In response to the pandemic that has affected us all, several temporary changes were made to the rules that govern our tax obligations. Many of these temporary changes are due to expire in 2021, so you may need to adjust your plans in the upcoming year. Here are some changes to be aware of.
- Required minimum distributions. If you are age 72 or older, you must once again plan to take the minimum required distribution from your retirement account in 2021. The one-year waiver of this required distribution is now over.
- Penalty-free distributions from retirement accounts. While penalty-free distributions from retirement accounts is still available for those in presidentially declared disaster areas, the distribution benefit for pandemic related reasons is expiring. Remember, if you had to make withdrawals you will need to pay income tax on the distributions unless you repay the funds in a timely manner.
- Unemployment taxation. Federal unemployment benefits continue to be extended through various federal spending programs. Late breaking rules make $10,200 of last year’s unemployment benefits tax-free on most federal tax returns. But that doesn’t mean you won’t be taxed on these benefits this year. If there are not withholdings from these payments, you may be required to send in estimated tax payments.
- New opportunities for businesses. While the original PPP loan program is now in forgiveness mode, there are new loans and active programs to help cover the cost of employees affected by the pandemic. The best course of action is to stay aware of ever-changing federal and state landscape.
Rules and benefit programs relating to the pandemic are not over, but they are changing. Our office can help you stay abreast of the changes that affect you, so that you aren’t caught unaware.
This article carries no official authority, and its contents should not be acted upon without professional advice. For more information about this topic, please contact our office.