The Coronavirus Aid, Relief, and Economic Security (CARES) Act included legislation related to retirement accounts. The CARES Act allows individuals to make early withdrawals from their retirement accounts up to $100,000 on or after March 27, 2020, and before December 31, 2020, without incurring the 10% penalty due to early withdrawal (before age 59.5). Tax on the distributions can be spread out over three years if desired. Redepositing of the funds within a three-year span will be treated as rollovers and will not be taxed. Please note that your statement will most likely say the early withdrawal is subject to the penalty, but filers will need to submit a new form indicating the withdrawal was related to COVID-19 hardships.
The CARES Act also included legislation to provide relief on federal student loans from March 13, 2020, through September 30, 2020, and was later extended through December 31, 2020. This legislation included suspending loan payments, collecting on defaulted loans, and waiving interest by temporarily setting the interest rate at 0%.
The Economic Impact Payments and rebate recovery credit were also part of the CARES Act. All eligible individuals are entitled to either a payment or credit up to $1,200 for single filers or $2,400 for married couples who filed jointly on their 2018 or 2019 taxes. Eligible individuals also receive $500 for each qualifying child. Phaseouts levels based on income affect eligibility.
The CARES Act allows for cash donations of up to $300 made by December 31, 2020, to be deductible whether or not you itemize. The taxpayer will still need to provide documentation for the charitable gift from the tax-exempt organization(s).
Taxpayers will have to disclose if they have received, sold, sent, acquired, or exchanged virtual currency on their 2020 taxes. This question has been moved to page one of Form 1040 and must be answered. This area is becoming increasingly scrutinized for potential audits.
Other Tax News:
In 2021, Social Security recipients will receive a 1.3% increase in their benefits. Also, individuals who turn 66 years old in 2021 will not lose any benefits if they earn $50,520 or less before they reach that age. After the beneficiary turns 66 years old there is no cap on future earnings. Those who are 62 through 65 years old by the end of 2021 will be allowed to make up to $18,960 before losing any benefits.