Quarterly Newsletter

PPP

On October 8th, 2020, the SBA released a new forgiveness application for PPP loans. The new application is available to businesses who received a loan of $50,000 or less and eliminates reductions in forgiveness based on wage or employee reductions. There are now three different forms for PPP forgiveness:

1.       SBA Form 3508S (for loans of $50,000 or less)

2.       Form 3508EZ (for loans over $50,000 with no reduction in wages or employees)

3.       SBA Form 3508 (for loans over $50,000 with reductions in wages or employees)

Please do not hesitate to contact us if you need assistance completing your PPP Applications for Forgiveness. We also offer tax planning services to determine how the PPP Loan will impact your 2020 taxes.

2020/2021 Planning

RMD Waiver:

The CARES Act waived the Required Minimum Distribution (RMD) for 2020. Your 2020 RMD was based on your retirement account value on 12/31/2019. Since your retirement account value may have drastically dropped since then, you can avoid paying taxes on a value that may no longer exists. You could also convert the RMD amount of your Traditional IRA into a Roth IRA instead.

Roth Conversions:

Previously, taxpayers who wished to convert their traditional IRA to a Roth IRA had to first take their RMD for the year, and this RMD could not be converted back into a Roth IRA. Additionally, since both RMD’s and IRA Conversions are added to gross income and taxed as ordinary income, this could be a large increase in taxes owed. However, for 2020 you can convert your RMD into a Roth IRA (thanks to the RMD waiver) and the taxes owed can be distributed over three years.

Why would you make this conversion? Roth IRA’s are pre-tax. If you expect to be in a higher tax bracket during retirement, you can convert some of your Traditional IRA into a Roth IRA now while you’re in a lower tax bracket and ultimately pay less in taxes. Lowering your Traditional IRA would also reduce future RMDs and possibly put you in a lower tax bracket, and there are no RMDs on a Roth IRA.

IRA Distributions:

The early withdrawal penalty of 10% has been waived for taxpayers under 59 ½ years of age for IRA distributions up to 100k. You also have the option to spread the taxes owed on retirement distributions over three years (2020, 2021, 2022).