Today is the tax filing deadline for 2019. I asked Wendy Valentino, CPA, a partner in the Woodbury, New York offices of Prager Metis, a top 40 U.S. accounting firm, (www.pragermetis.com) for her top four tax tips during the COVID-19 pandemic.
1. Tax filing deadlines extended due to the COVID-19 pandemic
The tax filing deadline for your federal and state 2019 personal income taxes is July 15, 2020. The government pushed out the April 15th deadline because of the pandemic. You can file an automatic extension to October 15th; however, this is an extension of time to file, not to pay your taxes.
First and second quarter 2020 estimated tax payments for business owners and individuals who receive income other than W-2 wages (such as dividends and capital gains), normally due April 15th and June 15th are now due on July 15th, as a result of the extension because of the pandemic. Note that while many states follow federal guidelines, New York took a slightly different path with the first estimate due on June 15th.
2. Unemployment benefits are taxable
Remember that if you have been receiving unemployment income, and did not have taxes withheld, that is income that you will owe tax on depending on your income level.
3. Required RMDs are waived for 2020
For those of you who are required to take a minimum distribution from your retirement accounts due to your age, those RMDs have been waived for 2020. (Normally, you would have to take a certain distribution and pay income tax on that.) But, if you need the funds, you can take them AND you can even pay them back without penalty. There are a variety of relief provisions related to loans and withdrawals from your retirement accounts that you should discuss with your tax advisor.
4. Child tax credits
The Child Tax Credit, created under the Tax Cuts and Jobs Act of 2017, unlike the prior child tax exemptions or deductions, is a dollar-for-dollar reduction in the amount of taxes you are required to pay to the IRS. The credit amount is set at $2,000 per child under the age of 17. As much as $1,400 of this credit if refundable, meaning that even if your tax bill is $0, you’ll get an additional $1,400 with your tax refund. There are income limitations and other restrictions that apply. Speak to your tax advisor for more information.
The residential custodial parent is legally entitled to the tax credit; however, the non-custodial parent may take the tax credit if the parties sign an agreement regarding this issue and the proper forms.