Tax Relief for Individuals in Response to the Pandemic
April 13, 2020
All of us at Putney hope that all of our clients and their families are well and safe during this difficult period. We also want you to know that all of us are working remotely and can continue to assist you and your families with any estate administration and planning needs.
We would also like to let you know about certain tax relief provisions that have been enacted at the federal and state levels.
Tax Return Filing and Payment
The United States Department of the Treasury has announced that all tax payments and filings otherwise due between April 1, 2020 and July 15, 2020 are automatically extended to July 15, 2020. This includes individual, businesses, estates and trusts, as well as federal estate, gift and generation skipping tax filings and payments. The extension is automatic. No interest or penalties will be imposed so long as the payments and filings are made on or before July 15, 2020.
New York State has also extended their payment and filing deadlines to July 15, 2020 for personal, fiduciary and business income taxes but not for the filing or payment of transfer taxes.
For New Jersey, Income payments and filing originally due on April 15, 2020 have been extended to July 15, 2020. However, the 2nd quarter estimated tax payments remain due on June 15, 2020. The due dates for filing inheritance and estate returns and any payment thereof have not been extended.
Connecticut filing and payment extension deadlines have been extended to July 15, 2020 for individual, business, fiduciary income tax and for gift taxes but not for estate tax filings or payments.
The Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”)
The CARES Act provides for payments of a tax credit of up to $1200 per individual, subject to income limitations. The credit phases out for individual filers with an adjusted gross income of $75,000, for head of household filers at $112,500 and for married filing jointly taxpayers at $150,000. In order to receive the credit, a taxpayer must file either file a 2019 individual income tax return (Form 1040), have filed an individual income tax return for 2018 or received a Social Security Benefit Statement.
The CARES Act also provides an exception to the 10% early withdrawal penalty for “coronavirus related distributions” up to $100,000 from retirement plan distributions.
Coronavirus distributions are defined as “distributions from an eligible retirement plan” made in 2020 to a person diagnosed with COVID-19 or whose spouse or dependent has been diagnosed with COVID-19 or who has “experienced adverse financial consequences” as a result of the virus. Income is recognized over 3 years unless the taxpayer recontributes the funds within 3 years.
Minimum distribution requirements for most retirement plans are suspended during 2020 – other than for distributions that have already been made in 2020. The suspension does not apply to individual retirement accounts and some defined contribution plans.
For gifts to charities, the CARES Act provides for an above-the-line deduction up to $300 for cash charitable contributions made by a taxpayer who does not itemize. Income limits for individual and corporate cash contributions to qualified charities (but not to foundations or donor-advised funds) are suspended.
These materials were prepared by Putney, Twombly, Hall & Hirson LLP prior to their combination with Bond, Schoeneck & King for informational purposes only and are not intended as legal advice or advertisement of legal services. Transmission of the information is not confidential and is not intended to create an attorney-client relationship or an attorney-client privileged communication. You should not act upon any of the information contained in these materials without seeking the advice of your own professional legal counsel.