What with all the challenges that 2020 has thrown us on political, economic and medical fronts, why would it matter whether fiscal policy gets upended as well?
In response to the economic meltdown the pandemic caused, Congress and the president gave us the CARES Act and all those personal stimulus checks in March. That had followed by just three months the SECURE Act, which ushered in its own set of rules pertaining to taxes and individual investment decisions. The result is that a lot of rules have changed, said Des Moines CPA Joe Kristan (pictured), of Eide Bailly. “It’s going to be a weird year,” he said. Some of this information we’ve covered in past dsmWealth interviews with Kristan. Other info may be new; in either case, it can help you better plan for your taxes.
Pertaining to business taxes, Kristan said there are several changes that will have an impact. A key one relates to net operating losses, under the assumption that many businesses will lose money because of the pandemic's economic shock. They can use that current year loss to offset profits for up to five previous years, thereby claiming refunds of previously paid income taxes. To help struggling businesses with cash flow, 2018 and 2019 losses may also be carried back for refunds.
A still unresolved issue is over the taxability of the PPP loans granted to millions of small businesses. The intent of Congress was that those loans, when properly used to support payrolls, would be forgiven. But Kristan said the U.S. Treasury views them in such a manner that may classify PPP dollars as taxable income to the recipient. Stay tuned on how that develops.
Noncorporate taxpayers with excess business losses got some good news with postponement of the $250,000 cap ($500,000 married filing jointly) on such losses. Excess business losses that would otherwise be disallowed for taxable years 2018 through 2020 will be permitted. This change is retroactive, allowing taxpayers to amend 2018 returns to claim the extra losses.
On the personal tax side, the SECURE Act lifted the age at which we have to withdraw money from IRAs to 72 (from 70 1/2). Three months later the CARES Act scrapped required minimum distributions (RMDs) for 2020. A lot of taxpayers got badly bruised by the stock market rout of early 2020, so this would give them time to recoup losses without having to fuss with an RMD.
That could have a negative impact on charitable giving, since such a gift offsets an RMD. To sort of make up for that shortfall, the law allows you to give cash equal to your entire adjusted gross income.
Consider 'Waze' App When You Start Traveling Again BY STEVE DINNEN
We arrived in Bologna on July 2, 2019, and left the food capital of Italy two days later. I was reminded of the dates by two letters that arrived just last week from the police department there that demanded 390 euros for two tickets I collected for straying into traffic-controlled areas called ZTLs – Zona a Traffico Limitato. Sixteen months after the fact, I’m weighing whether to pay. I collected an overtime parking ticket in Sicily a few years back, and demand letters from them that started at 30 euros escalated to 200 euros. I finally replied that I didn’t intend to pay but would not fight extradition should they choose to bring me to justice in Italy. Never heard from them again. Camera systems in ZTLs read license plates and issue tickets to characters like me. They’re all over Europe, but Italy has high hopes for their earnings power: In Florence alone, they issue more than 1,000 of these tickets every day. Until recently I went to Spain three to four times a year on business. I always paid tickets I collected there. Not sure about Italy; I may remain a beffardo (scofflaw). But if I return there, I will avail myself of Waze – a free phone app that warns you when you’re approaching ticket territory. When the country reopens, consider doing likewise.
When it comes to achieving your company’s goals for a giving campaign, offering activities that lead to active engagement is the key to success. ... Read more »
Don't Let Election Panic Drive Your Investing Decisions
BY MICHELLE SINGLETARY FOR THE WASHINGTON POST
I’m stressed about my 401(k) retirement plan and what a protracted legal battle over the next U.S. president may do to the stock market.
I’m not supposed to admit this. I should know better. But the volatility of the stock market can take you there: a place of panic.
However, when your emotions will probably drive you to make a misguided financial decision, it helps to get an outside perspective.
Home has become work and school for millions of people. Many residences needed to somehow shift overnight to accommodate two workplaces and multiple classrooms because of the coronavirus.
With schools and businesses signaling that these conditions will extend at least through the spring, it’s no surprise there is a stampede of people seeking more space. But when so many are acting on instinct, the best move may well be to slow down and ask some counterintuitive questions.
Try this one on for size: Should the house you’re thinking of as a starter home be your forever home instead?
This is a tricky subject, like many of the biggest questions in personal finance, because of the complex stew of money and feelings that are involved. >> READ MORE
