Treasury Secretary Steve Mnuchin announced today that the U.S. income tax filing deadline will be extended to July 15th due to the Coronavirus pandemic.
“All taxpayers and businesses will have this additional time to file and make payments without interest or penalties,” Mnuchin said on Twitter.
We will continue to monitor the updates regarding this issue and do our best to keep you informed.
Treasury Secretary Steven Mnuchin announced this week that taxpayers may get a bit of relief due to the Coronavirus issue affecting the Nation. Mnuchin declared a 90-day deferral of taxes owed with no interest or penalties . While this provides for some relief due to the COVID-19 issue, it’s important to keep in mind that the filing deadline for individual and C corporation returns is still April 15th. The deferral is only for the payment of taxes for 90 days (July 15th), not a filing delay. While other states have followed the IRS’ lead, Illinois has not announced its position on this payment relief as of March 19th. If not changed, an individual’s and corporation’s Illinois tax will still need to paid by April 15th. We’ll keep you updated on this Illinois situation.
The IRS and Treasury Department released Notice 2020-17 on March 19th to better explain what payments can be deferred. We have highlighted a few key components of this information:
The IRS and Treasury Department will provide more guidance as needed. Our team will keep you advised as more information comes in. Please contact us if you have any questions or concerns.
Dear Clients and Friends,
As our firm continues to monitor the COVID-19 (Coronavirus) situation, we wanted to take a few minutes to reach out to our clients, friends, and community. As you are aware, we are in the heart of the busiest time of year for our industry. Scheffel Boyle remains fully operational in our seven offices – Alton, Edwardsville, Belleville, Highland, Jerseyville, Columbia, and Carrollton, IL. We are and will continue to be dedicated to serving and advising you. We are focused on high quality service and the health and safety of our clients, team members, business partners, vendors, and their families.
We are currently reviewing and updating internal policies, particularly regarding in-person meetings and office visitors. At this time, we have taken the following measures to ensure service continuity remains strong, but also that important safety precautions are taken:
Our leadership is closely monitoring Federal, State, local government, and IRS updates regarding both this issue and our usual deadlines during busy season. We are also taking actions to have as little disruption as possible to our professional work, while keeping safety top-of-mind. The CDC recommends the following routine preventative actions to help prevent the spread of virus, including everyday habits which we are stressing to all our team:
Our policies and the measures we take internally during this crisis are fluid and will remain adaptive as the situation evolves. We will communicate with our clients if our current situation, policies, or procedures were to change.
Please reach out to our team with any questions or concerns you may have during this time. We remain dedicated to serving you and doing things for the health and safety of our team, clients, community, and friends.
Sincerely,
The Scheffel Boyle Team
Generally, you must file a gift tax return for 2019 if, during the tax year, you made gifts that exceeded the $15,000-per-recipient gift tax annual exclusion (other than to your U.S. citizen spouse) or that you wish to split with your spouse to take advantage of your combined $30,000 annual exclusion.
You also need to file if you made gifts to a Section 529 college savings plan and wish to accelerate up to five years’ worth of annual exclusions ($75,000) into 2019. Other reasons to file include making gifts:
Keep in mind that you’ll owe gift tax only to the extent an exclusion doesn’t apply and you’ve used up your lifetime gift and estate tax exemption ($11.4 million for 2019). As you can see, some transfers require a return even if you don’t owe tax.
No gift tax return is required if your gifts for the year consist solely of gifts that are tax-free because they qualify as annual exclusion gifts, present interest gifts to a U.S. citizen spouse, educational or medical expenses paid directly to a school or health care provider, or political or charitable contributions.
But if you transferred hard-to-value property, such as artwork or interests in a family-owned business, consider filing a gift tax return even if you’re not required to. Adequate disclosure of the transfer in a return triggers the statute of limitations, generally preventing the IRS from challenging your valuation more than three years after you file.
If you owe gift tax, the payment deadline is indeed April 15 — regardless of whether you file for an extension (in which case you have until October 15 to file). If you’re unsure whether you must (or should) file a 2019 gift tax return, contact us.
Toddlerhood and preschool. Talk about how most people work to earn money to buy things like food and toys. Bring your kids along on shopping trips and discuss how much various items cost. Point out that buying a more expensive item means less money for other things.
