It’s hard to believe a little over a year ago the COVID 19 pandemic hit everyone. As things slowly turn back to normal, you need to be ready for the normalizing of the tax rules and adjusting to new ones. Here is how you can be prepared.
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.
Businesses need to stay alert. 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 as social distancing rules adjust, so too must you to the changing tax law landscape.
If you have any questions about the pandemic rule rollbacks, please contact any member of the Baker Holtz staff at (616)458-1835.