The IRS has established a special section focused on steps to help taxpayers, businesses and others affected by the coronavirus. This page will be updated as new information is available. https://www.irs.gov/coronavirus
As of this writing, the IRS has extended several IRS deadlines due to the coronavirus. The April 15th, 2020 filing deadline for 2019 tax returns is still in effect. However, payment deadlines are extended to July 15, 2020 for up to $1,000,000 due. The deadline is also extended for first quarter 2020 estimated payments. Type C Corporations also may pay their tax liabilities by July 15, 2020, up to $10,000,000 worth of tax due. The IRS also included a reminder that you may request a filing extension, and that the best solution is to file as soon as possible so you can receive your refund if you are entitled to one.
Keep in mind this does not extend non-income tax deadlines nor affect state income taxes.
In addition to the IRS’ coronavirus response, there are several other government links worth keeping in mind.
For health information about the COVID-19 virus, visit the Centers for Disease Control and Prevention (CDC) https://www.coronavirus.gov
The Department of Treasury also has information available at Coronavirus: Resources, Updates, and What You Should Knowhttps://home.treasury.gov/coronavirus
Trump’s 2021 fiscal year include major Medicaid and Medicare budget cuts which will have a big impact on those programs if successfully implemented.
President Trump’s proposed fiscal year 2021 budget will include substantial Medicaid and Medicare budget cuts. The HHS budget notes that taxpayers could save $756 billion in Medicare through 2030 by reducing fraud and waste and relying on lower payments to hospitals through “site-neutral” payment policies. For Medicaid, the Health and Human Services Department’s annual budget proposal presumes that expanded work requirements, tighter beneficiary eligibility screening and capped or “block grant” state funding will all be in effect. These types of Medicaid and Medicare budget cuts will have a big impact, if successfully implemented.
These approaches show how the White House will change entitlement programs in an election year, if Trump’s budget is approved. His administration would like to see able-bodied adults who enroll in Medicaid to have a work requirement imposed. If this requirement was implemented, it would probably decrease the population of recipients and more of those receiving benefits would be physically unable to work.
“As part of the President’s Health Reform Vision, Medicaid spending will grow at a more sustainable rate by ending the financial bias that currently favors able-bodied working adults over the truly vulnerable,” the HHS budget document said.
The Centers for Medicare & Medicaid Services (CMS) has okayed 11 state work requirement programs and is in the process of looking at nine others. These state work mandates are being challenged in court, but the administration still contends they’ll save Medicaid $8 billion in 2021 alone.
CMS would like to implement Medicare’s “site-neutral” payment policy. This would pay the same lower rate for services whether provided at a doctor’s office or in a hospital outpatient setting. It’s a priority to see it go into effect. However, a federal court scrapped the policy last year, saying it was a programmatic overreach. Nonetheless, the Trump administration again implemented it this year and is facing more lawsuits from the hospital industry. The Trump White House says the site-neutral Medicare payments would save more than $164 billion over 10 years.
The administration also wants to cut Medicare payments for doctors’ residency training programs and hospitals’ uncompensated care. Those moves would save about $52 billion and $88 billion, respectively, over 10 years, the budget document explains.
The administration also estimates that overhauling Medicare payments for care after a patient leaves the hospital would save more than $101 billion over the next 10 years.
We’ll continue to watch these developments as they will have a big impact on Medicare and Medicaid programs.
Most people ignore the estate tax due to its high exemptions, but as some candidates may lower the exemption, it is good to familiarize yourself with it.
In the U.S., we treat the estate tax and gift tax as a single tax system with unified limits and tax rates—but it is not very well understood by many people. Plus, the estate tax exemption is currently as high as it’s ever been, so many people ignore it assuming it doesn’t and never will apply to them.
However, the estate and gift tax has always been a political football, so it is a good idea to familiarize yourself with it in an election year. The Motley Fool’s recent article entitled “What Is the Estate Tax in the United States?” gives us an overview of the U.S. estate and gift tax, including what assets are included, tax rates and exemptions in 2020. As an overriding point, this blog covers federal estate and gift tax. Some states have their own estate, gift and/or inheritance tax (tax on all transfers to beneficiaries at a lower rate) which may work differently then the federal tax.
The U.S. estate tax only impacts the wealthiest households. Let’s look at why that’s the case. Americans can exempt a certain amount of assets from their taxable estate—the lifetime exemption. This amount is modified every year to keep pace with inflation and according to policy modifications. This year, the lifetime exemption is $11.58 million per person. Therefore, if you’re married, you and your spouse can collectively exclude twice this amount from taxation ($23.16 million). To say it another way, if you’re single and die in 2020 with assets worth a total of $13 million, just $1.42 million of your estate would be taxable.
However, most Americans don’t have more than $11.58 million worth of assets when they pass away. This is why the tax only impacts the wealthiest households in the country. It is estimated that less than 0.1% of all estates are taxable. Therefore, 99.9% of us don’t owe any federal estate taxes whatsoever at death. You should also be aware that the lifetime exemption includes taxable gifts as well. If you give $1 million to your children, for example, that counts toward your lifetime exemption. As a result, the amount of assets that could be excluded from estate taxes would be then decreased by this amount at your death.
You don’t have to pay any estate or gift tax until after your death, or until you’ve used up your entire lifetime exemption. However, if you give any major gifts throughout the year, you might have to file a gift tax return with the IRS to monitor your giving. There’s also an annual gift exclusion that lets you give up to $15,000 in gifts each year without touching your lifetime exemption. There are two key points to remember:
The exclusion amount is per recipient. Therefore, you can give $15,000 to as many people as you want every year, and they don’t even need to be a relative; and
The exclusion is per donor. This means that you and your spouse (if applicable) can give $15,000 apiece to as many people as you want. If you give $30,000 to your child to help her buy their first home and you’re married, you can consider half of the gift from each spouse.
The annual gift exclusion might be an effective way for you to reduce or even eliminate estate tax liability. The tax rate is effectively 40% on all taxable estate assets.
It is also worth noting that a lot of clients want to give away assets during their life time through annual gift exclusions because they are worried about the estate tax. However, with such a high exemption, it is often better to keep assets in your estate. This is because generally appreciable assets in your estate receive a “step-up” in basis at your death. This point is outside the scope of this blog, but see here for why keeping assets in your estate is probably a good thing. https://galligan-law.com/higher-estate-tax-exemption-means-you-could-save-income-taxes-by-updating-your-estate-plan/
Finally, the following kinds of assets aren’t considered part of your taxable estate:
Anything left to a surviving spouse, called “the unlimited marital deduction”;
Any amount of money or property you leave to a charity;
Gifts you’ve given that are less than the annual exclusion for the year in which they were given; and
Some types of trust assets.
Some candidates seeks to greatly lower the estate and gift tax exemption, which may lead to many more taxable estates. If you are concerned about this tax, or are after the election, please contact our office to discuss how the estate and gift tax impacts you.
