Check back frequently for updates and guidance on all these new changes.
3/27/2021 IRS Notice 2021-21 Extends the IRS Tax-filing deadline for the 2020 forms 5498
to the IRS and accountholders until June 30, 2021
3/17/2021 IR 2021-67
Extends 2020 Tax-filing deadline and IRA contribution deadline from April 15 to May 17, 2021.
In a recent release, the IRS extended both the 2020 tax-filing
deadline and IRA, HSA and CESA contribution deadline to May 17, 2020. It is still not clear if the contributions made
between April 16-May 17 for the prior year will be captured on the 2020 5498 going out by May 31, 2021 or on the 2021 5498
as "Postponed Contributions" in boxes 13a-13c.
3/2021 IRS Notice 2021-58 Gives Texas, Oklahoma and Lousiana Additional
Extended Tax-filing deadline and IRA contribution deadline from April 15 to June 15, 2021
Earlier in March the IRS released extended 2020 Tax-filing deadlines and 2020
IRA contribution deadlines for residents of Texas, Oklahoma and Louisiana due to the winter storms in February from April
15 to June 15, 2021. Contributions made after April 15 through June 15 will most likely be reported on the 2021 5498 in boxes
13a-13c as "Postponed Contributions" with a code DD - unless the IRS extends the 2020 5498 IRS Filing deadline past
May 31, 2021.
12/1/2020 Use of New Life Expectancy
Tables postponed from 2021 RMDs until 2022 RMDs. Because of the late release of the new Life Expectancy
Tables, the IRS decided to postpone the implementation until the 2022 RMDs to give the processors a chance to download and
calculate the new information. All distributions calculated for 2021 will be using the existing Life Expectancy tables.
3/30/2020 CARES Update On Friday, March 27, the Coronavirus Aid, Relief and Economic Security Act aka CARES Act was signed into law.
Effective immediately, these are the provisions that were released:
- Qualified individuals may take up to $100,000
out of an IRA or Qualified Plan in 2020 to use for adverse financial and medical issues due to COVID-19.
- If under age 59.5, the code used will be "premature - no exception, penalty
applies" - IRS code "1" on the 1099-R and "normal" IRS code "7" if age 59.5 and older.
- The 10% early distribution penalty will not apply and the accountholder will
file am IRS form 5329 with his/her taxes to take the exception
distributed will either be taxed at one time in 2020 or may choose to spread the income equally between 2020, 2021 and 2022.
- The accountholder has up to 3 years from the receipt of the distribution to repay
the funds back into the plan.
- The repayment does not have
to be done at one time and is not considered a "rollover", so the once-per-12-month rule will not apply.
- The IRS will most likely have the repayments reported like the federal disaster
repayments on the 5498 in box 14a for the amount repaid and 14b for the IRS code possibly "DD" (Disaster Distribution).
- If a repayment occurs, the accountholder will most likely file an amended return
for the year the distribution was claimed to recoup the taxes that were paid on the distribution amount.
The Secure Act of 2019 is now a law and effective January 1, 2020
On December 20, 2019 the Secure Act of 2019 was signed into law with major changes to IRA contributions, RMDs for
owners and beneficiaries and Annual RMD Notice changes. The revisions are summarized below:
- The age for Traditional IRA contributions has been eliminated. Beginning
for 2020 contributions, anyone who has earned income may make a contribution to a Traditional IRA. They may
also take a tax deduction for the contribution - unless they are a participant of a Qualified Employer plan and make
over the income phase-out limit.
Minimum Distribution (RMD) age has been raised to age 72. Those who would have attained the age of 70.5
in 2020 and beyond may delay their RMD start year until the year they actually attain the age of 72. Those
who were age 70.5 prior to 1/1/2020 must continue RMDs under the old rules
- Nonspouse Beneficiaries of IRA owners who died 1/1/2020 or later are no longer
allowed to take distributions over the Single Life Expectancy method. Unless the beneficiary meets one
of the exceptions of spouse, disabled, minor child, chronically ill or nonspouse beneficiaries less than 10 years
younger than the owner, the Inherited IRA must be closed by December 31st of the 10th year after the
owner dies. There
are no "required" distributions in the first 9 years but the account must be paid out by the 10th year after
the owner's death.
I have revised my 2020-2021 IRA Training Manual (aka the "Red Book"). It is
available for a discounted price of $115 if you attend the Webinar or it is included in your seminar registration fee if you
attend a live training class. Please click on the "IRA Training" tab to see my full 2021 schedule of live
IRA Training Seminars and Webinars.
Required Minimum Distributions to Qualified Charities Have Been
Extended Permanently Effective December 18, 2015
The Consolidated Approriations Act
of 2016 was signed into law on Friday, December 2015. One of several provisions regarding IRA changes was the ability for
70.5 year old IRA accountholders and beneficiaries of IRAs who have attained the age of 70.5 or older to use their RMD amount
plus more up to $100,000 per year to make tax exempt charitable contributions directly from an IRA to qualified charities
has been made permanent by this Act effective immediately.
