VIRUS WILL CHANGE NEXT TAX RETURN

Virus will  change next tax return. The coronavirus seems to be changing every aspect of life, even taxes. The pandemic prompted the IRS to push back the filing deadline for 2019 tax returns to July 15, and tax changes will continue into next year. The Coronavirus Aid, Relief, and Economic Security Act, more commonly known as the CARES Act, makes the following changes which could impact the 2020 tax return you file next spring. A stimulus tax credit for eligible taxpayers. Millions of people have received stimulus payments of up to $1200 per taxpayer and $500 per child, depending on their income. The amounts were based on taxpayers 2019 incomes, but the payments are actually an advance on a tax credit that recipients will claim on their 2020 tax return. That means if you didn’t get a stimulus payment at all or didn’t get the full amount because your 2019 income was too high, but your 2020 income ends up being lower, you could still receive a stimulus credit on your 2020 tax return. Virus will change next tax return.

No penalty for some early retirement withdrawals. If you have a 401 (k), individual retirement account or similar retirement plan, there is generally a 10% tax penalty for withdrawing money before age 59 and a half. However, the CARES Act waives that penalty in 2020 for people who have been negatively affected by the coronavirus pandemic. Up to $100,000 in coronavirus related distributions can be withdrawn penalty free from January 1, 2020, until December 31, 2020. The criteria for who is eligible for the penalty waiver is broad. Getting this right is crucial so as to not incur a tax liability and cause the need for tax resolution.

It generally covers anyone who has experienced a financial hardship because of the pandemic or who has been diagnosed with COVID-19, the disease caused by the coronavirus, or has had a spouse or dependent diagnosed with it, according to the Senate Finance Committee. While the penalty is waived, regular income taxes will still be assessed on the early distribution.