back frequently for updates and guidance on all these new changes.
NEW CARES ACT 2.0 WEBINAR
WAS RECORDED ON JULY 29, 2020. To purchase a CD or OnDemand contact: https://www.bankwebinars.com/webinar/details/3781
the deadline for filing the 2019 5498 with the IRS draws closer to August 31, 2020, the IRS has still not released guidance
on how "prior year" contributions made to a Traditional, Roth, HSA or Coverdell ESA between the dates of April 16
- July 15 are to be reported. One suggestion is if your processing system is able to identify those late contributions
as "prior year", it can add them to the "regular" contribution boxes on the 2019 5498s. Check with
your processor for verification. Also, it has been further clarified that 2020 RMDs that were taken and then returned
to the same IRA by August 31, 2020 would be considered a "normal" distribution out of an owner's IRA and a "death"
distribution out of an Inherited IRA on the 2020 1099-R. The contribution back into the IRA would be considered a "repayment"
reporting in boxes 14a and 14b rather than a "rollover" reporting in box 2 of the 2020 5498.
06/23/2020 On June 23, 2020 the IRS issued
Notice 2020-51 expanding the 2020 RMD taken by owners and beneficiaries to be "repaid" back into an IRA. The
following rules apply:
required minimum distribuitons (RMD) have been waived for IRA owners and beneficiaries for 2020.
- Any IRA owner who took an RMD in 2020 may repay that RMD amount back into by August 31, 2020
- Any IRA beneficiary - including nonspouses - who took an RMD death distribution
may repay that back into his/her Inherited IRA by August 31, 2020
- In order for only the RMD amount to be repaid back in, the 60 day and the once-per-12-month rule does not apply.
- For any amount above the RMD amount, the 60 day and once-per-12-month rule does
- For RMDs taken in monthly amounts in 2020, the RMD
may be totaled and repaid into the IRA at one time for owners and beneficiaries.
- The coding for this would be a "repayment" reporting in boxes 14a -14b of the 2020 5498.
05/28/2020 - On May 28,
2020 the IRS issued Notice 2020-35 which further extended the 2019 5498 series
filing to the IRS and the customer from July 15 to August 31, 2020. We still do not have guidance at this point if the
reason for the extension is to include contributions made between April 16 and July 15 for the previous year on the 2019 5498
form as "regular contributions" or on the 2020 5498 form as "postponed contributions". We will keep
04/17/2020 (revised) - On Thursday, April 9, the IRS released IRS
Notice 2020-23 extending the deadline for some time-sensitive issues including rollovers to IRAs.
Buried deep in the IRS Notice 2020-23 and crossing over
with old Revenue procedures, this extension also applies to IRS filings due after April 1, 2020 - including the 2019 5498.
2019 5498 forms which are usually required to be filed with the IRS and mailed to IRA accountholders who had activity in 2020
for 2019 by May 31, which was postponed until July 15, 2020 - now extended to August 31, 2020.
- While the extension to file
the form has been extended, there is no mention of whether the regular IRA contributions made for 2019 after April 15th will
be reported on the 2019 5498 form as regular contributions or on the 2020 5498 in boxes 13a-13c as "postponed contributions".
- Because this
has not been clarified, it is recommended you keep these separate from your "prior year" contributions made on or
before April 15 by coding them as "postponed contributions" with a code "FD" - Federal Disaster. If guidance
is issued to also report contributions made after April 15th for the prior year on the 2019 5498, all you will have to do
is go back and change the coding from "postponed contribution" to "prior year" contribution.
- Any Distribution taken from an IRA between February 1-May 15, 2020 - including
2020 RMDs - may be rolled back into an IRA by July 15, 2020 as long as the other qualifications were met. CHANGED
- SEE 6/23/2020 UPDATE
- Any IRA Distribution
taken in January 2020 is not allowed to be rolled back into an IRA at this time - although that may change in the future.
CHANGED - SEE 6/23/2020 UPDATE
- The rollover can only occur if there has not been a rollover from an IRA in the last 12 months - beginning
the date of receipt of the funds for the last rollover. CHANGED - SEE 6/23/2020 UPDATE
- Since non-spouse beneficiaries are not allowed to do indirect rollovers, once they receive a "death distribution", this rollover exception
does not apply to any nonspouse beneficiary who has taken a death distribution in 2020. CHANGED
- SEE 6/23/2020 UPDATE
minimum distributions are optional in 2020 for IRA owners and Inherited IRA beneficiaries.
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.
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
- Funds 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
- 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 specific to the COVID-19.
- 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.
minimum distributions have been suspended for IRA owners and beneficiaries for the calendar year of 2020.
- If an individual turned 70.5 in 2019 and postponed their RMD until 2020, that RMD does not
have to be taken.
