The SECURE Act and What it Could Mean For You

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.


Modification of Required Minimum Distribution (RMD) Rules for Beneficiaries of Inherited IRAs or Qualified Plans

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.

Insights

  • The age of majority varies across the states. There is currently no regulatory guidance from the IRS on the age of majority for purposes of applying this provision of the SECURE Act.
  • Taxpayers may want to review the named designated beneficiaries of their IRAs and retirement plans. Where this change in the SECURE Act may now produce an unintended result, taxpayers may want to revisit their estate plans and consider alternative planning opportunities such as taking advantage of the Tax Cuts and Jobs Act (TCJA) lower income tax rates and converting traditional IRAs to Roth IRAs, which generally are not subject to the RMD requirements during the IRA owner’s lifetime. Inherited Roth IRAs are subject to RMD requirements.
  • The House Ways and Means Committee estimates that this change will raise $15.7 billion of the total estimated $16.3 billion the SECURE Act is expected to generate over the next 10 years.


RMD Age Increased to Age 72

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.

 

Insights

  • Generally, there is no RMD requirement for a Roth IRA during the Roth IRA owner’s lifetime. Unlike contributions to a traditional IRA which are made with pre-tax dollars, contributions to a Roth IRA are made with after-tax dollars. As such, the RMD requirement of traditional IRAs ensure that a taxpayer may not indefinitely defer tax on assets held in a traditional IRA.
  • The House Ways and Means Committee estimates that this change will cost $8.9 billion over the next 10 years. That’s more than half of the nearly $16.3 billion total the SECURE Act is estimated to cost over the next 10 years.


Penalty-Free Withdrawals From Certain Retirement Plans for Expenses Related to Child Birth or Adoption

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.

Insights

  • Amounts withdrawn for qualified birth or adoption expenses are included in the taxpayer’s income in the year withdrawn, but they are not subject to the 10 percent early withdrawal penalty or to mandatory 20 percent income tax withholding (because the new law says that they are not “eligible rollover distributions”). Qualified birth or adoption distributions generally can be repaid with after-tax dollars at any time, essentially allowing retirement plan participants to restore the full amount of the distribution to their plan accounts. So, if a participant withdrew $5,000 as a qualified birth or adoption expense, he or she could recontribute the full $5,000 back into the plan (even years later), even though the participant paid income tax on the distribution.
  • The $5,000 limit is per individual. Thus, a married couple may each separately receive a $5,000 qualified birth or adoption distribution from an eligible retirement plan.
  • The individual receiving the qualified birth or adoption distribution appears to be the only person who can repay it to the retirement plan or IRA. Thus, someone else could not directly repay the amount as a gift, but they could gift the funds to that individual, enabling him or her to repay the distribution.


Repeal of Maximum Age for Traditional IRA Contributions and Coordination with Qualified Charitable Distributions (QCDs)

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.

Insights

  • The House Ways and Means Committee Report acknowledged that Americans are continuing to work past traditional retirement ages and explained that the elimination of the age limitation removed an impediment for older American workers to add to their retirement savings.
  • Roth IRAs have no such age limitation and therefore are unaffected by this provision of the SECURE Act. In 2020, contributions to all of taxpayer’s IRAs (traditional and Roth), may not exceed $6,000. Individuals age 50 or older are able to contribute an additional $1,000.

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.

Insights

  • This change to QCDs prevents a taxpayer over age 70 ½ from usurping the traditional charitable contribution limitations by taking a deduction for a qualified contribution to a traditional IRA and then making a QCD and excluding the QCD from gross income.

Reinstatement of the Kiddie Tax Previously Suspended by the TCJA

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.

Insights

  • Taxpayers can elect to apply this provision retroactively to tax years that begin in 2018 or 2019. Taxpayers should revisit their 2018 filings and determine whether an amended return would be beneficial.

Own a Pass-Through Entity? Beware the Ides of March

“Beware the Ides of March.” Shakespeare’s words don’t apply just to Julius Caesar; they also apply to calendar-year partnerships, S corporations and limited liability companies (LLCs) treated as partnerships or S corporations for tax purposes. Why? The Ides of March — March 15 — is the federal income tax filing deadline for these “pass-through” entities.


Not-So-Ancient History

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.

Avoiding a Tragedy

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.

Extending the Drama

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.

To File or To Extend

We can help you file your tax returns on a timely basis or determine whether filing for an extension is appropriate. Contact us today.

Accounting for the Near and the Long Term in a Family Budget

A wise person once said, “Simplicity is the key to a family budget.” (He or she may or may not have been an accountant.) However, it also needs to be comprehensive enough to cover all necessary items. To find the right balance, a budget should cover two distinct facets of family members’ lives: the near term and the long term.

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.

