Roth Conversions

A good tax strategy for 2020 for some taxpayers who are expecting much less income or even losses would be to convert a portion of their retirement plan to a Roth. This would generate taxable income in the year of conversion but might not create a tax liability if you plan it right. This would set up a source of tax free retirement funds for the future which would not be taxable as long as you didn't pull any money out within 5 years. This also is a good strategy to maximize your 20% qualified business income deduction if your taxable income is lower than your qualified business income.

Are Paycheck Protection Loan (PPP) Expenses Deductible?

What the government gives you it can also take away. The IRS has come out with notice 2020-32 saying that PPP expenses such as payroll costs, qualified mortgage interest, rent and utilities are not tax deductible if the PPP loan is forgiven because the forgiveness is tax free income and they want to prevent a double tax benefit. I believe Congress intended the expenses to be deductible and 5 senators filed a bill on May 5 to make it so. Presently negotiations are going on between the senators and the IRS to withdraw notice 2020-32. We will see what happens.

Paycheck Protection Program (PPP)

This is a loan program designed to support small businesses in this crisis to keep their employees on the payroll. It will cover 8 weeks of payroll costs including benefits along with interest on mortgages, rent and utilities. The loan can be forgiven by the government if you qualify on the spending side. The details are fluid to say the least with constant changes. Check out this website to keep up with PPP: https://home.treasury.gov/policy-issues/cares/assistance-for-small-businesses.

Georgia Scholarship Program

Georgia allows taxpayers to get a 100% tax credit for payments made to the Georgia scholarship program. Unfortunately, it is not as good as it used to be as it is no longer deductible on the federal return since August 27, 2018 per treasury decision 9864.

No RMD for 2020

I stated this in an earlier post but I wanted to highlight it again because it is so significant. No  minimum distributions from your retirement plans are required in 2020! This affects those over age 72 and allows you to leave the money in your plan and let it hopefully grow for the rest of the year. You need to contact your broker and stop automatic withdrawals if you haven't already done so. RMD's will start up again in 2021.

2020 Estimated Tax Payments

Both the IRS and Georgia have extended the estimated payments due on April 15 and June 15 to July 15. If you have the federal payments set up to come automatically out of your bank account, you need to call the IRS automated line 888-353-4537 to cancel the June 15 payment. I can send you a paper voucher to use instead with a mailed payment on July 15.

Stimulus Payments and the Cares Act

The stimulus bill(Cares Act) has been signed into law and has many provision to help us deal with the economic impact of the pandemic. Some of the more significant items are listed below:

1. Each qualifying individual will get $1,200 ($2,400 if filing jointly) plus $500 per child under 17. The amount phases out at $75,000 ($150,000 if filing jointly) of adjusted gross income so no payments will be made at an adjusted gross income of $99,000 for individuals and $198,000 for joint returns. Dependents do not qualify for payments. The Treasury department will use your 2018 tax return or 2019 if it has been filed to determine your adjusted gross income. The payments will be direct deposited into your bank account if that was provided on your tax return. Otherwise you will get a check. The IRS and Treasury have a website irs.gov/coronavirus which will soon provide more information about these payments. These payments are not taxable income.
2. A charitable contribution of up to $300 can be deducted beginning in 2020 for those that do not itemize.
3. You do not have to take a required minimum distribution from your retirement plan in 2020 which would have been based on the value of your account at 12/31/19.
4. Waives the 10% early withdrawal penalty from retirement plans for coronavirus related distributions.
5. Qualified leasehold improvements, qualified restaurant property, and qualified retail improvement property now have a depreciation period of 15 years which qualifies them for 100% bonus depreciation. Generally to be qualified, construction had to be done on nonresidential real property already placed in service.