Covid-19 is affecting many people financially. Here is some good news. If you take money out of your retirement account and you are pre 59 ½, you don’t have to pay the 10% penalty on up to $100,000 of coronavirus-related distributions in 2020. Also, you can elect to pay the federal income tax on these distributions over a three-year period beginning with the year of distribution.
The IRS has expanded the definition of a coronavirus distribution. The definition covers owners or their spouse if they have been furloughed or laid off. If work hours were cut or you were paid less or you had child care issues these will qualify also if COVID-19 related. Distributions to people who own or operate a business that closed or had reduced hours qualify as well.
Economic stimulus payments made to residents of nursing homes do not belong to the nursing home. These payments are for the residents even if the payment is directly or indirectly received by the nursing home. Residents whose care is paid by Medicaid are not required to give the stimulus payment to the nursing home either. The stimulus payment cannot be counted as a resource for 12 months to determine eligibility for Medicaid after the funds are received.
The IRS is starting up high-wealth individual’s comprehensive audits again. A specialized group has been tasked to examine the super-rich 1040 returns as well as any entities they control in these audits.
All of the IRS offices plan to be open by July 13th but the IRS’s mandatory telework policy remains in effect for employees that can work remotely.
If you filed a paper return in March or later and are due a refund, there will be significant delays in processing these returns. There is good news though the IRS will pay interest on the delayed refund from April 15th through the refund date. If the IRS owes you the interest, you may receive it in a separate payment from your refund payment.
Remember, none of the stimulus checks you receive are considered income.