Careful Tax Planning Required for Incentive Stock Options

Incentive stock options (ISOs) are a popular form of compensation for executives and other key employees. They allow you to buy company stock in the future at a fixed price equal to or greater than the stock’s fair market value on the ISO grant date. If the stock appreciates, you can buy shares at a price below what they’re then trading for. But careful tax planning is required because of the complex rules that apply.


Tax Advantages Abound

Although ISOs must comply with many rules, they receive tax-favored treatment. You owe no tax when ISOs are granted. You also owe no regular income tax when you exercise ISOs. There could be alternative minimum tax (AMT) consequences, but the AMT is less of a risk now because of the high AMT exemption under the Tax Cuts and Jobs Act.

There are regular income tax consequences when you sell the stock. If you sell after holding it at least one year from the exercise date and two years from the grant date, you pay tax on the sale at your long-term capital gains rate. You also may owe the 3.8% net investment income tax (NIIT).

If you sell the stock before long-term capital gains treatment applies, a “disqualifying disposition” occurs and a portion of the gain is taxed as compensation at ordinary-income rates.

2019 Impact

If you were granted ISOs in 2019, there likely isn’t any impact on your 2019 income tax return. But if in 2019 you exercised ISOs or you sold stock you’d acquired via exercising ISOs, then it could affect your 2019 tax liability. It’s important to properly report the exercise or sale on your 2019 return to avoid potential interest and penalties for underpayment of tax.

Planning Ahead

If you receive ISOs in 2020 or already hold ISOs that you haven’t yet exercised, plan carefully when to exercise them. Waiting to exercise ISOs until just before the expiration date (when the stock value may be the highest, assuming the stock is appreciating) may make sense. But exercising ISOs earlier can be advantageous in some situations.

Once you’ve exercised ISOs, the question is whether to immediately sell the shares received or to hold on to them long enough to garner long-term capital gains treatment. The latter strategy often is beneficial from a tax perspective, but there’s also market risk to consider. For example, it may be better to sell the stock in a disqualifying disposition and pay the higher ordinary-income rate if it would avoid AMT on potentially disappearing appreciation.

The timing of the sale of stock acquired via an exercise could also positively or negatively affect your liability for higher ordinary-income tax rates, the top long-term capital gains rate and the NIIT.

Nice Perk

ISOs are a nice perk to have, but they come with complex rules. For help with both tax planning and filing, please contact us.

The TCJA Effect: Qualified Residence Interest

The Tax Cuts and Jobs Act (TCJA) made a significant impact — both directly and indirectly — on the deductibility of various types of interest expense for individuals. One area affected is qualified residence interest.


Two Ways About It

The TCJA affects interest on residential loans in two ways. First, by nearly doubling the standard deduction and placing a $10,000 cap on deductions of state and local taxes, the act substantially reduces the number of taxpayers who itemize. This means that fewer taxpayers will benefit from mortgage and home equity interest deductions. Second, from 2018 through 2025, the act places new limits on the amount of qualified residence interest you can deduct.

Previously, taxpayers could deduct interest on up to $1 million in acquisition indebtedness ($500,000 for married taxpayers filing separately) and up to $100,000 in home equity indebtedness ($50,000 for married taxpayers filing separately).

Acquisition indebtedness is debt that’s incurred to acquire, build or substantially improve a qualified residence, and is secured by that residence. Home equity indebtedness is debt that’s incurred for any other purpose (such as buying a boat or paying off credit cards) and is secured by a qualified residence. A single mortgage could be treated as both acquisition and home equity indebtedness, allowing taxpayers to deduct interest on debt up to $1.1 million.

The TCJA reduced the deduction limit for acquisition indebtedness to interest on up to $750,000 in debt and eliminated the deduction for home equity indebtedness altogether, through 2025. The new limit on acquisition indebtedness doesn’t apply to debt incurred on or before December 15, 2017, subject to an exception for mortgages that were incurred on or before April 1, 2018, in certain circumstances. Specifically, it involves debt incurred pursuant to a written binding contract to purchase a qualified residence executed before December 15, 2017, and scheduled to close before January 1, 2018 (so long as the purchase, as it turned out, was completed before April 1, 2018). And it doesn’t apply to existing mortgages that are refinanced after December 15, 2017, provided the resulting debt doesn’t exceed the refinanced debt.

The elimination of interest deductions for home equity indebtedness, however, applies to existing debt. So, if you were previously deducting interest on up to $100,000 of home equity debt, that interest is no longer deductible. The same holds true for the $100,000 home equity portion of $1.1 million in mortgage debt. Note, however, that interest on a home equity loan used to substantially improve a qualified residence is deductible as acquisition indebtedness (subject to applicable limits).

Review Your Expenses

In light of the TCJA’s changes, you may want to make changes such as paying off home equity loans because interest is no longer deductible. Contact us for help.

