However, two IRS Notices published in June relating to distributions from qualified plans may be of interest.
A recent notice describes how qualified individuals can take coronavirus-related loans and distributions from eligible retirement plans under the Coronavirus Aid, Relief, and Economic Security Act (CARES). There are a number of requirements to qualify and we would be happy to review them with you if you are considering a loan from your IRA.
In another notice, the IRS provides relief for taxpayers who had already taken required minimum distributions (RMDs) in 2020 before the CARES Act suspended the RMD requirement for 2020 in response to the pandemic and its effect on taxpayers and the stock market. Taxpayers who already took an RMD in 2020 from certain retirement accounts now have the opportunity to roll those funds back into a retirement account. To give taxpayers time to take advantage of the rollover opportunity, the 60-day rollover period for any RMDs already taken this year has been extended to August 31, 2020.
Other COVID – 19 tax-related issues have been highlighted in a report from the Taxpayer Advocate Service released on June 30. The report praises the IRS for acting quickly to postpone over 300 filing, payment, and other time-sensitive deadlines, provide broad relief from compliance actions under its
“People First Initiative,” and disburse some 160 million Economic Impact Payments (EIPs) authorized by the CARES Act.
We highlight several significant challenges identified in the report that are worth reviewing:
• Taxpayers who filed a 2019 paper return and are entitled to a refund may be in for a long wait. The IRS had to suspend the processing of paper tax returns, and as of May 16th, it estimated it had a backlog
of 4.7 million paper returns.
• Some taxpayers whose returns were mistakenly flagged by IRS processing filters are experiencing lengthy delays in receiving their refunds. Affected taxpayers are often asked to mail in documentation
to substantiate their claims, but the IRS has not opened or processed many of their responses, delaying their refunds.
• Taxpayers who have needed help from the IRS have had difficulty obtaining it. In late March, the IRS shut down its Accounts Management telephone lines, Taxpayer Assistance Centers and mail facilities. There is a large backlog of incoming mail, including about ten million pieces of mailed tax returns or correspondence sitting in trailers at IRS campuses. The IRS has not been able to process paper returns and process or respond to other written correspondence from taxpayers and has sent only a very limited
volume of outgoing taxpayer correspondence.
• IRS systems prepared over 20 million notices during the pandemic that could not be mailed due to closure of notice production centers between April 8th and May 31st. The IRS is mailing these notices now. However, some collection notices bear old dates and include response deadlines that often have passed.
If you have any questions regarding tax notices, correspondence or delayed refunds, please contact your
portfolio manager or tax professional at Howland. It may take some time to sort through all of the tax-related challenges resulting from COVID-19. However, despite the delays, we are here as ever to answer questions and help guide you through the resolution of any tax-related issues.