CARES Act Update

Bruce Primeau, CPA, CFP®, PFS |

There are a considerable number of provisions of the CARES Act, some of which apply to a limited number of people, so we are going to break down one or two provisions per blog that we believe are most relevant.

2019 Tax Return Filing Deadlines:  2019 individual tax returns are now due 7/15/2020.

  •  This is an automatic extension. Taxpayers do not have to file Forms 4868 or 7004 to get the 7/15/2020 deadline.
  • However, tax return extensions to the normal extended due date of 10/15/2020 must be filed with tax payments by 7/15/2020. Interest on unpaid balances may begin to accrue on 7/15/2020 regardless of whether the extension is filed.
  • There is no limit on the amount of tax payment that may be postponed tax and penalty free until 7/15/2020.  This buys many of you some time to either come up with the tax you owe or to hold onto those payments and potentially earn some extra interest on them until the 7/15/2020 deadline.
  • 2020 second quarter estimated payments remain due 6/15/2020.

2020 Required Minimum Distributions (RMD):  

  • In general, RMDs are not required for 2020 and if you took money out of your Traditional IRA within the past 60 days, you can put it back.
  • Note that even if you own an inherited Traditional or Roth IRA, you do not have to take out RMDs for 2020. However, if you already took money out of an inherited account, you may not put it back in the account.
  • This provision may create an opportunity for folks to convert some of your Traditional IRA dollars to a Roth IRA.  This strategy is one we have been implementing for clients for quite some time, and it may make sense for you to consider as well, if you haven’t already.  The goal with a Roth IRA conversion would be to convert only enough to use up the bottom federal and state income tax brackets in hopes of creating an income tax free withdrawal opportunity later in life.  We will be reviewing this opportunity for each our wealth management clients to determine whether it makes sense for you to consider in 2020.

The CARES Act is very complicated and contains many provisions that may or may not apply to your specific situation.  We will continue to present opportunities to you in these blogs and would be happy to discuss any specific questions you may have.