 

Sidebar: Investment Interest Also Affected

The Tax Cuts and Jobs Act (TCJA) also affects investment interest. This is interest on debt borrowed to buy taxable investments (margin loans, for example). Like qualified residence interest, investment interest is an itemized deduction, which is lost if you no longer itemize.

Deductions of investment interest cannot exceed your net investment income, which generally includes interest income and ordinary dividend income, but not lower-taxed capital gains, qualified dividends or tax-free investment earnings. For many people, net investment income is now higher because the TCJA eliminated miscellaneous itemized deductions for such expenses.

Illinois Minimum Wage Law – In a Nutshell

Illinois workers rung in the New Year with an hourly raise. In February of 2019, Governor J.B. Pritzker signed a bill passed by the Senate that sets a gradual increase on the current minimum wage, reaching a total increase to $15.00 per hour in 2025.

The new minimum wage laws began on January 1st, 2020 with an increase from $8.25 per hour to $9.25 per hour. The next increase is set for July 1st, 2020 to $10.00 per hour. We have included the table below to outline the scheduled wage increases.

DATE HOURLY WAGE
1/1/20 $9.25
7/1/20 $10.00
1/1/21 $11.00
1/1/22 $12.00
1/1/23 $13.00
1/1/24 $14.00
1/1/25

$15.00

 

Under the old law, workers under age 18 AND working 650 hours or less in a calendar year could be paid $.50 per hour less than the applicable minimum wage until 12/31/19.

Example: $8.25 – $.50 = $7.75

Under the new law, workers under 18 working less than 650 hours in a calendar year can be paid under the following rules:

DATE HOURLY WAGE
1/1/20 $8.00
1/1/21 $8.50
1/1/22 $9.25
1/1/23 $10.50
1/1/24 $12.00
1/1/25 $13.00

 

When it comes to tipped employees, they will have a minimum wage of 60% of the applicable wage as long as tips plus wages equals the current wage standard.


Tax Credit

You may have heard rumors of a tax credit for certain employers under the new regulations. The guidelines for earning this credit are…

  • If the employer has 50 or fewer full-time employees (FTE) who make minimum wage,
  • whose average wages for employees earning less than $55,000 per year during reporting period exceeds the average wage paid for employees making less than $55,000 during same reporting period in prior calendar year,
  • limited to tax liability for reporting period, the credit equals..
YEAR CREDIT CONSIDERATIONS
2020 25% Of wages paid for quarterly reporting periods
2021 21% Same
2022 17% Same
2023 13% Same
2024 9% Same
2025 5% Same
2026 5% For employers with >5 employees
2027 5% For employers with no more than 5 employees

 

Penalties for Employers

The new law also increases penalties on employers for violating these new wage requirements, including:

  • $100 per affected employee for failure to keep payroll records
  • Civil damage penalties on employers that fail to pay minimum wage (Treble Damages)
  • $1,500 fine for willful disregard of wage requirements

 

If you have questions on the new Minimum Wage Law, our team is ready and willing to help. Contact us today.

 

 

Do You Know Your Tax Bracket?

Although the Tax Cuts and Jobs Act (TCJA) generally reduced individual tax rates through 2025, there’s no guarantee you’ll receive a refund or lower tax bill. Some taxpayers have actually seen their taxes go up because of reductions or eliminations of certain tax breaks. For this reason, it’s important to know your bracket.

Some single and head of household filers could be pushed into higher tax brackets more quickly than was the case pre-TCJA. For example, the beginning of the 32% bracket for singles for 2019 is $160,725, whereas it was $191,651 for 2017 (though the rate was 33% then). For heads of households, the beginning of this bracket has decreased even more significantly, to $160,700 for 2019 from $212,501 for 2017.

Married taxpayers, on the other hand, won’t be pushed into some middle brackets until much higher income levels through 2025. For example, the beginning of the 32% bracket for joint filers for 2019 is $321,450, whereas it was $233,351 for 2017. (Again, the rate was 33% then.)

As before the TCJA, the tax brackets are adjusted annually for inflation. Because there are so many variables under the law, it’s hard to say exactly how a specific taxpayer’s bracket might change from year to year. Contact us for help assessing what your tax rate likely will be for 2020 — and for help filing your 2019 tax return.

Mark Your Calendars!

With a new year, comes new deadlines to keep in mind. Mark your calendars for these important tax deadlines for the first quarter of 2020.

January 15
— Individual taxpayers’ final 2019 estimated tax payment is due.

January 31 — File 2019 Forms W-2 (“Wage and Tax Statement”) with the Social Security Administration and provide copies to your employees.

