Answering Your Top Questions on the Latest Stimulus Bills
Imagine setting aside twenty billion hundred dollar bills
As many of you may have heard, the government is going to be depositing money into your account or possibly your neighbor’s. The government is setting aside 2 trillion dollars to help stimulate the economy. This is the third stimulus bill, and the government is already working on the fourth to help get us through this difficult time. Given the size of this bill and the general speed at which things are changing, I thought it would be a good time to take a quick inventory of some important tax changes.
When are my taxes due?
The due date to file and pay your 2019 Federal and Oregon taxes (keep in mind each state is potentially different) is now July 15th. While we now have more time to file and pay this tax, you might not want to wait. Here is why:
It’s likely you will be getting a refund from Oregon if you paid Oregon tax in 2018 due to the large kicker this year. You must file to get this money back.
Keep in mind you can file your returns at any point and still wait until July to pay if you owe Federal. There may even be an opportunity to use your Oregon refund to pay some of your Federal tax if you owe and can get it back in time.
You will also have until July to decide on IRA and H.S.A. contributions for 2019.
Quarter 1 2020 Federal estimates are now due July 15th. However, Oregon did not extend this deadline. You are still required to pay Quarter 1 2020 Oregon estimates by April 15th.
Quarter 2 2020 estimated payments are still due June 15th for Federal and State.
Am I receiving a stimulus check?
Cash payments are $1,200 ($2,400 for married couples), with an additional $500 cash payment for each child. These payments would not be subject to tax.
Full payments are available for Americans making up to $75,000 ($150,000 for married couples). The payment is then phased out by $5 for every $100 over that limit. The stimulus would be based on your 2018 or 2019 tax return. If you have filed 2019, we are assuming the IRS will use that year.
It’s likely too late to try and manipulate this by filing or not filing. However, to be safe, if you have not filed 2019 and income could be phased out, it might make sense to hold off until you receive a check.
If you made too much in 2018 or 2019, you may still be able to get some stimulus in the form of a refundable tax credit when you file your 2020 return.
Can I make changes to my retirement account?
If you’re a retiree, you are no longer required to take a Required Minimum Distribution for 2020. This creates an opportunity for you to potentially realize some capital gains in the zero percent tax bracket or convert to a Roth IRA for tax-free growth.
They have eliminated the early withdrawal penalty of 10% for withdrawals up to $100,000 from qualified retirement accounts for retirement plan participants who qualify for COVID-19 relief.
Individuals could "re-contribute" the funds to the plan within three years without regard to contribution limits. While the law allows for these types of penalty-free distributions, individual plans can set more restrictive policies.
Income tax on the distribution would still be owed but could be paid over a three-year period. You would need to pay the tax for two years but then presumably get it back in the third year if you decided to recontribute.
They have increased the amount that can be taken as a loan from a qualified retirement plan from $50,000 to $100,000 for 2020.
Has charitable giving gotten more favorable?
Yes. There is a new charitable deduction you can take for up to $300 in cash, even if you do not itemize on your 2020 tax return.
Prior to the CARES act, you could take up to 60% of adjusted gross income as a charitable contribution. For 2020, you can now donate up to 100% of your income.
With all the changes going on, we will continue to update you as much as possible. Please feel free to reach out if you have any specific questions
Sources
https://www.irs.gov/newsroom/economic-impact-payments-what-you-need-to-know
