February 24, 2020 - Douglas Myser

Retirement enhancement act explained. This Act, also known as the Secure Act, allows for non-taxable income received by home healthcare workers "difficulty of care" payments, to be treated as compensation for purposes of contributing to defined contribution plans and IRAs. The maximum penalty free distribution is $3,000 per individual per birth or adoption. As  a result, on a joint return, each spouse may separately receive a $5,000 distribution. For this purpose, a qualified plan does not include a defined benefit plan. IRA contributions for graduate and postdoctoral students: Before the Secure Act, certain taxable stipends and non-tuition fellowship payments received by graduate and postdoctoral students were included in taxable income but not considered compensation for IRA purposes. The new law states, "The term compensation shall include any amount which is included in the individuals gross IRS income and paid by the individual to aid the individual in the pursuit of postdoctoral study." Retirement enhancement act explained.

This change enables students to begin saving for retirement and to accumulate tax favored retirement savings. The code provides that income received by a foster care provider is not includable in gross income. A difficulty of care payment is compensation for providing additional care needed for qualified foster individuals who have a physical, mental, or emotional disability for which it has been determined that "There is a need for additional compensation to care for the individual. The care is provided in the home of the foster care provider and, the payments are designated as compensation for such purpose. The Secure Act now allows for non-taxable income received by home health care workers.

Kiddie Tax reverts to tax law prior to the Tax Cuts and Jobs Act, this repeals the provision in the TCJA that the estate and trust rates would be applied to the tax returns of minors subject to the Kiddie Tax. Taxpayers can amend their tax return if the estate and trust rates were assessed.

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