Early elementary school. Explain the difference between needs and wants. Provide a small “piggy bank.” It might help if it’s a clear container so kids can see their cash grow. Consider offering a small reward when the stash reaches a specific level.
Later elementary and middle school. Decide how you’ll handle allowances. Some parents choose to remit an allowance only if certain chores are completed. Others provide it no matter what and discipline the child in other ways. Whatever your approach, teach your child to budget and have him or her set aside part of the allowance to introduce the concept of savings.
Middle school. Gradually increase your child’s allowance. Suggest earning extra money through babysitting or other jobs.
High school. If possible, encourage your child to get a part-time job. Reinforce the importance of savings — whether for further education or some other goal. Discuss how to use credit wisely and how interest compounds over time.
Maintaining an open dialogue about finances and modeling sound money management can help you raise financially responsible kids. We’d be happy to provide additional ideas.
The Tax Cuts and Jobs Act (TCJA) created a new tax credit for certain employers that provide paid family and medical leave. Originally, it was available only for the 2018 and 2019 tax years.
However, in December, a new law extended the credit through 2020 for eligible employers that have a written policy providing at least two weeks of such leave annually to all qualifying employees, both full- and part-time, and meet certain other requirements.
An eligible employer can claim a credit equal to 12.5% of wages paid to qualifying employees who are on family and medical leave, if the leave payments are at least 50% of the normal wages paid to them. For each 1% increase over 50%, the credit rate increases by 0.25%, up to a maximum credit rate of 25%.
An eligible employee is one who’s worked for your company for at least one year, with compensation for the preceding year not exceeding 60% of the threshold for highly compensated employees for that year. For the 2019 tax year, the threshold for highly compensated employees is $125,000 (up from $120,000 for 2018). That means a qualifying employee’s 2019 compensation can’t exceed $72,000 (60% × $120,000).
Employers that claim the Family and Medical Leave Act credit must reduce their deductions for wages and salaries by the amount of the credit.
Under the rules, family and medical leave is defined as time off taken by a qualified employee for only certain reasons. These include the birth, adoption or fostering of a child (and to care for the child). Care for a spouse, child or parent with a serious health condition qualifies, too, as does leave taken by an employee because of a serious health condition.
Also qualifying is any need because of an employee’s spouse, child or parent being on covered active duty in the Armed Forces (or being notified of an impending call or order to covered active duty). Care for a spouse, child, parent or next of kin who’s a covered veteran or member of the Armed Forces is eligible as well.
Employer-provided vacation, personal, medical or sick leave (other than leave defined above) is ineligible.
Generally, to claim the credit for your company’s first tax year that begins after December 31, 2017, your written family and medical leave policy must be in place before the paid leave for which the credit will be claimed is taken.
However, under a favorable transition rule for the first tax year beginning after December 31, 2017, your company’s written leave policy (or an amendment to an existing policy) is considered to be in place as of the effective date of the policy (or amendment) rather than the later adoption date.
The new credit could be an attractive perk, but it can also be pricey because you must offer it to all qualifying full-time employees. Contact us for more info.
Let’s say you drive for a ride-sharing app, deliver groceries ordered online, or perform freelance home repairs. If you do one of these jobs or a variety of others, you’re a gig worker — part of a growing segment of the economy.
In fact, a 2019 IRS report found that the share of the workforce with income from alternative, nonemployee work arrangements grew by 1.9 percentage points from 2000 to 2016. (That’s a big increase.) And, over 50% of this rise occurred during the period 2013 to 2016, almost entirely because of gigs set up online.
No matter what the job or app, all gig workers have one thing in common: taxes. But the way you’ll pay taxes differs from the way you would as an employee.
To start, you’re typically considered self-employed. As a result, and because an employer isn’t withholding money from your paycheck to cover your tax obligations, you’re responsible for making federal income tax payments. Depending on where you live, you also may have to pay state income tax.
The U.S. tax system is considered “pay as you go.” Self-employed individuals typically pay both federal income tax and self-employment taxes four times during the year: generally on April 15, June 15, and September 15 of the current year, and January 15 of the following year.
If you don’t pay enough over these four installments to cover the required amount for the year, you may be subject to penalties. To minimize the risk of penalties, you must generally pay either 90% of the tax you’ll owe for the current year or the same amount you paid the previous year.
