New Law. The SECURE ACT changes the age on which the required beginning date for required minimum distributions is based, from the year in which the employee or IRA owner attains 70 1/2 years to the year in which the employee or IRA owner attains 72 years. Under the Act, the former rules continue to apply to employees and IRA owners who attain age 70 1/2 prior to January 1, 2020.
The provision is effective for distributions required to be made after December 31, 2019, with respect to individuals who attain age 70 1/2 after December 31, 2019.
Covid Resources - Trina D Hoekstra CPA P.S. COVID-19 Tax Portal (covidtaxportal.com)
FOR FREE OR LOW INCOME TAX ASSISTANCE -
If you have a simple return and may not need a CPA, the IRS has a free file option you may qualify for. https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free
Also new for 2019, if you are doing your own taxes there is a new form for seniors. Form 1040-SR is available as an optional alternative to using Form 1040 for taxpayers who are age 65 or older. Form 1040-SR uses the same schedules and instructions as Form 1040 but is supposed to be easier to complete. https://www.irs.gov/forms-pubs/about-form-1040-sr
Also for free tax help the Volunteer Income Tax Assistance (VITA) program offers free tax help to people who generally make $56,000 or less, persons with disabilities and other taxpayers who need assistance in preparing their own tax returns. There is also an AARP program. Locations can be looked up on the IRS website. https://irs.treasury.gov/freetaxprep/
2020 TAX NEWSLETTER -
I recently went to a several day tax conference to gear up for tax season and there are some new provisions. This 2020 Act brought back many deductions and credits that had expired at the end of 2017, as well as a few others that had either expired at the end of 2018 or were scheduled to expire at the end of 2019. In addition, substantial changes were made to retirement-related tax provisions and new disaster-related tax provisions have been added. Some of the funding for these changes will come from increases made to various penalty provisions - notably increases in the penalties for failing to timely file a tax return or timely pay the tax due.To the extent that you could have benefited from any of the resurrected 2017 tax provisions on your 2018 tax return, we should file an amended return to claim any refunds you may be due. The 2020 Act changes may also affect your 2019 tax liability.
The following is a recap of some of the provisions that have been extended that may require the filing of an amended tax return for 2018.
Deduction for Qualified Tuition and Related Expenses
The deduction for qualified tuition and related expenses is now available for 2018, 2019, and 2020 and applies to qualified education expenses paid during the year for yourself, your spouse, or a dependent. The maximum deduction is $4,000 of expenses if your modified adjusted gross income does not exceed $65,000 ($130,000 in the case of a joint return). If your income is more than that, you can still deduct $2,000, as long as your adjusted gross income does not exceed $80,000 ($160,000 in the case of a joint return).
Expansion of Section 529 Plans
Several changes were made to the rules involving Section 529 plans - tax-advantaged savings plans designed to accumulate funds for future educational needs. First, tax-free distributions for higher education expenses can now apply to expenses for fees, books, supplies, and equipment required for the participation of a designated beneficiary in an apprenticeship program. The apprenticeship program must be registered and certified with the Secretary of Labor under Section 1 of the National Apprenticeship Act. Second, tax-free treatment applies to distributions of certain amounts used to make payments on principal or interest of a qualified education loan. No individual may receive more than $10,000 of such distributions, in aggregate, over the course of the individual's lifetime. Third, a special rule allows tax-free distributions to a sibling of a designated beneficiary (i.e., a brother, sister, stepbrother, or stepsister). This rule allows a 529 account holder to make a student loan distribution to a sibling of the designated beneficiary without changing the designated beneficiary of the account.
Treatment of Mortgage Insurance Premiums as Qualified Residence Interest
For 2018, 2019, and 2020, you can treat amounts paid during the year for qualified mortgage insurance as qualified residence interest. The insurance must be in connection with acquisition debt for a qualified residence.
Nonbusiness Energy Property Credit
The nonbusiness energy property credit is extended to property placed in service in 2018, 2019, and 2020. The nonbusiness energy property credit is available for (1) 10 percent of the amounts paid or incurred for qualified energy efficiency improvements installed during the tax year, and (2) the amount of residential energy property expenditures paid or incurred during the tax year.
Alternative Fuel Refueling Property Credit
The credit for alternative fuel refueling property has been extended to property placed in service in 2018, 2019, and 2020. The credit is equal to 30 percent of the cost of any qualified alternative fuel vehicle refueling property placed in service by the taxpayer during the tax year.
Two-Wheeled Plug-In Electric Vehicle Credit
The credit available for the purchase of a qualified two-wheeled plug-in electric drive motor vehicle is extended to vehicles acquired in 2018, 2019, and 2020.
Another change made by the 2020 Act which may affect your 2019 tax return and future tax returns includes the following:
Reduction in Medical Expense Deduction Floor
The floor for deducting medical expenses for 2019 and 2020 has been reduced from 10 percent of adjusted gross income to 7.5 percent of adjusted gross income. In addition, there is no adjustment to the medical expense deduction when computing the alternative minimum tax for 2019 and 2020.
Some of the retirement-related provisions which may be of interest to you include the following:
Repeal of Maximum Age for Traditional IRA Contributions
The prohibition on contributions to a traditional IRA by an individual who has attained age 70½ has been repealed.
Increase in Age for Required Beginning Date for Mandatory Distributions
The required beginning date for required minimum distributions has been increased to 72 years old from 70 ½ years old. The former rules continue to apply to employees and IRA owners who attain age 70½ prior to January 1, 2020. The new provision is effective for distributions required to be made after December 31, 2019, with respect to individuals who attain age 70½ after December 31, 2019.
Other changes not discussed include disaster related provisions, exclusion of gains on discharge of qualified residence indebtedness, certain fellowship payments treated as compensation for IRA purposes, elimination of some kiddie tax provisions and penalty-free withdrawals from retirement plans for birth or adoption of a child.