• Overman & Parks, CPAs, PA

CARES Act Highlights

2020 has proven to be a year full of change. We could write pages and pages of technical data about the changes to the tax code alone!!! However, for your sake, we have complied some highlights. As always if you have questions you can call our office anytime! (252) 443-3124

Retirement plans and IRAs:

Required Minimum Distribution (RMD) requirement waived for 2020: The RMD requirements do not apply to any distribution which is required to be made in calendar year 2020. Suspending this RMD requirement allows you to choose - you may take funds out of your retirement plan during 2020 if you wish but this suspension means that you are not required to take any out.

Withdrawals: 10% additional tax does not apply to any coronavirus‐related distribution, up to $100,000. A coronavirus‐related distribution is any distribution made during 2020 from an eligible retirement plan, to a qualified individual. Any individual who receives a coronavirus related distribution may, at any time during the 3‐year period beginning on the day after the date on which the distribution was received, contribute amounts not to exceed the amount of the distribution back to an eligible retirement plan to avoid including such distribution in their taxable income. If they choose not to contribute the money back to a qualified plan, any amount required to be included in gross income for such tax year will be spread over a 3‐tax year period beginning with the year of the distribution.

Loans from qualified plans: The CARES Act provides flexibility for loans from certain retirement plans for coronavirus‐related relief. Such provisions may include: expansion of amounts eligible for borrowing, loan payments due in 2020 can be delayed for up to one year from the time you take out the loan, reduced interest rates on loans. (These polices will be adopted on a plan by plan basis so check with your administrator for the specifics related to your plan).

Changes pertaining to Charitable Deductions:

The CARES Act adds a for AGI deduction for tax years beginning in 2020, for the amount (not to exceed $300) of qualified charitable contributions made by an eligible individual during the tax year. Additionally, the CARES Act provides that individuals may elect to deduct charitable contributions up to 100% of their Adjusted Gross Income.

Education Provisions:

The CARES Act adds to the types of educational payments that are excluded from employee gross income "eligible student loan repayments” made before January 1, 2021. The payments are subject to the overall $5,250 per employee limit for all educational payments. (Note: taxpayer will not be eligible to deduct the student loan interest related to employer paid amounts)

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