With an annual April 15 deadline for tax returns right around the corner, these coming weeks would typically be crunch time for CPAs and Accountants across the nation. Delays and social distancing caused by the corona-virus have prompted extensions and relief at both the federal and state levels.
Federal Return Due Date: July 15, 2020
Under IRS Notice 2020-18, federal income tax returns and payments, are now due on July 15, 2020 regardless of the amount owed. This 3 month extension gives individuals, trusts, estates and corporations a little more time to pull together their paperwork and have a prepare returned.
State Return Due Date: July 15, 2020 for Individuals, April 15, 2020 for Estimated Payments
Minnesota has followed the Federal guidance in extending the due date for Individual returns and payments to July 15, 2020 but is still requiring estimated tax payments for Minnesota income tax due April 15 for the 2020 tax year.
Nothing rings in a new year like changes to tax law. This year’s changes will have significant impacts on many individuals’ and families’ estate plans. Changes to the taxation of retirement accounts, and gift and estate tax exemptions may mean your wills, trusts and beneficiary designations need an update.
Effective January 1, 2020, the Secure Act eliminated the use of the “Stretch IRA”. Many have used the “Stretch IRA” as a part of their estate plans to provide for their descendants while avoiding income taxation. Under the Secure Act, the rollover has disappeared. Now, instead of allowing a descendant to inherit a retirement account and stretch the distributions over their lifetimes, the retirement account must be distributed with 10 years or risk significant loss due to taxation at the compressed trust tax rates. If your estate plan utilizes the Stretch IRA, you must decide whether it is more important to protect the asset for the benefit of your loved one, or save on income taxes.
Other updates to note, effective January 1, 2020:
Increased federal estate/gift tax lifetime exemption: $11.58 million per individual ($23.16 million married) up from $11.4 million
Increased Minnesota state estate tax exemption amount: $3 million up from $2.7 million in 2019.
The annual gift tax exclusion has remained steady at $15,000 per individual ($30,000 married).
With these changes in mind, be sure take a moment to review your assets and consider your estate and financial planning needs. For those of you who already have a will or trust in place, please take a moment to review your documents and assets (on your own, or with an attorney at MZ Law) to determine how this years tax changes may impact your estate. For those of you who have “Make a Will” on your list of 2020’s New Year’s Resolutions, schedule a free estate plan consultation and we’ll share how to best plan your estate with the new laws in mind.