<img src="//bat.bing.com/action/0?ti=5104607&amp;Ver=2" height="0" width="0" style="display:none; visibility: hidden;">

Professionals

financial-professionals-menu-image

Stand out from the competition by offering your audience a way to diversify their portfolios.

Learning Center

Learning-Center-menu-image-1

Access the largest knowledge base for Self-Directed IRAs. Expand your investor knowledge with articles, whitepapers, practical guides and tons of other educational resources.

About Entrust

teg-symbol-about-entrust-menu-image

For almost 40 years, The Entrust Group has provided account administration services for self-directed retirement and tax-advantaged plans. Entrust can assist you in purchasing alternative investments with your retirement funds, and administer the buying and selling of assets that are typically unavailable through banks and brokerage firms.

What a Relief: New 2020 Tax Deadline and the Unemployment Compensation Exclusion

What a Relief: New 2020 Tax Deadline and the Unemployment Compensation Exclusion

Estimated reading time: 2.5 minutes

 

Filing Deadline Extension for Tax Year 2020

 

The IRS issued an announcement March 17 of 2021 that the deadline to file 2020 taxes has been extended from April 15 to May 17, 2021 due to the hardships caused by the COVID-19 pandemic. There’s no need to file IRS Form 4868 to apply for this extension; the extension is automatic and available to all taxpayers.

 

Unlike other extensions that apply to the filing deadline but don't include the deadline to pay taxes, this extension applies to both. Interest on due tax payments will begin accruing May 18. Those in need of extra time to file their return beyond the new due date, may file IRS Form 4868 to receive an extension. The new extension deadline is October 15, 2021, six months after April 15.

 

The new filing deadline also extends the deadline for making contributions to retirement plans and other tax favored accounts. This includes individual contributions to Traditional IRAs, Roth IRAs, Health Savings Accounts (HSAs), and Coverdell Education Savings Accounts (ESAs). The extension is also available to those who are self-employed (schedule C filers).

C Corporations, which have a filing deadline of April 15, were not addressed by the IRS announcement, as this relief was intended specifically for individual filers. It also did not address partnerships and S Corporation tax filing deadlines as those were due March 15.

The extension applies to federal tax returns exclusively; it does not apply to state tax returns. Guidance for each state will be determined at the state level. Use this link to get more information regarding taxes in your state.

The IRS will be issuing additional formal guidance on this matter if you have questions about the deadline.

Unemployment Benefits Tax Break

 

The American Rescue Plan enacted on March 11, 2021 grants a tax break to individuals who received unemployment benefits. Individuals can exclude up to $10,200 of their unemployment benefits from their income. This tax break is available only to individuals and married couples with a Modified Adjusted Gross Income (MAGI) of less than $150,000.

 

For example, if the gross income of an individual is $160,000 for the year, but they contributed to a 401(k) plan and/or a cafeteria plan at work, their reduced income as a result of those two programs might fall below the $150,000 threshold and allow them to qualify. This worksheet from the IRS website can help you figure out if you qualify.

 

To recalculate your taxable income based on the Unemployment Compensation Exclusion (UCE), use the schedule 1 attachment of IRS Form 1040. Based on the revised instructions, all unemployment income received in 2020 should be included on line 7 of schedule 1. If you qualify for the UCE tax benefit, write in UCE on line 8 and enter the amount of the exemption. Calculate the total of lines 1 through 9 on part 1 of the schedule 1. Once the new amount is determined, enter it on line 8 of the IRS Form 1040.

 

If you have more questions regarding this tax benefit, consult with your tax advisor.

Self-Directed IRAs:
The Basics Guide

Learn about your investment options, Self-Directed IRA rules, and much more!

Download Now

Like what you read?

Subscribe to our newsletter to get in-depth articles, right in your inbox every month

0 Comment

Be the first to comment!