Category: COVID-19 Relief

The IRS recently released Notice 2020-51. This notice provides that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has an additional amount of time to roll those funds back into a retirement account under the CARES Act RMD waiver for 2020.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans, such as pensions.

Initially, the IRS permitted a 60-day rollover period for any RMDs already taken this year. This 60-day period has been extended to August 31, 2020, to allow taxpayers additional time to take advantage of this opportunity.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

Under Notice 2020-51, the repayment of an IRA distribution by August 31, 2020 is a new method presented by the IRS for anyone to unwind the receipt of an RMD. This relief, however, only applies to IRAs and not 401(k) and 403(b) plans. Under this repayment option the IRA owner or beneficiary simply repays the amount to the distributing IRA.

Importantly, Notice 2020-51 extends the rollover date of all other 2020 RMDs to August 31, 2020.

If you have any questions or need guidance on either repaying or rolling-over a 2020 RMD, please contact us at RGV & Company.

On August 8, 2020, President Trump took executive action towards the next COVID-19 stimulus package. These executive actions address a moratorium on renter evictions, an extension of unemployment benefits, a payroll tax deferral and extended relief for student loan debt.

While Congress has indicated that it will continue ongoing negotiations regarding another stimulus package, the President signed one executive order and three executive memoranda. It should be noted that there is uncertainty regarding the application of these provisions. In addition, the President’s executive actions may be subject to legal challenge and subsequent legislation. As a result, taking action with respect to these provisions requires careful consideration and professional advice.

The executive order relates to an extension on the moratorium on renter evictions, the previous moratorium ended on July 24, 2020, under the CARES Act.

The executive memoranda are as follows:

• Extension of federal unemployment – the new benefit will be $400 with 25% of it to be paid by the states while the federal government will pay $300.
• Payroll tax deferral – the employee portion of payroll taxes will be deferred for taxpayers earning less than $100,000 annually. This deferral would apply for the period of September 1 – December 31, 2020. The President has asked the Secretary of the Treasury to seek to make the deferral permanent. Section 2302 of the CARES Act already allows employers and self-employed to defer their portion of the Social Security tax through the end of 2020.
• Student loans – the interest on student loans would continue to accrue at 0% interest until December 31, 2020.

It appears that Congress will continue negotiations on the next stimulus package, which is expected to contain the following items:

• IRS stimulus payments
• Extension of the Paycheck Protection Program until December 31, 2020
• Employer tax credits for job retention

The IRS and Treasury Department issued Notice 2020-65 providing guidance on the employee payroll tax deferral contained in President Trump’s August 8 memorandum. Under this memo, the Secretary of the Treasury was directed to postpone the collection of the employee portion of the 6.2% Social Security tax for the period of September 1, 2020, through December 31, 2020.

According to Notice 2020-65, employees that earn less than $4,000 during a bi-weekly pay period (or the equivalent threshold amount with respect to other pay periods) are eligible for this deferral. It should be noted that this is a deferral of the tax, not a payroll tax cut. The deferred tax must be repaid by April 30, 2021. That means the deferred (uncollected) tax must be withheld from the employees’ wages ratably during January to April 30, 2021.

There are several items to consider regarding the impact of Notice 2020-65. While the list below is not exhaustive, it does illustrate that careful consideration is required.

• Notice 2020-65 provides that implementation by an employer is optional and is not required. The notice is silent regarding employee choice.
• If an employer implements the deferral, the employer and the employee will have to agree upon a repayment method if the employee is no longer employed during the tax repayment period of January 1, 2021, through April 30, 2021.
• Notice 2020-65 provides for a four-month deferral – not forgiveness – so the benefit to the employee, absent further legislation, is the time value of money. This is a critical aspect that must be communicated to and understood by eligible employees.
• For employers that implement the deferral, employees need to be aware of the additional payroll tax deductions that will start in January 2021 and run through April 30, 2021.
• From a practical standpoint, payroll systems will need to be adjusted to accommodate the deferral and subsequent collection of the tax.
• It is anticipated that Form 941 will need to be revised for the third and fourth quarters of 2020 as well as the first and second quarters of 2021 to properly report the deferral and repayment.
• Employers will be subject to penalties and interest if the deferred taxes are not paid by April 30, 2021.

If you have any questions regarding IRS Notice 2020-65, please contact Larry Rice, Joao Gomes, or Paul Buchman at RVG & Company.