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New IRS Details on July Tax Filing Deadline

By: P. Lewis Robinson, CPA

As you might have already heard, due to the coronavirus pandemic, this year’s tax filing and payment deadlines for form 1040 has been extended to July 15 for many taxpayers. We also wanted to update you on a couple new details from the IRS about July tax deadline.

  1. You do not have to use a special form in order to be able to file using the July 15 deadline. If you file a return or an automatic extension request and pay your tax due by July 15, no interest or penalties will be due.
  2. Individuals can ask for an automatic extension of time to file (but not pay) by filing Form 4868 by July 15. The deadline to file these returns remains October 15, 2020 – as it would have been without the three-month filing and payment delay.
  3. The deadline to contribute to an Individual Retirement Account (IRA), Roth IRA, Health Savings Account, or Archer MSA is also extended to July 15.
  4. What DOES NOT qualify for the IRS’s three-month delay?
  • Estate and gift taxes
  • Excise taxes
  • Information returns such as 1099 form and payroll taxes. Congress is considering a payroll tax deferral.
  • Tax items that don’t have April 15 deadlines, such as the March 16 due date for partnership returns

For more information on this or other questions, check the IRS’s FAQs and its page devoted to the coronavirus issues. https://www.irs.gov/coronavirus

For more information about CapSouth Wealth Management, call our office at 800.929.1001 or visit our website at www.capsouthwm.com

CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent registered Investment Advisory firm. CapSouth does not offer tax, accounting, or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. 

Provisions in the 2020 Stimulus Plan that Affect your Retirement Accounts and Income Taxation

by: P. Lewis Robinson, CPA

Retirement Accounts Required Minimum Distributions (RMDs):

  •  For the calendar year 2020, no one will have to take a required minimum distribution from any individual retirement accounts or workplace retirement savings plans, like a 401(k). That way, you aren’t forced to sell investments that may have fallen in value, which would lock in losses. If you don’t need the money now, you can let the funds remain invested in expectation that they will recover.
  • If you took your 2019 or 2020 RMD within the last 60 days, you are also in luck. You can roll over your distribution to the same or a different IRA within 60 days of the prior distribution and not pay the income tax on the withdrawal (as long as you have not made an IRA Rollover within the 365 days preceding your distribution).
  • Normally, RMDs cannot be converted to Roth IRAs, but now since there are no RMDs, you can withdraw IRA funds at low values and low tax rates and convert them to your Roth IRA. Yes, you pay taxes on the conversion, just like you would have on your RMD. Now, under this 2020 RMD waiver period, you can get more for the tax you pay by being able to convert the funds you withdraw to your Roth IRA at a relatively low tax cost.

Provisions to withdraw funds without paying a 10% penalty:

  • You can withdraw up to $100,000 from your retirement accounts this year without the usual 10 percent penalty for being under age 59 ½, if the need for the funds is a result of COVID-19.
  • You will also be able to spread out any resulting income taxes that you owe over three years from the date you took the distribution. And if you desire, you could put the money back into the account before those three years are up, even though the rules may normally keep you from making that large of a contribution.

Borrowing from 401(k):

  • You can take out twice the usual amount. For 180 days after the passing of the bill, with certification that you’ve been affected by the pandemic, you’ll be able to take out a loan of up to $100,000. The normal rule limiting the withdrawal to half of your balance has been suspended.

Charitable Contributions A deduction for charities even if you don’t itemize:

  • $300 per year without having to itemize deductions
  • To qualify, you must give cash to a qualified charity and not to a donor-advised fund. You may be aware of donor-advised funds, as we often recommend these charitable accounts to batch contributions in a particular year in order to maximize deductions and to accomplish other objectives. If you’ve already given money since Jan. 1, that contribution counts toward the $300 cap.

Limits on annual contributions have been lifted:

  • As part of the bill, donors can deduct 100 percent of their gift against their 2020 adjusted gross income.
  • If you have $200,000 of income, you can give $200,000 to a public charity and deduct the full amount in 2020.
  • The new deduction is only for cash gifts that go to a public charity. If you give cash to, say, your private foundation, the old deduction rules apply. And while the organizations that manage donor-advised funds are public charities, you do not get the higher deduction for donating cash to your donor-advised fund.

