Most owners of IRA accounts name a beneficiary or beneficiaries to receive the assets upon the death of the IRA owner. But much like the passing of other assets to heirs, IRA owners may be concerned about how the ultimate heirs will handle a potential lump sum of taxable money distributed directly to the heir or heirs upon the IRA owner’s death. Should a trust be an IRA beneficiary?

What is an IRA owner trying to accomplish by naming a trust as the IRA beneficiary?

A trust can be a useful planning tool, and I would argue it is a reasonable decision for persons who wish to direct or control how heirs are to receive assets once the owner of the assets passes away. Most “fill in the blank” beneficiary arrangements do not provide any direction or control over assets once they are distributed to the heirs. The IRA owner passes away, and the beneficiary(ies) have full access and control of the account. …

Clients finding themselves in dire financial straits this fall? How about tapping into their IRAs or qualified plan accounts? Better hurry — the relaxed rules end December 31.

We are all painfully aware of the economic issues created by the coronavirus pandemic. You may find clients (or for that matter, yourself) in dire financial straits and wondering what alternatives might be available outside of filing bankruptcy. For you or your clients with IRAs or qualified plans, recent tax laws provide the means to access qualified plan money and perhaps avoid not just early withdrawal penalties but also tax on qualified plan distributions.

While I am not attempting to provide financial planning advice, and it could easily be argued that accessing qualified plans prior to retirement may be considered the worst advice possible, the changes and options described below may give you or your client options beside financial ruin and provide the ability to put things back the way they were prior to the crisis. …

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Why the Mixed Up Confusion? Well, More PPP Guidance: Enter the Paycheck Protection Program Flexibility Act (PPPFA) of 2020 (HR 7010)

[Want to listen to Bob Dylan while reading today’s blog post? Listen here.]

President Trump signed the Paycheck Protection Program Flexibility Act (PPPFA) of 2020 into law on June 5, 2020, which then becomes effective on the date of enactment.

The PPPFA makes the following changes to the PPP:

  • Time period (covered period) to use the funds for qualified expenses expanded from 8 weeks to 24 weeks
  • Borrowing deadline in still June 30, 2020.
  • The 75/25 Rule becomes a 60/40 rule with a “cliff”
  • The Period for Calculating FTEEs is extended
  • New FTEE Exceptions Based on Employee Availability Given Social Distancing/Safety…

Terms to watch for in this blog post: PPP, 75/25 Rule, Qualified Expenses, Covered Period, FTEE

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On March 27, the federal government allocated $349 billion in forgivable loans to small businesses under the Paycheck Protection Program (PPP)(PL 116–136 §1102), which is part of the Coronavirus Aid, Relief, and Economic Stability Act (CARES)(PL 116–136). Unfortunately, it was depleted in less than a week and had to “recharged” with additional funds later in April.

Now that disbursement of the funds has begun, borrowers are shifting their focus (and their phone calls to us) on how to spend the money in the hopes of not having to pay it back. …

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Recovery rebate.
Economic impact payment.
Stimulus check.

No matter what they call it, if you have tax clients, they are asking you questions about the advance of a 2020 credit that they have received (or may not have received yet). Or maybe you have those questions yourself! In this post, Tom clarifies the parameters of these payments.

Towards the end of the video post, Tom shares some information on timing on when paper checks will be mailed out, depending on taxpayer AGI.

Give it a watch or check out the video transcript below.

Video transcription:

Hello again, everybody. I’d like to thank you for participating in this week’s University of Illinois Tax School blog. This is Tom O’Saben, Assistant Director of Professional Education and Outreach coming to you, not from the campus in Urbana Champaign, but from the Southern Command Center at my office in Maryville, Illinois, while we’re still sheltering in place away from campus and expect to be for quite some time going into the future. What I’d like to do and talk about today is to discuss with you these recovery rebate or economic impact payments, the checks that clients have started to receive. They’re driving us crazy about the notion of thought I would get more, why did my neighbor get it and I didn’t, etc. I’m going to try to talk about the facts and circumstances of what these checks are. Some of you already know this, but it doesn’t hurt to hear it again. And then I’ve got some information for you as to timing, it would seem, as to when people are going to be receiving money, who hadn’t yet received it. …

Tom walks us through the frequently asked questions as posted by the IRS regarding Notice 2020–18, which provides special Federal income tax return filing and payment relief in response to the ongoing COVID-19 emergency.


