CORONAVIRUS RELIEF PROVISIONS – INDIVIDUAL TAX PROVISIONS

Due Date for Filing Income Tax Returns and Making Income Tax Payments
The IRS and the Wisconsin Department of Revenue have extended the due date for filing 2019 income tax returns from April 15, 2020 to July 15, 2020. The extension is automatic. An extension application need not be filed.

In addition, the IRS and the Wisconsin Department of Revenue have extended the due date for paying 2019 balances due and for making first quarter 2020 estimated tax payments from April 15, 2020 to July 15, 2020.

Prepaid 2020 Tax Credits.
Eligible Individuals will be paid a 2020 federal tax credit of $1,200 per individual ($2,400 for joint filers) plus $500 for every minor child. An eligible individual is one who has a Social Security number and who is not a non-resident alien or a dependent. The credit is reduced by 5% of adjusted gross income in excess of $75,000 for single individuals, $150,000 for joint filers and $112,500 for heads of household. The credit phases out entirely at adjusted gross income of $99,000 for single taxpayers and $198,000 for joint filers.

The IRS will make credit calculations based on a taxpayer’s most recently filed tax returns or if no returns were recently filed, the taxpayer’s Social Security statement. As soon as possible, prepayments will be made by mail or by direct deposit if direct deposit of a federal tax refund was authorized on a prior tax return. Reconciliation of the prepayment will be made on the 2020 federal tax return. If the prepayment was too small, an additional credit may be claimed on the 2020 federal tax return. If the prepayment was too large, it need not be paid back.

Deferred Payment of Self-Employment Tax.
Self-employed individuals can delay the payment of the employer portion of self-employment taxes for 2020. Fifty percent of self-employment taxes deferred must be paid by December 31, 2021. The balance must be paid by December 31, 2022.

Due Dates for Contributions to Retirement Plans and Health Savings Accounts.
The due date for making 2020 contributions to an IRA, a Health Savings Account or an Archer Medical Savings Account is extended from April 15, 2020 to July 15, 2020.

Temporary Waiver of Required Minimum Distributions.
Required minimum distributions from IRAs and certain defined contribution plans are waived for 2020.

Tax Favored Withdrawals from Retirement Plans.
Early withdrawals from a retirement plan by an individual diagnosed with SARS-CoV-2 or COVID 19 or whose spouse or dependent is so diagnosed or who experiences financial hardship because of quarantine or other factors are not subject to the 10% excise tax on early distributions. The distributions may not exceed $100,000 for any tax year. Taxpayers may elect to ratably spread the income over a 3-year period beginning with 2020. Taxpayers may also avoid income recognition by repaying the distribution to the retirement plan within three years of receipt.

Loans from Retirement Plans.
The maximum amount of a loan from a qualified retirement plan is increased from $50,000 to $100,000. For outstanding loans, repayment dates before December 31, 2020 are delayed for one year and subsequent payments as well as interest accruals are adjusted accordingly.

Charitable Contribution Deductions.
For 2020, individuals who do not itemize may claim an above the line deduction of up to $300 for cash contributions to qualified charities.

For those who do itemize, the percentage limitation for charitable contributions (60% of adjusted gross income) is eliminated for cash contributions made during 2020. Thus, an individual may claim a charitable contribution deduction up to 100% of adjusted gross income.

Due Date for Federal Gift Tax Returns.
The due date for filing 2019 federal gift tax returns is extended from April 15, 2020 to July 15, 2020.