ASD Tax Services

Extensions and FBAR Deadline - Did You Know?

For taxpayers who requested extensions to file various 2019 returns, the filing due date for those returns is October 15, 2020. This deadline applies to multiple filings that were originally due on April 15, 2020. (For most of these forms, the filing due date without an extension was subsequently changed to July 15, 2020 by the IRS due to the COVID-19 pandemic.)

The October 15 deadline to file under an extension applies to several common returns, including:

2019 INDIVIDUAL INCOME TAXES:

Most individual taxpayers who requested an automatic extension to file their 2019 federal tax returns must file by October 15. However, additional extensions may be available to some taxpayers affected by recent disasters, including hurricanes and western wildfires.

2019 CORPORATE INCOME TAXES:

The October 15 deadline also applies to C corporations that requested an extension to file their 2019 corporate income tax returns (Form 1120).

FOREIGN BANK ACCOUNT REPORT (FBAR):

Many U.S. taxpayers, including individuals and businesses, must file an annual report of their foreign bank and other financial accounts, called an FBAR. Typically, filing an FBAR is necessary if the total value of a taxpayer's foreign accounts exceeds $10,000 at any time during the calendar year. However, certain accounts, such as those held within a qualified IRA or other retirement plan, may not need to be reported. Most taxpayers who are required to file a 2019 FBAR and have not yet done so must file by October 15.

Remember that in general, an extension to file tax returns is NOT an extension to pay any tax due. Therefore, those who have not yet filed but expect to owe 2019 tax should estimate the amount they owe and pay that amount as soon as possible, even if they will not file their returns until October 15. Immediate payment will minimize any interest charges and late payment penalties. A tax professional can help you determine how much to pay and/or if an FBAR is required.

Unemployment Benefits Are Taxable Income – Did You Know?

Due to the economic impact of the COVID-19 (coronavirus) pandemic, individuals may have had to file for Unemployment Insurance (UI) benefits for the first time. These benefits include the federal Pandemic Unemployment Assistance (PUA) program created under the CARES Act, which provides an additional $600 per week to many UI benefits recipients. For individuals receiving UI payments in 2020, it is important to understand the tax treatment of those benefits.

Both state and federal unemployment benefits payments are generally taxed as ordinary income by the IRS. As is the case with most regular income sources, recipients of these benefits are required to make tax payments throughout the year. One way that taxpayers can meet this requirement is to request that tax be withheld from their UI payments, which can be done in most states by filing Form W-4V with the state's unemployment benefits office.

If no tax is withheld from their UI payments, taxpayers may need to make quarterly estimated tax payments in order to avoid a large tax bill next spring, which could include penalties and interest charges. A tax professional can help UI payment recipients determine whether estimated payments are needed, and how much to pay. The estimated tax payment deadline for the first two quarters of 2020 was July 15, but if an individual missed that deadline, penalties can still be minimized by making a payment as soon as possible.

Even if tax is withheld from UI payments, the amount withheld may be incorrect if a person's benefit amount differs from their salary while working. To avoid an unpleasant tax surprise next spring, taxpayers can use the IRS Withholding Estimator tool (link below) to calculate the appropriate withholding amount, and file an updated Form W-4V to request additional withholding if necessary. UI benefits recipients should also do a second checkup with the Withholding Estimator after returning to work, to ensure that their paycheck withholding is accurate going forward.

IRS Withholding Estimator tool: https://www.irs.gov/individuals/tax-withholding-estimator

RMD Repayment or Rollover Deadline - Did You Know?

The deadline to return or rollover a Required Minimum Distribution (RMD) for IRA owners, beneficiaries or workplace retirement plan participants is coming up on Monday, August 31.

The CARES Act allows most taxpayers with an eligible retirement account, such as a 401(k), 403(b) or traditional IRA, to skip their required minimum distributions (RMDs) for 2020 without penalty. Individuals who received the RMD, including those who turned 70½ in 2019, have the option to return the distribution to their account or other qualified plan. They may also have the option of rolling over to another IRA or qualified retirement plan by August 31, 2020 to avoid taxes on the RMD. Please note that the suspension of the RMD does not apply to qualified defined benefit plans.

A tax and financial professional can help you determine the best strategy for handling your 2020 retirement account RMDs.