be found here.
3. Extended Deadline for 2019 IRA and Health Savings Account ContributionsIn conjunction with the extension of the federal tax filing deadline, the deadline for contributions to IRAs and HSAs for the 2019 tax year has been extended to July 15, 2020. No changes have been made to the amounts or other qualifications related to these contributions. More information here.
4. 401(k) Hardship Withdrawals
For the 6 months following the March 27, 2020 enactment of the CARES Act, the rules governing hardship distributions from retirement accounts have been relaxed. Persons affected by COVID-19 may access up to $100,000 of their retirement savings (or 100% of the account if it is smaller than that amount) without the usual 10% penalty. The distribution will be treated as a loan for tax purposes, and a nominal rate of interest applies. Moreover, if the hardship distribution is returned to the retirement savings account within 3 years, then no income tax will be imposed on the hardship distribution. As with other hardship rules, plans are not required to adopt these rules, so check with your plan administrator and your tax professional for more information.
5. Home Office Cost Deduction for Employers, Available Tax Benefit for EmployeesFinally, while this is not new for 2020, there is an existing tax provision that may be of benefit to employers and employees, since the pandemic has caused many to transition to an at-home work environment. While employees can no longer deduct expenses for their at-home offices, employers may make tax-deductible payments to their employees for disaster-related expenses. Among the things which would be disaster-related expenses are certain expenditures for business equipment (i.e., office furniture and computers) made by employees who are required to work at home. This means that, if employers choose to reimburse workers for these expenses, then employers can take the deduction, and the reimbursement will not be counted as taxable income to the employee.
This information was prepared by the Business Services Group at Dodson Parker Behm & Capparella, PC. Learn more about our practice here. |