The Indian Panorama

Tag: Internal Revenue Service

  • IRS announces administrative transition period for new Roth catch‑up requirement; catch-up contributions still permitted after 2023

    IRS announces administrative transition period for new Roth catch‑up requirement; catch-up contributions still permitted after 2023

    WASHINGTON , D.C. (TIP): Today, the Internal Revenue Service announced an administrative transition period that extends until 2026 the new requirement that any catch-up contributions made by higher‑income participants in 401(k) and similar retirement plans must be designated as after-tax Roth contributions.

    At the same time, the IRS also clarified that plan participants who are age 50 and over can continue to make catch‑up contributions after 2023, regardless of income.

    Today’s announcements were included in Notice 2023-62, now posted on IRS.gov. This notice provides initial guidance for section 603 of the SECURE 2.0 Act, enacted in December 2022. Under that provision, starting in 2024, the new Roth catch-up contribution rule applies to an employee who participates in a 401(k), 403(b) or governmental 457(b) plan and whose prior-year Social Security wages exceeded $145,000.

    The administrative transition period will help taxpayers transition smoothly to the new Roth catch-up requirement and is designed to facilitate an orderly transition for compliance with that requirement. The notice also clarifies that the SECURE 2.0 Act does not prohibit plans from permitting catch-up contributions, so plan participants who are age 50 and over can still make catch-up contributions after 2023.

    The Treasury Department and the IRS plan to issue future guidance to help taxpayers, and the notice describes several positions that are expected to be included. In addition, the notice invites public comment on the matters discussed in the notice and suggestions for the future. The notice provides details on how to submit comments.

  • IRS, Treasury disburse more Economic Impact Payments under the American Rescue Plan; total tops 130 million with more to come

    IRS, Treasury disburse more Economic Impact Payments under the American Rescue Plan; total tops 130 million with more to come

    WASHINGTON (TIP): The Internal Revenue Service, the U.S. Department of the Treasury and the Bureau of the Fiscal Service announced, April 1, they are disbursing several million more payments in the third batch of Economic Impact Payments from the American Rescue Plan. This brings the total disbursed so far to more than 130 million payments worth approximately $335 billion.

    As announced on March 12, Economic Impact Payments continue to roll out in batches to millions of Americans. The third batch of payments began processing on Friday, March 26, with an official payment date of March 31, with some people receiving direct payments in their accounts earlier as provisional or pending deposits. Here is additional information on this batch of payments:

    This batch includes the first of ongoing supplemental payments for people who earlier in March received payments based on their 2019 tax returns but are eligible for a new or larger payment based on their recently processed 2020 tax returns. These “plus-up” payments could include a situation where a person’s income dropped in 2020 compared to 2019, or a person had a new child or dependent on their 2020 tax return, and other situations. The payments announced today also include payments for people for whom the IRS previously did not have information to issue a payment but who recently filed a tax return and qualify for an Economic Impact Payment.  Payments to this group — and the “plus-up” payments noted above — will continue on a weekly basis going forward, as the IRS continues processing tax returns from 2020 and 2019.

    In total, this third batch includes more than 4 million payments, with a total value of more than $10 billion.

    This batch of payments contains more than 2 million direct deposit payments (with a total value of more than $5 billion) and approximately 2 million paper check payments (with a total value of nearly $5 billion).

    For the first two batches of payments (which began processing on March 12 and March 19), payments were primarily sent to eligible taxpayers who filed 2019 or 2020 returns. People who don’t typically file a return but who successfully used the Non-Filers tool on IRS.gov last year were also sent payments in these first two batches, either as a direct deposit or by paper check or an EIP Card, a prepaid debit card.

    Starting Friday, a large set of payments will begin going to Social Security and other federal beneficiaries who didn’t file a 2020 or 2019 tax return and didn’t use the Non-Filers tool last year. These payments will go to Social Security retirement, survivor or disability (SSDI), Supplemental Security Income (SSI), and Railroad Retirement Board (RRB) beneficiaries. As announced previously, these payments will begin to be issued this weekend, with the projection that the majority of these payments will be sent electronically and received on April 7.

