Are you suffering financially due to COVID-19? You might qualify to withdraw up to $100,000 from your IRA or other retirement plan before December 31, 2020, without any negative tax consequences. Qualifying distributions aren’t subject to the 10% tax penalty that generally applies to distributions made before age 59½, and the regular tax liability can be paid over three years (or avoided if you recontribute your withdrawal within three years).
You can qualify if you, your spouse or dependent has tested positive and been diagnosed with COVID-19. Other qualifiers include certain financial hardships related to the pandemic, such as being furloughed or unable to work due to lack of childcare.
The IRS has issued depreciation dollar limits for business passenger automobiles placed in service during calendar year 2020. For passenger automobiles acquired after September 27, 2017, and placed in service in 2020, to which the first-year bonus depreciation deduction applies, the limits are: $18,100 for the placed-in-service year; $16,100 for the second tax year; $9,700 for the third tax year; and $5,760 for each succeeding year.
If a taxpayer isn’t entitled to bonus depreciation, the depreciation limits are: $10,100 for the placed-in-service year; $16,100 for the second tax year; $9,700 for the third tax year; and $5,760 for each succeeding year. Contact us for more information.
A deceased individual isn’t eligible to receive an Economic Impact Payment (EIP). These are the payments the federal government made to help mitigate the effects of the COVID-19 pandemic. However, EIPs totaling $1.4 billion were sent to deceased persons, according to the Treasury Inspector General for Tax Administration.
How did that happen? The Government Accounting Office (GAO) said, in the interest of speed, initial batches of EIPs went out without reference to Social Security Administration death records. If similar payments are made in the future, added the GAO, “both Treasury and IRS having full access to death data will help ensure the integrity of direct payments to individuals.” Also, the IRS needs “cost-effective options for notifying ineligible recipients” of EIPs how to return these payments, said the GAO. Here’s the report: https://bit.ly/3eSssiI
What are the latest audit targets of the IRS? IRS Commissioner Charles Rettig gave some clues in recent written testimony before the Senate Finance Committee. Rettig set out the following audit priorities:
- Abusive tax shelters, particularly syndicated conservation easements and micro-captive insurance shelters;
- Virtual currency;
- Tax compliance among high-income taxpayers (generally those with incomes above $100,000 who failed to file tax returns in 2018 or previous years); and
- High-income/high-wealth taxpayers as well as certain types of questionable transactions typically engaged in by such taxpayers.
A Government Accountability Office (GAO) report suggests ways to improve compliance for “gig” workers. These individuals generally work for businesses that operate an app or online platform that connects people to provide services to customers. Examples of popular gig economy businesses are ride-sharing and home rental services.
Companies providing the apps or platforms typically treat the workers as independent contractors and don’t withhold taxes. The GAO noted that “some platform companies only report total annual payments for workers if they exceed $20,000 and 200 transactions, an amount that exceeds the average gross pay from a single company for many platform workers.” Amending this rule “to lower the reporting thresholds would provide workers with more information to help them comply with their tax obligations.”