Due to the coronavirus pandemic, a number of new IRS rules have been made. What will follow is part 1 of a 3 part discussion of changes to IRS code from the Cares Act. The work was done by Charles Rotblut CFA of the American Association of Individual Investors (AAII).
It is broken into 3 parts because who can read that much tax code all at once? It is important even if the subject matter isn’t exciting.
Tax Return and Payment Deadlines Moved
In response to the coronavirus pandemic, the Internal Revenue Service (IRS) revised its deadlines. The new IRS rules most notably change the 2019 and first-quarter 2020 tax payments.
The date for filing 2019 tax returns has been pushed back. The date was April 15, 2020. It has been pushed back to July 15, 2020. Likewise, the payment deadline for 2019 taxes is now July 15. This change only applies to federal taxes. It does not apply to state taxes or local taxes. Check with your state and local, government if applicable, to determine their deadlines.
Those who file an extension for their 2019 taxes are still required to file a return by October 15, 2020. As of early April, this deadline has not changed. An extension is not required if you file by July 15.
The deadline for paying first-quarter 2020 estimated taxes has also been pushed back by three months. Estimated taxes can be paid on July 15 instead of April 15. Second-quarter estimated taxes can also now be paid as late as July 15 instead of June 15.
No penalties or interest will be charged for those who choose to delay payments until July 15. The deferment applies to all taxpayers. This includes individuals, trusts and estates, corporations and other non-corporate tax filers. It also applies to those who pay self-employment tax.
More Time to Make 2019 IRA Contributions
In conjunction with revision of the deadline for filing 2019 taxes, the deadline for making 2019 IRA contributions has been pushed back. Taxpayers can now make contributions as late as July 15, 2020. The IRS states, “Because the due date for filing federal income tax returns has been postponed to July 15, the deadline for making contributions to your IRA for 2019 is also extended to July 15, 2020.”
If you have already filed your 2019 tax return but have not contributed the maximum allowed amount to your IRA you may have to file an amended return. The maximum are $6,000 plus an additional $1,000 for those ages 50 or older. Because qualified contributions to a traditional IRA reduce your adjusted gross income, an amended return needs to be filed.
Contributions to a Roth IRA do not alter your adjusted income since they are made with after tax dollars. However, an amended tax return would still be needed for a Roth IRA contribution made if the retirement savings contributions credit is claimed.
If you made contributions during the 2019 and 2020 calendar years, be sure you calculate the total contributions made for the 2019 tax year to ensure you do not go over the limits.
Age Limit on Making Traditional IRA Contributions Removed
Those over age 70½ can now continue to make contributions to traditional IRAs if they have earned income. Prior to the start of 2020, such contributions were not allowed by those over age 70½; the age limit has been removed by the IRS.
Roth IRA contributions did not have an age limit. Due to the coronavirus pandemic, a number of new IRS rules have been made. Remember there are two more articles following this one.