    No action is needed by most people to obtain this round of Economic Impact Payments. People can check the Get My Payment tool on IRS.gov on to see if their payment has been scheduled. The IRS notes that the Get My Payment tool on IRS.gov will not be updated until the weekend of April 3-4 with information for Social Security and other federal beneficiaries expecting payments next week.

    The IRS continues to review data received for Veterans Affairs (VA) benefit recipients and expects to determine a payment date and provide more details soon. Currently, the IRS estimates that Economic Impact Payments for VA beneficiaries who do not regularly file tax returns could be disbursed by mid-April. VA beneficiary payment information will be available in the Get My Payment tool at a future date.

    Special reminder for those who don’t normally file a tax return

    Some federal benefits recipients may need to file a 2020 tax return, even if they don’t usually file, to provide information the IRS needs to send payments for any qualified dependent. Eligible individuals in this group should file a 2020 tax return to be considered for an additional payment for their qualified dependent as quickly as possible. People who don’t normally file a tax return and don’t receive federal benefits may qualify for these Economic Impact Payments. This includes those experiencing homelessness, the rural poor, and others. For those eligible individuals who didn’t get a first or second Economic Impact Payment or got less than the full amounts, they may be eligible for the 2020 Recovery Rebate Credit, but they’ll need to file a 2020 tax return. See the special section on IRS.gov: Claiming the 2020 Recovery Rebate Credit if you aren’t required to file a tax return.

    Free tax return preparation is available for qualifying people.

    The IRS reminds taxpayers that the income levels in this new round of Economic Impact Payments have changed. This means that some people won’t be eligible for the third payment even if they received a first or second Economic Impact Payment or claimed a 2020 Recovery Rebate Credit. Payments will begin to be reduced for individuals making $75,000 or above in Adjusted Gross Income ($150,000 for married filing jointly). The payments end at $80,000 for individuals ($160,000 for married filing jointly); people with Adjusted Gross Incomes above these levels are ineligible for a payment.

    Individuals can check the Get My Payment tool on IRS.gov to see the payment status of these payments. Additional information on Economic Impact Payments is available on IRS.gov.

  • IRS Pushes Tax Deadline Back by One Month

    IRS Pushes Tax Deadline Back by One Month

    Filers will have until May 17, the agency said Wednesday, March 17.

    WASHINGTON (TIP): The Internal Revenue Service will give Americans extra time to file their taxes as a result of the pandemic. Instead of the usual April 15 deadline, filers will instead have until May 17, the agency said Wednesday, an extension that will ease the burden on filers dealing with the economic upheaval caused by the coronavirus, which has put millions out of work or caused their hours to be cut.

    “This continues to be a tough time for many people, and the IRS wants to continue to do everything possible to help taxpayers navigate the unusual circumstances related to the pandemic,” said Chuck Rettig, the IRS commissioner.

    The one-month delay is not as much extra time as the IRS offered last year, when the filing deadline was pushed to July 15. But it should make it easier for taxpayers to get a handle on their finances — as well as tax changes that took effect just this month with the signing of the American Rescue Plan.

    The new law made the first $10,200 of unemployment benefits received in 2020 tax-free for people with incomes of less than $150,000, a significant change for many whose jobs were affected by the pandemic. The IRS said last week that it would provide a worksheet for paper filers and coordinate with tax-software companies. The agency also asked those who were eligible for the tax break but had already filed their 2020 returns not to file an amended return until it had issued additional guidance.

    But Mr. Rettig said taxpayers should not unnecessarily delay filing, especially if they will be receiving money back.

    “Filing electronically with direct deposit is the quickest way to get refunds,” he said. (Taxpayers who file electronically can generally expect to receive any refund within 21 days.)

    The IRS emphasized that the extra time is only for federal returns, not state returns, so taxpayers should check with their state tax agencies about any deadline changes. It also does not apply to estimated tax payments that are due on April 15, which are still due on that day.

    Filing quickly also can benefit people whose 2020 income makes them newly eligible for a stimulus payment, or eligible for a larger one. (The latest stimulus bill includes a provision for the Treasury Department to make supplemental payments by September; if you don’t get one by then, you should be able to claim what you’re owed when you file your 2021 taxes.)

    (Source: NY Times)