You may have encountered the term “the 1099 economy” or been called a “1099 worker.” This is because, as a self-employed person, you won’t get a W-2 from an employer. You may, however, receive a Form 1099-MISC from any client or customer that paid you at least $600 throughout the year. The client sends the same form to the IRS, so it pays to monitor the 1099s you receive and verify that the amounts match your records.
If a client (say, a ride-sharing app) uses a third-party payment system, you might receive a Form 1099-K. Even if you didn’t earn enough from a client to receive a 1099, or you’re not sent a 1099-K, you’re still responsible for reporting the income you were paid. Keep in mind that typically you’re taxed on income when received, not when you send a request for payment.
As a gig worker, you need to keep accurate, timely records of your revenue and expenses so you pay the taxes you owe — but no more. We can help you set up a good record keeping system, file your taxes and stay updated on new developments in the gig economy.
By definition, gig workers are self-employed. So, your taxes are based on the profits left after you deduct business-related expenses from your revenue. Expenses can include payment processing fees, your investment in office equipment and specific costs required to provide your service. Remember, if you use a portion of your home for work space, you may be able to deduct the pro rata share of some home-related expenses.
On December 20, 2019, President Trump signed the SECURE Act into law, which makes changes to certain retirement plans. The SECURE Act has received a lot of publicity due to the provisions affecting inherited individual retirement accounts (IRAs). However, that’s not the only notable change of interest to individuals.
Upon the death of a traditional IRA owner or qualified plan participant, RMDs could be paid over the life expectancy of the designated individual beneficiary. Often referred to as a “stretch payment,” payment of RMDs over the life expectancy of a much younger beneficiary (such as a taxpayer’s child or grandchild), resulted in smaller annual distributions, thereby providing the opportunity for the continued deferral of tax on the retirement account assets while they continued to appreciate.
Prior to the SECURE Act, if a traditional IRA owner or qualified plan participant died without naming an individual as a designated beneficiary and the IRA owner or qualified plan participant had not yet reached the required beginning date, the taxpayer’s remaining interest in the retirement plan was required to be distributed no later than the end of the fifth calendar year following the death of the taxpayer (the five-year rule).
The SECURE Act does away with the favorable tax deferral of stretch payments. Instead, non-spouse beneficiaries of traditional IRAs or qualified plans of taxpayers who die after December 31, 2019, must now deplete the plan’s assets on or before the end of the 10th calendar year following the death of the taxpayer. Further, this 10-year rule also applies to plans that previously would have been subject to the aforementioned five-year rule.
Eligible designated beneficiaries are not subject to the new 10-year rule. Eligible designated beneficiaries include the surviving spouse, minor children, certain chronically ill or disabled beneficiaries, and individual beneficiaries who are not more than 10 years younger than the deceased IRA owner or qualified plan participant. Eligible designated beneficiaries may continue to receive RMDs over their life expectancy, provided however, that the account balance must be distributed within 10 years of the death of the eligible designated beneficiary or, in the case of an eligible beneficiary who was a minor child, within 10 years of such child reaching the age of majority.
Prior to the SECURE Act, taxpayers were generally required to begin receiving RMDs from their traditional IRAs and certain qualified retirement plans beginning on April 1 of the year following the year they reached age 70 ½. *The SECURE Act increased this RMD age to age 72 for all distributions required to be made after December 31, 2019. That is, individuals who attain age 70 ½ after December 31, 2019, will not be required to take mandatory distributions until April 1 of the year following the year in which they attain age 72.
*Taxpayers may defer withdrawals from a qualified plan until retirement from the company sponsoring the plan, provided the taxpayer is not a 5% or greater owner of the company.
Distributions from traditional IRAs and qualified retirement plans are generally included in income in the year received. With rare exception, distributions before age 59 ½ are subject to a 10-percent early withdrawal penalty on the amount includable in income. A common exception to the early withdrawal penalty is for distributions made in certain cases of emergency or financial hardship.
The SECURE Act provides an additional exception to the 10-percent early withdrawal penalty for a distribution of up to $5,000 from a defined contribution retirement plan or IRA made after December 31, 2019 which is used for expenses related to a qualified birth or adoption. To qualify for the penalty-free exception, the distribution must be made during the one-year period beginning on the date on which the child is born, or the adoption is finalized. Eligible adoptees are any individual (other than a child of the taxpayer’s spouse) who has not attained age 18 or is physically or mentally incapable of self-support. Qualified birth or adoption distributions may generally be repaid to the retirement plan at any time.
