As we enter the final quarter of 2020 and finalize the 2019 tax year, we find that many of the IRS issues highlighted in our previous Commentary persist.Oct 2020
The IRS has struggled to address the problem of tens of millions of pieces of unopened correspondence,
including payments. As a result of the backlog of mail that accumulated over spring and summer (unopened mail was estimated to number 12 million items), millions of taxpayers received balance due
notices from the IRS. The IRS announced in August that it had suspended sending certain balance-due notices to taxpayers while it continued to process its backlog of unopened mail, which may, in some cases, contain the sought payments.
This action came two days after U.S. Rep. Richard Neal, Chairman of the House Ways & Means Committee, requested that the IRS temporarily stop sending notices to taxpayers regarding payments that taxpayers had mailed to the IRS on time.
Despite the challenges presented by COVID – 19, many taxpayers were able to take advantage of deferral provisions of the Coronavirus Aid Relief and Economic Security Act (CARES) related to required minimum distributions (RMDs). Due to COVID-related cancellations of spring and fall semesters at colleges and universities, you may have received refunds for tuitions paid from a 529 College Savings Plan. To avoid having the refund considered taxable income, the refund must be deposited back in to a 529 plan within 60 days of the date of the refund.
Given the short window and complicated provisions surrounding this re-contribution, we encourage you to contact your investment or tax professional at Howland to discuss the appropriate action to take. From a legislative perspective, it is unclear whether any tax changes will be passed by Congress before year end.
There have been discussions of another economic stimulus bill that may contain an extension of the Payroll Protection Plan (PPP). There is also broad support to relaunch PPP but in the form of tax credits.
While the upcoming presidential and Congressional elections are unpredictable, we are paying attention
to the proposals of Democratic nominee Joe Biden. These would include raising taxes on individuals with income above $400,000, including individual income, capital gains and payroll taxes. Among
other parts of the Biden plan, there are proposed changes to tax credits for caregivers and a proposal to reinstate and increase the credit for first-time homebuyers.
As we approach the end of the year, we will keep you abreast of any changes that may impact your tax obligations or provide planning opportunities. If you have any questions, please contact your investment or tax professional at Howland Capital.