  • File 2019 Forms 1099-MISC (“Miscellaneous Income”) reporting nonemployee compensation payments with the IRS and provide copies to recipients.
  • Most employers must file Form 941 (“Employer’s Quarterly Federal Tax Return”) to report Medicare, Social Security and income taxes withheld in the fourth quarter of 2019. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the quarter in full and on time, you have until February 11 to file the return. Employers who have an estimated annual employment tax liability of $1,000 or less may be eligible to file Form 944 (“Employer’s Annual Federal Tax Return”).
  • File Form 940 (“Employer’s Annual Federal Unemployment [FUTA] Tax Return”) for 2019. If your undeposited tax is $500 or less, you can either pay it with your return or deposit it. If it’s more than $500, you must deposit it. However, if you deposited the tax for the year in full and on time, you have until February 11 to file the return.
  • File Form 943 (“Employer’s Annual Federal Tax Return for Agricultural Employees”) to report Social Security, Medicare and withheld income taxes for 2019. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 11 to file the return.
  • File Form 945 (“Annual Return of Withheld Federal Income Tax”) for 2019 to report income tax withheld on all nonpayroll items, including backup withholding and withholding on pensions, annuities, IRAs, etc. If your tax liability is less than $2,500, you can pay it in full with a timely filed return. If you deposited the tax for the year in full and on time, you have until February 11 to file the return.

February 28 — File 2019 Form 1096, along with copies of information returns with the IRS.

March 16 — 2019 tax returns must be filed or extended for calendar-year partnerships and S corporations. If the return isn’t extended, this is also the last day for those types of entities to make 2019 contributions to pension and profit-sharing plans.

Every Business Owner Needs an Exit Strategy

As a business owner, you have to keep your eye on your company’s income and expenses and applicable tax breaks. But you also must look out for your own financial future. And that includes creating an exit strategy.


Buy-Sell Agreement

When a business has more than one owner, a buy-sell agreement can be a powerful tool. The agreement controls what happens to the business if a specified event occurs, such as an owner’s retirement, disability or death. A well-drafted agreement provides a ready market for the departing owner’s interest in the business and prescribes a method for setting a price for that interest. It also allows business continuity by preventing disagreements caused by new owners.

A key issue with any buy-sell agreement is providing the buyer(s) with a means of funding the purchase. Life or disability insurance often helps fulfill this need and can give rise to several tax issues and opportunities. One of the biggest advantages of life insurance as a funding method is that proceeds generally are excluded from the beneficiary’s taxable income, provided certain conditions are met.

Succession Within the Family

You can pass your business on to family members by giving them interests, selling them interests or doing some of each. Be sure to consider your income needs, the tax consequences, and how family members will feel about your choice.

Under the annual gift tax exclusion, you can currently gift up to $15,000 of ownership interests without using up any of your lifetime gift and estate tax exemption. Valuation discounts may further reduce the taxable value of the gift.

With the gift and estate tax exemption approximately doubled through 2025 ($11.4 million for 2019), gift and estate taxes may be less of a concern for some business owners. But others may want to make substantial transfers now to take maximum advantage of the high exemption. What’s right for you will depend on the value of your business and your timeline for transferring ownership.

Get Started Now

To be successful, your exit strategy will require planning well in advance of retirement or any other reason for ownership transition. Please contact us for help.

What to do About Fraudulent Credit or Debit Card Charges

It’s an awful feeling to learn that someone has used your credit or debit card to make fraudulent charges. Whether you’re liable typically depends on the type of card, whether you still possess the card and when you alert the issuer.


Credit Cards

If your card is lost or stolen and you report it to the card provider before your card is used in a fraudulent transaction, you can’t be held responsible for any unauthorized charges. If you report it after unauthorized charges have been made, you may be responsible for a specified dollar amount in charges. Some card issuers have decided not to hold their customers liable for any fraudulent charges regardless of when they notify the card company. And if your account number is stolen but not the actual card, your liability is $0. But either you or the card issuer must identify the fraudulent transactions for them to be removed.

When reporting a card loss or fraudulent transaction, contact the issuer via phone. Then follow up with a letter or email. This should include your account number, the date you noticed the card was missing (if applicable), and the date you initially reported the card loss or fraudulent transaction.

Debit Cards

If you report a missing debit card before any unauthorized transactions are made, you aren’t responsible for any unauthorized transactions. If you report a card loss within two business days after you learn of the loss, your maximum liability for unauthorized transactions is $50.

But if you report the card loss after two business days but within 60 calendar days of the date your statement showing an unauthorized transaction was mailed, liability can jump to $500. Finally, if you report the card loss more than 60 calendar days after your statement showing unauthorized transactions was mailed, you could be liable for all charges.

What if you notice an unauthorized debit card transaction on your statement, but your card is still in your possession? You have 60 calendar days after the statement showing the unauthorized transaction is mailed to report it and avoid liability.

Safest Choice

If you’re unsure about the specific conditions that trigger liability for unauthorized charges, contact your card issuer.