- An IRA owner who already took their RMD in 2020 before
the CARES Act was signed into law but after January 31, 2020, is allowed to "rollover" of that amount back into
his/her IRA by July 15, 2020 as long as another IRA rollover had not occurred in the last 12 months.
3/20/2020 IRA Updates - The IRS has extended the 2019
tax-filing deadline and tax-payment deadline for most taxpayers until July 15, 2020. The Traditional, Roth, Coverdell
ESA and Health Savings Account 2019 regular contribution is also extended to July 15, 2020. If made after April 15,
2020, they will more than likely be reported as "postponed contributions" on line 13a-13c of the 2020 5498.
Please check in for updates.
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:
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.
- Required 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.
- New Life Expectancy Tables will be released in 2021 increasing life expectancies about
1 to 1-1/2 years. All IRA owners and beneficiaries in payout will switch to the new tables for 2021 RMDs resulting
in lower RMD amounts.
- The annual Required Minimum Distributions
Notices which must go to IRA owners in RMD in January each year will have a change in who receives them because of the new
72 RMD year. IRA owners who turned 70.5 before 1/1/2020 and IRA owners who are 72 and older in 2020 and beyond
must still receive the RMD notice in January 2020. For those who turned 70.5 after 1/1/2020 and are not yet 72 in 2020
do not receive the RMD notice this year.
For more detailed information
on these changes it is extremely necessary to attend an IRA Webinar and/or live training class in 2020.
We presented an IRA SECURE Act
and CARES Act Webinar on April 2, 2020. To purchase the recording, contact TTS Bank Webinars through the following link:
I have revised my 2019-2020
IRA Training Manual (aka the "Red Book"). It is available for a discounted price of $100 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 2020 schedule of live IRA Training Seminars and Webinars.
2020 IRA Cost of Living Adjustments have
been released on 11/3/19
Contribution Deadline for 2019 Contributions:
Wednesday, April 15, 2020 - NOW EXTENDED TO JULY 15, 2020
- Regular Contributions for 2019 to Traditional, Roth, Coverdell ESA and Heath Savings Accounts
Thursday, October 15, 2020 -
Regular Employer Contributions for 2019 to a SEP or SIMPLE IRA, as well as previous year recharacterization and removal
of excess contribution for prior year deadline.
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"
The 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
IRA 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".
2019/2020 Cost of Living Adjustments
Traditional and Roth IRAs
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 2019/2020:
SINGLE TAXPAYERS AS ACTIVE PARTICIPANT
TRADITIONAL IRA DEDUCTION ELIGIBILTY AND MAGI IS:
Full Deduction Partial Deduction
<$64,000 $64,000 - $74,000 >$74,000
2020 <$65,000 $65,000 - $75,000 >$75,000
MARRIED TAXPAYERS AND
BOTH ARE ACTIVE PARTICIPANTS OF QP
OR, THE COVERED SPOUSE'S ELIGIBILITY IF ONLY ONE SPOUSE IS COVERED
TRADITIONAL IRA DEDUCTION ELIGIBILTY AND JOINT MAGI
Tax Years Full
Deduction Partial Deduction
2019 <$103,000 $103,000
- $123,000 >$123,000
2020 <$104,000 $104,000 - $124,000
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
2019 <$193,000 $193,000 - $203,000 >$203,000
$196,000 - $206,000 >$206,000
Simplified Employee Pension Plan (SEP)
Annual Regular Contribution Limits
0-25% of up to $280K
0-25% of up to $285K
Savings Incentive Match Plan for Employees/Employers (SIMPLE IRA)Annual Regular Contribution Limits
Salary Deferral Contribution Limit
Under Age 50
Annual Salary Deferral Contribution Limit
Age 50 And Over
ROTH IRA CONTRIBUTION ELIGIBILITY
MODIFIED ADJUSTED INCOME PHASEOUT
Tax Years Full Contribution Partial Contribution
$122,000 - $137,000 >$137,000
- $139,000 >$139,000
MARRIED TAXPAYERS FILING JOINTLY
Full Contribution Partial Contribution
$193,000 - $203,000 >$199,000
$196,000 - $206,000 >$206,000
HEALTH SAVINGS ACCOUNT
Limit Under Age 55
Under Age 55
Age 55 And Over
Deductible Health Plan (HDHP) Definition is as follows:
Single HDHP minimum deductible
$1,350 (2019) $1,400 (2020)
Family HDHP minimum deductible $2,700 (2019)
Out-of-Pocket Expense Limits:
Single HDHP $ 6,750 (2019), $ 6,900 (2020)
Family HDHP $13,500 (2019), $13,800 (2020)
drugs are only a qualified expense with a doctor's prescription.
* Penalty for non-qualified medical expense withdrawals increases to 20%.