Cares Act – Part 3

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Before we start the discussion of the 3rd segment as it relates to charitable contributions under the
CARES Act, I want to discuss the extension of the April 15th deadline.

Personal Income Tax Extensions related to COVIDÔÇÉ19
As you have probably heard, the IRS has automatically extended the Personal Income tax filing
deadline by 90 days to July 15, 2020. This is for the filing of tax returns and the payment of income
taxes due for 2019. If you did not pay enough income tax during 2019, either through withholding or
through estimated tax payments, there will not be a late payment penalty if the 2019 balance on the
tax return is paid by July 15th
This automatic extension also means you have until July 15, 2020 to make eligible contributions to
your IRA for 2019, and
your HSA for 2019.

The IRS has also granted an extension to pay your 1st quarter estimated tax until July 15, 2020. You
are probably thinking that the 2nd quarter estimated tax payment due date, which is June 15, has
also been extended. At this point the IRS has not granted an extension for 2nd quarter payments. This
is indeed an unusual situation where 2nd quarter payments are due before the 1st quarter!

Maryland has also extended the filing and payment of 2019 tax returns and tax due, and payment of
the 2020 1st quarter estimated tax, until July 15, 2020. In fact, most states have extended the
deadline. Presently, the only state that has not extended or modified the deadline is New Jersey.

Update on Charitable Contributions
Under the Cares Act, which was signed into law recently, for tax year 2020 eligible taxpayers get an
additional tax deduction of up to $300 for qualified charitable contributions made by them. Eligible
taxpayers are those who do not itemize, and a qualified charitable contribution is a charitable
contribution made to certain public charities in cash. This is an “above the line” tax deduction, which
means that it is in addition to the standard deduction. The dollar amount of the deduction doesn’t
seem to be much but it is a step in the right direction, especially at the present time. Also, the
deduction will reduce the taxpayer’s adjusted gross income which may qualify them for additional
tax breaks.

For those who elect to itemize their deductions for 2020, the CARES Act reduces the limitation on
deductible charitable contributions, which is presently at 60% of the taxpayer’s adjusted gross
income (AGI) to 100% of their AGI. As with the $300 above the line deductions, this increased limit
only applies to cash contributions and contributions made to certain public charities. Any excess
charitable contributions will be carried forward and deducted in future years.

You should consider taking advantage of the extended time if a balance is owed on either your
federal or state return. In addition, you should also consider taking advantage of the 2019 extended
deadline if filing the 2019 return would preclude you from receiving the stimulus rebate. We
discussed the rebate to individuals and families in the first segment.

Please call our office if you want to discuss the 2019 extended deadline.

Best regards,
Kevin Q. Williams