The following procedure must be followed
in order for the tax exemption to take affect:beginning in the calendar year of 2015 and beyond:
1. IRA account owners and beneficiaries
of IRAs who have attained the age of 70.5 or older will instruct the financial institution to take a distribution from their
IRA and have a bank check or cashier's check made payable directly to a Qualified Charity. The financial institution
can mailt the check directly or the IRA accountholder can mail it to the charity.
2. The financial institution will code the distribution as either a "normal distribution" if coming
from an IRA owner's account (IRS code "7" in box 7 of the 1099-R) or a "death distribution" if coming
from an Inherited IRA (IRS code "4" in box 7 of the 1099-R). The should NOT be coded as an IRS Code
"F" - "Charitable Gift Annuity"
IRA accountholder will take the tax exemption on the IRA distribution line of his her tax return (line 4a and 4b of the 1040
form) and put the letters "QCD" next to 4b to take the exemption. See the 1040 instructions for more details.
ROLLOVERS WERE CHANGED IN 2015
Effective January 1,
2015, the new definition of the "once-per-12 month" rule applies to the IRA accountholders "aggregate"
IRAs - NOT per IRA, NOT per plan type and NOT per financial institution. Once an accountholder has taken money out of
ANY of their IRA plans and rolled those fund over, the accountholder cannot do any more rollovers from any of his/her IRAs
for the next 12 months - starting from the date of the distribution. Any additional distributions will be ineligible for
rollover during that 12 month period. This does not apply to QP to IRA rollovers or conversions from Traditional or SEPs
to Roth IRAs. Additional IRA to IRA movement has to be done as direct IRA to IRA non-reportable "transfers".
August 24, 2016 IRS releases 11 exceptions when the financial institution may accept
late rollovers (past 60 days) if the accountholder "self-certifies" the exception.
The accountholder will sign a "self-certification" letter provided by the financial
institution choose the exceptions that apply. The bank will report the late rollover in box 13a of the 5498 as a "postponed
contribution" - not in box 2 as a "rollover" contribution. In box 13c of the 5498 the financial institution
will use the code "SC" for "Self Certification".
2020/2021 Cost of Living Adjustments
Traditional and Roth IRAs
Annual Regular Contribution Limits
Under Age 50
Age 50 And Over
Traditional IRA Deductibility Modified Adjusted Gross Income Limits for Qualified Employer
Plan Participants are as follows for 2020/2021:
SINGLE TAXPAYERS AS ACTIVE PARTICIPANT
TRADITIONAL IRA DEDUCTION ELIGIBILTY AND MAGI IS:
Tax Years Full
Deduction Partial Deduction No
2020 <$65,000 $65,000 - $75,000 >$75,000
$66,000 - $76,000 >$76,000
TAXPAYERS AND BOTH ARE ACTIVE PARTICIPANTS OF QP
OR, THE COVERED SPOUSE'S ELIGIBILITY IF ONLY ONE SPOUSE
TRADITIONAL IRA DEDUCTION ELIGIBILTY
AND JOINT MAGI IS:
Tax Years Full Deduction Partial Deduction
$104,000 - $124,000 >$124,000
$105,000 - $125,000
ONE SPOUSE IS ACTIVE PARTICIPANT AND ONE SPOUSE IS NOT COVERED:
SPOUSE MAY TAKE THE DEDUCTION IF JOINT MAGI IS:
Tax Years Full
Deduction Partial Deduction No Deduction
2020 <$196,000 $196,000 - $206,000 >$206,000
$198,000 - $208,000 >$208,000
Simplified Employee Pension Plan (SEP)
Regular Contribution Limits
0-25% of up to $285K
0-25% of up to $290K
Savings Incentive Match Plan for Employees/Employers (SIMPLE
IRA)Annual Regular Contribution Limits
Annual Salary Deferral Contribution Limit
Deferral Contribution Limit
Age 50 And Over
ROTH IRA CONTRIBUTION ELIGIBILITY
MODIFIED ADJUSTED INCOME PHASEOUT
Tax Years Full Contribution Partial Contribution
$124,000 - $139,000 >$139,000
2021 <$125,000 $125,000
- $140,000 >$140,000
MARRIED TAXPAYERS FILING JOINTLY
Full Contribution Partial Contribution No Contribution
<$196,000 $196,000 - $206,000
$198,000 - $208,000 >$208,000
HEALTH SAVINGS ACCOUNT
Contribution Limit Under Age 55
Contribution Limit Under Age 55
Age 55 And Over
High Deductible Health Plan (HDHP) Definition is as follows:
Single HDHP minimum deductible
$ 1,400 (2020/2021)
Family HDHP minimum deductible $ 2,800 (2020/2021)
Single HDHP $ 6,900 (2020), $ 7,000 (2021)
Family HDHP $13,800 (2020), $14,000 (2021)
drugs without a prescription and medical Televisits are now qualified tax-free medical expenses.
* Penalty for non-qualified medical expense withdrawals increases to 20%.