If you have any questions about how these changes might impact your financial plan, please contact your local CapSouth office or 800.929.1001.

To learn more about CapSouth Wealth Management, please visit our website at www.CapSouthWM.com

CapSouth Partners, Inc., dba CapSouth Wealth Management, is an independent registered Investment Advisory firm. CapSouth does not offer tax, accounting, or legal advice. Consult your tax or legal advisors for all issues that may have tax or legal consequences. Information provided by sources deemed to be reliable. CapSouth does not guarantee the accuracy or completeness of the information. 

Establishing Good Credit in College

Establishing Good Credit in College

Good credit may open doors. It is vital to securing a loan, a business loan, or buying a home. When you establish and maintain good credit in college, you create a financial profile for yourself that can influence lenders, landlords, and potential employers.

Unfortunately, some college students do not have good credit. In fact, Credit Karma says that the average 18-to-24-year-old has a credit score of 630. A FICO score of 730 or higher is considered good.[i]

What are the steps toward a good credit score? To start, you need to utilize credit. About 15% of your credit score is built on the length of your credit history, so the sooner you purchase goods and services with a credit card and pay off that debt, the sooner you create a record of credit use.1

Aim to reduce the balance to $0 every month. Does this sound like a challenge? It may not be if you just use a credit card to purchase everyday things. When you start splurging with a credit card, paying off the balance in full can become a problem.1

Pay your credit card bill on time. Roughly 35% of your credit history develops from your pattern of payments: how on time they are, how late they are. One approach to consider is scheduling automated payments from your bank account, schedule reminders, or just try to pay the bill as soon as it arrives.1

Refrain from applying for 2-3 credit cards at once. About 10% of your credit score reflects your history of credit inquiries, so if you suddenly apply for another 2-3 cards, you could hurt your score.1

Another potentially bad move is jumping from card issuer to card issuer – that is, getting a card, then closing that credit card account and opening a new one after a few months because you find another credit card with better perks. In doing this, you end up giving yourself a shorter credit history per credit card account.1

What if you have problems getting a traditional card? If you have no income, you might run into this – or, there might be other reasons that make it hard for you to qualify for one. If this is the case, consider going to the bank or credit union where you have a savings account and applying for a secured credit card. With these types of cards, you transfer some money into an account linked to the use of the card, and that amount represents your credit card limit. You can also ask to become an authorized user on a credit card held by one or both of your parents.1

You can potentially help your credit score in other ways. Consistent bill paying is a plus for your credit history. If you do become an authorized user on a parent’s credit card and they use credit responsibility, just being linked to that account history could help your credit rating. If you are living off campus, you might end up co-signing a lease so make certain you understand you and your roommates’ financial obligations. Financially negligent ones could hurt your credit rating if, for example, you are sharing utilities costs. With financially trustworthy roommates, you may avoid that kind of credit score damage. Lastly, if you move while in college, be vigilant about having your bills forwarded to you, to avoid missing payments.1

To learn more about CapSouth Wealth Management and the services we provide, call our office at 800.929.1001 or visit our website at www.capsouthwm.com

Investment advisory services are offered through CapSouth Partners, Inc., dba CapSouth Wealth Management, an independent registered Investment Advisory firm. Information provided by sources deemed to be reliable.  CapSouth does not guarantee the accuracy or completeness of the information.  This material has been prepared for planning purposes only and is not intended as specific tax or legal advice.  Tax and legal laws are often complex and frequently change.  Please consult your tax or legal advisor to discuss your specific situation before making any decisions that may have tax or legal consequences.

This article contains external links to third party content (content hosted on sites unaffiliated with CapSouth Partners). The policies and procedures governing these third-party sites may differ from those effective on the CapSouth company website, as outlined in these Disclaimers. As such, CapSouth makes no representations whatsoever regarding any third-party content/sites that may be accessible directly or indirectly from the CapSouth website. Linking to these third-party sites in no way implies an endorsement or affiliation of any kind between CapSouth and any third party, including legal authorization to use any trademark, trade name, logo, or copyrighted materials belonging to either entity.

[i] https://thesimpledollar.com/how-to-build-good-credit-in-college/

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