The SECURE Act passed at the end of 2019 increased retirement saving opportunities and new proposals in the House could go even further. A current bill includes incentives for individuals to save for retirement and for employers to offer retirement plans. The proposals include further increasing the age for RMD and increasing limits for catch-up contributions.
Beware: Economic Impact Payment Scams
IRS warns of a text message scam asking for financial information related to your economic impact payment They send you a link that takes you to a fake “Get my payment” website. DO NOT CLICK this link. The IRS recommends you take a screen shot of the text from your phone and email it to the IRS at phishing@irs.gov.
Life Expectancy Tables Updated for RMD’s
The new tables extend life expectancy and spread RMD’s over an additional one to two years. Smaller annual RMD’s allow for money to grow in accounts longer.
Early Retirement Plan Distributions Related to COVID-19
The 10% fine is waived in 2020 for early withdrawals by individuals under age 59 1/2 that were impacted by COVID-19. Tax on these withdrawals are paid over three years using Form 8915-E unless elected to be paid all at once. Any repayments over the following three years are treated as rollovers.
Upper Income IRS Scrutiny
The IRS if facing increased pressure to audit two main types of upper income taxpayers. These include non-filers for 2018 and prior and filers with large, unusual, or questionable 1040 items.
IRS Focus On Virtual Currency
The IRS has renewed its focus on virtual currency transactions. The front page of the 1040 for 2020 requires all individuals to answer the question: “At any time during 2020, did you receive, sell, send, exchange, or otherwise acquire any financial interest in any virtual currency?”.
Virtual currency for investment purposes is treated as property and taxed at short-term and long-term capital gains rates. Payment for services made in virtual currencies, such as Bitcoin, are valued at the U.S. dollar amount on the date received. These amounts are to be included on W-2 and 1099 forms.
For answers to frequently asked questions related to virtual currencies see the link to the IRS’s FAQ page:
Big Losses on Schedule C Are Audit Targets
Sole proprietors reporting only losses on Schedule C are at a high risk of audit.
If You Turned 72 This Year Your IRA RMD Is Waived
The Secure Act signed at the end of 2019 increased the IRA required minimum distribution (RMD) age from 70 1/2 to 72. However, the CARES Act passed earlier this year also waived RMD’s for individuals that turned 72 in 2020. Therefore, individuals that turned 72 this year would have until the end of 2021 to take their first RMD.
2021 Social Security Changes
Social Security beneficiaries will receive a 1.3% cost-of-living adjustment beginning in 2021. For more information on Social Security changes view the IRS factsheet link below.
PPP Loan Forgiveness
Banks have recommended holding off on applying for PPP loan forgiveness as we wait to see if several bills in Congress are passed that would streamline the forgiveness process. One potential bill includes a provision to automatically forgive loans less than $150,000.