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Important Upcoming Tax Deadlines for August 2020

July 2020

There have been many changes, adjustments and deadline extensions in the tax and financial industry this year due to coronavirus. Individuals and companies have been able to take advantage of financial assistance options such as federal loan programs, tax credits, economic impact payments and other available financial relief options to try and stay afloat during this challenging time.


Here are a couple of benefits still available to people and businesses, but their August deadlines are fast approaching:


• Paycheck Protection Program Loan Application Deadline Extended to Aug. 8


Businesses now have more time to apply for a Paycheck Protection Program (PPP) loan. Congress has extended the application deadline from June 30 to Aug. 8. Additionally, lawmakers are expected to put more money into PPP loans in the next stimulus bill. Independent contractors, sole proprietors and self-employed individuals (Schedule C filers) are eligible for PPP loans, even if they don’t have employees.

Learn more about PPP Loans—including how to apply on the U.S. Small Business Administration’s website


• Deadline to Return Required Minimum Distribution and Not Pay Tax is Aug. 31


As a result of the Coronavirus Aid, Relief and Economic Security (CARES) Act, Required Minimum Distributions (RMDs) are not required for 2020 for individuals with IRAs and 401(k) accounts.

Generally, RMDs are minimum amounts that a retirement plan account owner must withdraw annually starting with the year that he or she reaches age 72 (70.5 if you reached 70.5 before Jan. 1, 2020), according to IRS.gov.


This year, the CARES Act allowed everyone to skip the required RMD for 2020. If you already took your RMD this year, you have until Aug. 31 to return it to your account and not pay tax on the distribution under IRS Notice 2020-51 (even if you took your RMD more than 60 days ago). Additionally, RMDs from inherited IRAs are also allowed to be rolled over or re-contributed by the summer deadline.


Provided you return the funds by Aug. 31, it will be treated as a tax-free rollover. The IRS notice also waives the usual one rollover per 12-month period limitation.


The only exception—if you received your RMD in the form of stock and later sold the shares, it doesn’t appear you can recontribute the proceeds and treat it as a rollover. When doing an IRA rollover, you must roll over the same property that you originally received from the account.


For example, if you took an IRA RMD of 500 shares of stock, those 500 shares must be returned, whether they increased or dropped in value since the distribution.


Anthony Hoffmaster, CPA, CES, MST, is available by phone 919-435-4413 or email [email protected] to answer any questions related to PPP loans or RMDs.

Seven Benefits of 529 College Saving Plans

July 2020

It’s no secret that college is expensive, and many students wind up paying for school through public and private loans leaving them with large debts to repay upon graduating. However, loans aren’t the only way to pay for college.


If you have younger children or grandchildren and a few years available to save, a specialized savings account, known as a 529 plan, can be a great way to help fund future higher education expenses. Another bonus to 529 plans—they can be used for more than just college.


Legally known as “qualified tuition plans,” 529 plans are sponsored by states, state agencies or educational institutions and are authorized by Section 529 of the Internal Revenue Code.


Here are seven tax and financial benefits you need to know about 529 plans:


1. Contributions to 529 plans offer a unique tax benefit since they are treated as gifts to the beneficiary of the account. There is no annual contribution limit; however, contributions of up to $15,000 per donor, per beneficiary qualify for the annual gift tax exclusion.

Another way to make a fairly large contribution without incurring the gift tax, is to contribute as much as $75,000 to a beneficiary (up to $150,000 if your spouse joins in) and elect to treat the contribution as made over a five-year period.


2. Contributions to 529 plans can’t be deducted on your federal tax return, but some states offer residents a deduction or credit on state tax returns for contributions.


3. Distributions from 529 plans used for college are tax-free. Examples of eligible expenses include the cost of tuition, books, supplies, fees, computers, internet access, and room and board for students enrolled at a college or university at least half-time. Off-campus housing, food and utilities can also be covered but the payout must not exceed the room and board allowance that the college or university includes in its cost of attendance. The school’s website usually lists this cost.


4. There are options for unused funds of a 529 plan if the beneficiary decides not to go to college. Distributions can be taken tax-free to pay for fees, books and supplies for certain apprenticeship programs or the money in the beneficiary’s account can be rolled over to a 529 plan for another family member.


5. In addition to paying for higher education, 529 plan funds can also help pay for grade school education. Tax-free payouts of up to $10,000 per student, per year can help pay tuition for kindergarten through twelfth grade. It’s important to note that a state’s tax treatment of distributions for grade school don’t always follow the federal law, so make sure to check the tax implications.


6. A lifetime limit of up to $10,000 in 529 funds can also be used to pay off college debt without any penalties or tax consequences. The funds can be paid to federal and most private student loans.


7. Your 529 plan funds have been refunded because your child’s school is closed due to COVID-19. Now what? After a distribution is made from a 529 account, tax law waives tax and penalties if the student gets a refund from the school and the funds are redeposited back into the 529 account of the beneficiary within 60 days of receipt.


If you have questions about 529 college saving plans and how they can affect your taxes, contact Anthony Hoffmaster, CPA, CES, MST by phone 919-435-4413 or email: [email protected]