Filing and Payment Deadlines Questions & Answers:

State Tax Agencies:

Illinois Income Tax Filing and Payment Extension:

Tax School Facebook Group:


Tom O’Saben coming to you from my sheltering in place office in Maryville, Illinois. Hope you’re doing well and weathering this unprecedented circumstance in our country and for that matter in our world. And I’m hoping to give you some information in this blog; it’s gonna be a little bit longer than normal, because we’re going to be addressing, Notice 2020–18 that was released by the IRS last week. For those of you who participated in my blog of last week, I made reference to Notice 2020–17, which in fact, did not extend the filing season or change the filing season. I’m going to use that term ‘change’ rather than ‘extend’ because I don’t want you to get confused with filing an extension versus the filing date having been changed. That being said, last Friday, I believe, IRS Notice 2020–18 came up, which in fact did change the filing date from April 15 to July 15. And we’re going to go through who is impacted by these, by the FAQs, frequently asked questions that the IRS released on March 24, in order to address some of the more popular questions that are coming up (and I’ve seen these out there on the Facebook page, too). So I think this is very pertinent information. I want to give you another caveat in my comments that I’m making here today. I’m not yet addressing the stimulus bill or the relief bill, I believe it’s going to be called CURES or some kind of acronym to that notion, once the House and the Senate come together, pass a bill and then the President signs it. I actually want you to watch for some marketing we’ll be sending out through Facebook, etc, or emails that we’re probably going to put together a webinar because the last I saw, there was substantial amount of tax legislation contained within this relief bill. But the point I’m trying to make of this blog today, is that we’re going to go through the frequently asked questions and there’s better than 20 questions so I’ll go as quickly as I can so I don’t take too much of your your time. …

News Flash! Tax Professional Thinks He Sees His Shadow, but it’s the IRS…

Don’t be Punxsutawney Phil when it comes to potential identity theft. As a tax professional, you are required to have a data security plan.

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Stop. Get a data security plan together.

Now, before you run back down into your burrow because you operate as a sole practitioner and believe these rules only apply to the ‘big boys,’ be aware that the IRS casts its shadow over you as well.

Remember the box you had to check when renewing your PTIN? …

Ever heard of a backdoor Roth IRA? Or for that matter, have you ever heard of a MEGA backdoor Roth IRA?

How does this work and is it legal?

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The concept of the backdoor Roth IRA is designed for persons who have income too high to fund a regular Roth contribution. Remember that with a Roth, it’s not a question of whether or not the contribution is tax deductible (which it’s not). The issue is whether you can make a contribution at all. That issue is determined by the taxpayer’s modified adjusted gross income (MAGI). For 2019, a married couple filing jointly starts to lose the ability to fund a Roth IRA when MAGI reaches $193,000. By the time MAGI reaches $203,000, no Roth contribution is allowed. …

Even before the TCJA introduced us to higher standard deductions, it has always been important for tax professionals to determine what borrowing against the primary residence has been used for, whether the loan was a first mortgage or a home equity line of credit (HELOC).

In this post, rather than concentrate on whether or not interest is deductible on Schedule A, I plan to concentrate on what the borrowing was used for. As we go through this, we’re going to assume your client’s principal residence is the collateral for the loan. …

New draft forms are here we say — doo dah doo dah
How do you think the final versions will play? Oh doo dah day
Comments they will fly
Changes they will try
I’m bettin’ we won’t know until next July oh doo dah day!

Draft 2019 Form 1040

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On July 11, the IRS released a draft of the 2019 Form 1040. The comment period ended on August 15.

Notable Changes:

  1. Signature page moves back to page 2. Your signature indicates your numbers are accurate after you tell the government what your numbers are.
  2. IRA distributions are separated from pension distributions
  3. Capital gain line was added back to the…


University of Illinois Tax School

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