Prior to the enactment of the SECURE Act, beneficiaries were required to be under age 70 ½ as of the end of the taxable year to be eligible for a deduction for qualified contributions to traditional IRA accounts. The SECURE Act repealed this maximum age limitation for taxable years beginning after December 31, 2019, ensuring that taxpayers of any age are now eligible to make qualified contributions to traditional IRA accounts and obtain a deduction for their qualified contributions.
QCDs permit taxpayers to make a charitable contribution up to $100,000 from their traditional IRA and exclude that distribution from the taxpayer’s gross income. For taxable years beginning after December 31, 2019, QCDs that are excluded from a taxpayer’s gross income are reduced (but not below zero) by the excess of: (1) the total amount of deductions allowed to the taxpayer for contributions to a traditional IRA in taxable years ending on or after the date the taxpayer attains age 70 ½ over (2) the total amount of reductions for all tax years preceding the current tax year.
Before the TCJA was enacted, for taxable years beginning before December 31, 2017, the net unearned income of a child was taxed at the parents’ tax rates if the parents’ rates were higher than the child’s. The TCJA suspended this so-called “kiddie tax” for taxable years beginning after December 31, 2017, and before January 1, 2026, and instead provided that the net unearned income of a child was taxed at the same rates as estates and trusts.
The SECURE Act reinstates the kiddie tax. As a result, for tax years beginning after December 31, 2019, the unearned income of a child is no longer taxed at the same rates as estates and trusts. Instead, the unearned income of a child will be taxed at the parents’ tax rates if such rates are higher than the child’s tax rates.
Until the 2016 tax year, the filing deadline for partnerships was the same as that for individual taxpayers: April 15 (or shortly thereafter if April 15 fell on a weekend or holiday). But the due date was changed to allow business owners to use the information contained in the pass-through entity forms to file their personal returns. For partnerships with fiscal year ends, tax returns are now due the 15th day of the third month after the close of the tax year. The same deadline applies to fiscal-year S corporations.
If you haven’t yet filed your calendar-year partnership or S corporation return, you can avoid the tragedy of a late return by filing for an extension. Under the current law, the maximum extension for calendar-year partnerships is six months (until September 15, 2020, for 2019 returns). This is up from five months under the old law. So, the extension deadline is the same — only the length of the extension has changed. The extension deadline for calendar-year S corporations also is September 15, 2020, for 2019 returns. Whether you’ll be filing a partnership or an S corporation return, you must file for the extension by March 15 if it’s a calendar-year entity.
Filing for an extension can be tax-smart if you’re missing critical documents or you face unexpected life events that prevent you from devoting enough time to your return right now.
But to avoid potential interest and penalties, you still must (with a few exceptions) pay any tax due by the unextended deadline. There probably won’t be any tax liability from the partnership or S corporation return. But, if filing for an extension for the entity return causes you to also have to file an extension for your personal return, it could cause you to owe interest and penalties in relation to your personal return.
We can help you file your tax returns on a timely basis or determine whether filing for an extension is appropriate. Contact us today.
In the near term, the budget should encompass the day-to-day items that affect every family. First, the home: This is often the most valuable possession in a personal budget. And a budget shouldn’t include only mortgage payments, but also expenses such as utilities, maintenance and supplies.
Naturally, there are other items related to daily life that need to be accounted for. These include groceries, fuel, clothing, child care, insurance and out-of-pocket medical expenses. And families need to draw clear distinctions between fixed and discretionary spending.
Along with being a practical guide to near-term family spending, the budget needs to address long-term goals. Of course, some goals are further out than others. For example, virtually everyone’s longest-term objective should be to have a comfortable retirement. So, a budget needs to incorporate plan contributions and other ways to meet this goal.
A relatively less long-term goal might be funding one or more college educations. So, again, the budget should reflect efforts to this effect. And, as a long-term but “as soon as possible” objective, the budget needs to be structured to pay off debts and maintain a strong credit rating. We can help you craft a sensible budget that addresses your family’s distinctive needs.
Serving St. Louis, the Metro-East and Southwestern Illinois since 1924.
