Below are a few COVID-19 related tax return implications. We are monitoring the ever-changing tax landscape and will update you as appropriate.
1) Michigan Governor Gretchen Whitmer extended the Michigan income tax filing and payment deadline to July 15th (Executive Order 2020-26). Also extended are Michigan Cities income tax returns to July (now due on the 15th or 31st depending on their original filing dates). This parallels the Federal government extending the tax filing and payment deadlines to July 15th. The extensions are automatic – nothing needs to be filed to qualify.
2) 1st Quarter estimate payments are now due on July 15th for both Federal and Michigan. However, the 2nd Quarter payments are currently still due on June 15th.
3) The IRS extended 2019 contributions to Traditional IRA and Health Savings Accounts to July 15th.
4) If you receive unemployment compensation due to COVID-19, the compensation is taxable. You may elect to have Federal and Michigan withholding on any compensation that you receive.
5) With the passage of the CARES Act, there is a suspension of Required Minimum Distribution (RMD) for retirement plan withdrawals for 2020. Taxpayers, regardless of age, may also withdraw up to $100,000 from retirement accounts without the 10% early withdrawal penalty for 2020 for coronavirus-related reasons (medical or adverse financial impacts due to quarantine, layoffs, work hour reduction, etc.). Taxes on these withdrawals can be avoided if the money is returned to the account within three years. If you are unable to fully repay the withdrawal, taxes may also be spread across three years. Please consult with your financial advisor if you are considering a retirement account withdrawal.
6) The CARES Act also provides stimulus checks of $1,200 for individuals ($2,400 per couple) and $500 for each qualifying child. The payments begin to phase out for those with adjusted gross incomes above $75,000 ($112,500 head of household and $150,000 for married filing jointly).
7) Another provision is a charitable contribution deduction (not to exceed $300). This is an “above the line” reduction in income over and above the standard deduction for qualified charitable contributions.